The was one of the main conclusions of a meeting in Lisbon promoted by the magazine Vida Imobiliária (Portuguese partner of Iberian.Property) with the support of Cushman & Wakefield under the theme, “Perspectives for the Real Estate Sector in 2017”, and which brought together leading figures in the Portuguese real estate market for debate.
Eric van Leuven, managing partner of C&W, is optimistic for 2017, maintaining, «If everything had been concluded as expected in 2016, the total (of investment) would have been equal to the previous year ». This expert notes the fact that this slight slippage in business for 2017 is simply due to small individual delays, and, for this reason, «this is by no means a warning». However, he believes that we must bear in mind that, «the world is a very volatile place».
In a context of historically low yields, Pedro Coelho, administrator at Square AM, stressed that these things happen, «On a small scale, they are not representative of the market», and for this reason the market will not be at risk for this reason. He warned that, in the current context of low interest rates, a rise could happen, «Sooner than is expected», which might cause a degree of instability.
José Araújo, Director of the Direção de Negócio Imobiliário do Millennium BCP, stressed that one could already feel, «The upturn in demand for construction land», not only in the centre of Lisbon, «where the product is scarce», but also in the outskirts, «where we have already seen a degree of demand for land by civil constructors for building new housing which, as we know, is very important for our country».
Parallel to this, he added, “Discount continues to be very large»at the portfolio level, so that various kinds of business can be effective, and that the recorded low level of yields, «is associated with a certain resale in prime sites, where there is liquidity». He considers that the lack of definition in political economics, whether in the USA or with the European elections, could be a challenge, as, «we are dependent on the economy and on money». In addition, Portuguese interest rates could also cause business to contract slightly.
A scarcity of product on the market is one of the immediate constraints
Alexandre Fernandes, Director of Investment and AM for Europe at Sonae Sierra, considering himself to be «moderately optimistic» for this year, stresses that «there is high demand and much capital. The immediate problem is that there are not many assets», specifically,«consolidated and in a good location». This specialist also noted that the market will have «opportunities for "surgical" development, for renewal, for mixed use and for sale and leaseback».
Offices are one of the sectors where the scarcity of supply is most glaring, at least for the pressure of demand now being felt: large multinationals seeking modern, spacious premises in good locations in Lisbon and Porto. Luís Rocha Antunes, partner and Director of Investment at C&W, stated that «there is much demand for offices and a new economic demographic looking for these assets, which need to be improved». Then E Eric van Leuven warned “the problem of the lack of office space in Portugal is economic, and is a problem of the country as a whole ».
The development of this kind of premises is very delayed. Pedro Coelho believes that, “it is a question of bad timing. Only now are rents sufficiently high to close projects», and Henrique Polignac de Barros, President of APPII, emphasises that «these multinationals pay little but have aggressive prices, just as much in offices as in housing», and this is delaying new development initiatives.
The APPII president also points out that «a whole world converges on Portugal and puts pressure on the product», the latter not increasing accordingly. At present, he considers, «we have to be careful with taxation, and not alter the rules in the middle of the game, which creates negative doubts» on the part of investors.
The hotel trade registers growing demand
Eduardo Abreu, partner in Neoturis, affiliate of CBRE, highlighted at the meeting the great demand for hotels in Lisbon, mainly from large worldwide hotels with 4 or 5 stars.
The realisation of business and the lack of larger scale product are, here also, a problem, linked to the fact that «the residential housing budget is closing in a much better state than that of hotels», since profitability is significantly higher. «Hybrid hotel and residential models or sales and leaseback transactions» could be opportunities to overcome this difficult situation.
In residential tourism and in the purchase of second homes, demand is still buoyant, with investors from increasingly more diverse corners of the globe. Juan Gómez-Vega, CEO of Vilamoura World, confirms that investors will be «ever more comfortable» in buying land outside of Lisbon and the traditional geographical locations, so «there is a high demand to be satisfied». Also, the Portuguese themselves «continue to buy», in a post-crisis era where value for money rules.
Gilberto Jordan, CEO of Planbelas, also attested to these factors, namely, «the growing diversification of the international market», and the increasing importance of the «technology and prices» of assets. «The market is, nowadays, more expensive, more rigorous and more sophisticated».
Luxury residential development company in Lisbon experiences an ‘amazing’ moment
The experience of Level Constellation, represented at the meeting by Pedro Vicente, director general of the Chinese capital company, has been ‘amazing’». With various projects running in the premium segment in Lisbon, the company has sold the vast majority of these assets already, a short time after putting them on the market. Here, too, can be seen a geographical diversity: «We started our activity with the Chinese market in mind, which now represents just 10%. We now have 17 different nationalities».
But he believes that this activity may present challenges, in spite of its success, because it is in such a restricted area of the city: «We are operating within a large football ground», and thus is not a good example for the city of Lisbon as a whole, causing, also in this area, the «problems of scarcity of supply».
The creation of REITs could boost the market
For João Torroaes Valente, of Úria Menéndez Proença de Carvalho, the creation of REITs could impact positively on the market, which many expect of this mechanism, to which the Prime Minister has also turned his attention, this being «a way of saving for small investors and a way to bring foreign capital into the country». Eric van Leuven reminded those present that «it is only necessary to copy the Spanish model», and this will allow «some groups in these kinds of society to transform, by selling to the public and the capital market», he stressed.