The MD predicts that market investment activity will continue to be dynamic, anticipating, «again a total of more than 1,000 million euros», in light of the 1,254 million euros which were invested in commercial real estate in 2016.
The climate is favourable for the market, mainly because «we are currently in a phase of stable government and the economy has grown for two consecutive years», even if this growth is small, and these are good signs for investors.
The need for new high quality offices of a good size in Lisbon and Porto was given as one of the main challenges of the sector this year, a warning which, furthermore, has been widespread among sector professionals. This is a challenge essentially «for developers. There is demand» from firms who see Portugal as a good place not only to work but also to live in. If they do not find the product they seek, «they may chose other competitors», though this has not yet happened.
JLL emphasise the low number of projects ‘in the pipeline’ of the new ABL for offices in Lisbon, which however includes projects like ‘Torre da Cidade’, developed by ECS Capital in the Avenida Fontes Pereira de Melo, which is in the first stage of construction and already completely occupied. The area which is coming onto the market in the next few years should be mostly contracted out beforehand, and, even if this is not the case, it is insufficient to meet current demand.
Pedro Lancastre also added that there are various areas of land, especially in Lisbon, which are ripe for development, for example in the area of Amoreiras (the former Feira Popular), or in Alcântara: «they are good opportunities» which include «space for other residential segments».
Residential development ‘speaks the loudest’
Some of the new development which could be taking place on such land, especially offices or tourism, has been curtailed by the choice of residential development, because «housing continues to be the most profitable. Offices bring in 4,500 or 5,000 euros/m² (e.g. on the Avenida da Liberdade), and housing is worth double», which has led to the conversion of various office buildings to residential use, for example Liberdade 40, Liberdade 12, Liberdade 238 or the head Offices of the Diário de Notícias, which have a residential plan about to begin.
The same has happened in the hotel trade. There are several hotel chains interested, but the accounts are more interesting if they were for residential use, which has already sparked interest in other parts of the country, like Coimbra or Aveiro.
Growth in house prices above the European average
House prices went up 7.6% in Portugal during the 3º trimester of 2016, the second biggest increase in the Europe zone countries.
The numbers of Eurostat now known show that, in this period of the year house prices rose 3.4% in the euro zone and 4.3% in the European Union, in general terms. Compared to the previous trimester, the differences were 1.3% and1.5%, respectively.
Latvia led the growth in house prices in the euro zone, where they went up 10.8% compared to the same period of the previous year In the countries of the European Union, Hungary led the way with a rise of 11.6%, followed by Latvia and Bulgaria, with 8.8%, the very opposite to the fall of prices in Cyprus (-3.3%) and in Italy (-0.9%).