Investing in Portugal: real estate at the forefront of opportunity

CREDIBILITY

Portugal continues to attract investment, with the reputational returns it is gaining being fundamental. In addition to the evidence, there is this vibrant energy that characterises the national market, and the various studies carried out by national and international players contribute to this.

Recently, PwC and the Urban Land Institute released a report that places the capital of Portugal among the 20 most attractive European cities for real estate investment this year. The “[Emerging Trends in Real Estate – Road to Recovery](https://www.pwc.com/gx/en/asset-management/emerging-trends-real-estate/assets/emerging-trends-in-real-estate-europe-2022.pdf)” report highlights the main indicators that have improved compared to last year: investment outlook increased by 3.92 points, while development outlook increased by 3.80 points.

According to the report’s classification, from a local perspective, current investment expectations in Lisbon are “good”.

Another particularly interesting indicator is that for the cities listed first, such as London and Berlin, the reverse is true. In other words: excessive demand inevitably results in the removal of people and companies that cannot keep up with such a high standard. Therefore, they look for alternative but equally qualitative markets, with Portugal being a potential destination.

Although this example highlights Lisbon, the opportunities do not end there. Portugal, due to the increasing transformation and regeneration of urban life, has several locations with high potential for development.

DEVELOPMENT POTENTIAL OF CITIES

With a new vision of urban development underway in Portugal, there is a heightened awareness of the work that needs to be done in the territories. Adding to this the concept of the 15 Minute City developed by Carlos Moreno, which Nhood aims to put in practice. Here, there is a clear focus on physical proximity in the different dimensions of our lives – home, work, services, retail, leisure, etc. – building towards a polycentric city, overturning the idea of a single centrality or cluster that dictates destiny.

Carlos Moreno says that “we are in a climate emergency and cities have a fundamental role. The biggest contributors to CO2 emissions are cities and, within cities, transport. With the 15 Minute City, the city of proximity, we want the city to become a vast network of places where free time is transformed into Life Time. It’s a different way of living, of consuming, of working, of being in the city. It means rethinking the way people traverse the city, exploring and discovering it on foot or by bicycle, thus responding to the effective reduction of the ecological footprint. It is therefore crucial to define a new urban lifestyle, based on proximity and reduced distance to all essential needs”.

Portugal is moving in this direction, leading to huge potential. The development of cities in Portugal has often been linked to the tourism sector, which will continue to play an important role, but it has become evident that cities must be places not only for tourists to live in, but also for residents. This motivates the regeneration and transformation of neighbourhoods and cities, which prove to be full of opportunities for investors. Examples include the promotion of mixed-use projects and the development of sustainable buildings that bring immediate and positive value to neighbourhoods and citizens.

ABILITY TO ADAPT AND INNOVATE

Adaptation and innovation have been the drivers of the national real estate sector and one of the main focuses of investors’ assessments. The market has been driven by the demand for innovative solutions that create more resilient spaces. Whether through a commitment to renewable energies, sustainable construction, or the ESG (Environmental, Social and Governance) policies by stakeholders – public and private – in urban planning, innovation is inseparable from development.

Thus, areas of transition and energy efficiency stimulate real estate, applying to both greenfield and regeneration projects. Progression involves making spaces more sustainable, conscious and accessible in commercial retail, offices, residential and other areas, a goal that Nhood Portugal also brings to its area of operation.

A clear example of this is the implementation of BREEAM certification from the first moment an asset project is identified, which is also a guarantee of its attractiveness on the market in the long term. This international certificate, which allows the measuring of a building’s degree of environmental sustainability, is present in several assets managed by Nhood, both in Portugal, in the Alegro Alfragide and Castelo Branco Setúbal Shopping Centres, and abroad, as in the Vialia Vigo project in Spain – an urban regeneration project at the entrance of the city of Vigo, with the introduction of a mixed-use space that integrates Vigo railway and bus stations, a public square and the shopping centre.

This certification is of considerable importance and Nhood, besides the projects mentioned above, intends to certify 100% of the assets it manages in the very short term.

SEVERAL VALUABLE AREAS OF REAL ESTATE

If in some countries the opportunities to invest in real estate are focused on just one area, in Portugal there are more doors open in real estate: tourism, commercial retail, residential, offices, logistics and others.

The pulse of the market is taken by the main players in the sector, whose indicators point to the residential sector continuing to be a major focus, especially at this time, when there is a shortage of supply for Portuguese families. Tourism is once again gaining importance, but the main focus is on growth in the industrial and logistics areas. This is motivated by the unsustainable shortage of qualified real estate supply for logistics operators, which makes the development land market particularly interesting.

For example, JLL, through its “Market Pulse” study, highlights that hotel and industrial & logistics transactions drive commercial real estate investment. Together, the two areas accounted for 66% of the amount transacted in the first half of this year, which amounted to 640 million euros.

JLL’s report also highlights the performance of the occupational markets, led by offices, whose occupancy in Lisbon in the first six months of 2022 has already exceeded the activity of the whole of 2021, reaching 168,000 m2. In Porto, it adds more than 30,000 m2, growing strongly alonside the same periods of 2019, 2020 and 2021.

“Market Pulse” also shows that the retail market is recovering, despite inflation. Visitor flows are increasing, both on the high street and in shopping centres, and retailers continue to pursue their expansion plans, seeking to establish a presence in prime locations.

Nhood also contributes to the retail field since it manages the Alegro Shopping Centres by leasing 58 new shops in the first semester of 2022, totalling close to 7,000m² of gross lettable area. The occupancy rate in the assets managed by Nhood Portugal is at 98%, in line with pre-pandemic levels – emphasising the measure of confidence.

REAL ESTATE SECTOR IN PORTUGAL: UNIQUE INVESTMENT OPPORTUNITIES

Investing in Portugal certainly involves real estate, and there’s no lack of opportunities, as you can see. It is essential to have the support of key players so that the companies and public bodies that promote new projects can keep up with the transformation of the cities, as well as the needs of those who live there, through permanent observation and listening so that they can grow together, too.

In this way, they will be able to respond to the new requirements of communities by creating innovative solutions that add value for all those involved and, above all, are sustainable, regardless of their sector of activity. Nhood Portugal, as a global platform for real estate solutions in mixed-use projects, works to support these players in their assets’ development, always with the principle of generating positive impact.

Photo Credits:

“Lisbon view from the River” by Infomastern is licensed under CC BY-SA 2.0 .