According to Knight Frank, Portuguese commercial property investment totalled €1.3bn during the first nine months of 2015, and is forecast to reach a record €2bn by the end of the year – an exceptional 178% y-o-y increase.
Investment activity during the first three quarters of the year was dominated by an active retail sector, accounting for 57% of total market activity. Transaction volumes were boosted by the sale of two large retail portfolios to US equity funds, Lone Star and Blackstone. As a result of strong international interest in Portuguese real estate, cross-border capital accounted for 95% of commercial investment during the first three quarters. The strength of demand led to a significant hardening of prime retail yields, which reached a record low of 5% in Q3 2015.
Boosted by the country’s continued economic recovery, Lisbon’s occupier market also improved significantly in the first three quarters of 2015, with office take-up increasing by 49% y-o-y to approximately 105,000m². With confidence in Lisbon’s office market slowly being restored, the demand for new stock is relatively high. However, development activity remains at low levels, and the city-wide vacancy rate fell for the fifth consecutive quarter to 11.3% in Q3.
Heena Kerai, research analyst at Knight Frank commented: “Investor appetite for assets in Portugal is forecast to remain strong in the coming months. The retail sector is expected to remain the most active, while office volumes are likely to stay relatively subdued, as the availability of investment product remains at low levels. Nevertheless, prime yields in Lisbon are forecast to harden further across both sectors by mid-2016, to reach new record lows for the market.”
For more information on the Lisbon property market see Knight Frank's report, available here.
