Despite a drop in the volume of investment in the first half of the year of around 69%, "everything indicates that the gradual resolution of the pandemic situation will make its effects felt in the market this year", says Cushman & Wakefield in its most recent study on commercial real estate investment activity in Portugal.
Estimates for the volume of investment at the end of 2021 point to around €2,150 million in transactions, a figure that implies a drop compared to 2020, in the order of 23%. Even so, if this value is realized, it will represent the 4th best result ever in the national market.
Paulo Sarmento, Partner and Director of Capital Markets at Cushman & Wakefield, highlights that «the interest of foreign investors in the Portuguese market is still very much alive. The main market players not only recognize the good response that the country had to the pandemic, but are also pressured by the high levels of liquidity that they register». However, he adds, «This investor appetite is more polarized, with a strong preference for assets in prime locations, with good contracts and solid tenants. With regard to more peripheral assets, or with a less stabilized income profile, it becomes very difficult to match the price expectations of buyers and sellers».
If we look segment by segment, it is easily noticeable that investors are clearly betting on the office market, which captured 43% of total investment this semester. Alternative sectors are increasingly asserting themselves with institutional investors, and accounted for 32% of the total invested. The lower attractiveness of retail assets was evidenced by the second-lowest allocation of capital in the last decade: only 15% of the investment volume in the 1st half of 2021 was directed to retail assets.
“International investors' interest is increasingly focused on the areas of logistics and income residential. Unfortunately, we do not have many assets in these categories in Portugal, which explains the low volume of investment to date», explains Paulo Sarmento.
However, the market believes that this fall in investment volume will be "substantially corrected by the end of the year". Cushman & Wakefield highlights that the additional volume of business with a very high probability of closing by the end of the year totals €1,600 million. When fulfilled, this figure points to a transaction volume in 2021 of around €2,150 million in income real estate assets. And, although this figure represents a drop of 23% compared to 2020, it is important to highlight that this will be the 4th best result ever in the national market.
According to Cushman & Wakefield's forecast, large-scale businesses will make their presence felt in the second half of the year and hotel assets could be the big surprise in 2021. If all operations currently underway are completed, the hospitality market will be the segment with the highest capital allocation in 2021, in the order of 35%.
2022 could bring an investment volume of around €3 billion
With an eye to the future, prospects for 2022 point to a resumption of investment activity towards pre-pandemic levels. «Today, we are able to identify around €800 million of deals with a high probability of closing in 2022. Taking into account this new market reality, in which off-market deals have become increasingly frequent, it is very likely that in 2022 let's go back to investment volumes close to €3,000 million», highlights Paulo Sarmento.