Commercial property market in Portugal showing signs of recovery after worst year on record
The Portuguese commercial real estate market is showing signs of a gradual recovery after all sectors experienced a severe downturn in 2009 that amounted to its worst ever year on record, according to a new report.
It is ready to recover, albeit at a very modest level, as confidence improves and activity levels begin to increase, says the report from consultants Jones Lang LaSalle.
‘As we moved into 2009, expectations could not have been worse for the property market, with the economy in recession and the investment and occupation markets shrinking. However, by the end of 2009 the extremely pessimistic forecasts did not materialise and the market adapted itself to the new circumstances, which in turn is leading to a return of confidence,’ said Manuel Puig, managing director of Jones Lang LaSalle Portugal.
‘The real estate market is not set for a complete recovery in 2010, but the year has started with increasing positive sentiment and all the signs suggest that some sectors will put in a better performance this year compared to last year,’ he added.
The report outlines several positive signs across the commercial property sectors in Portugal that seem to point towards a slow recovery of the market in 2010. In the investment market, demand is expected to continue at the same pace as in the last six months of 2009, driven forward by improved access to finance, the return of foreign investors and the bigger demand for subscriptions of national funds.
In the retail sector, Jones Lang estimates that retailers will seek to resume their expansion plans, albeit modestly. The forecast for the offices sector is less optimistic as both take-up levels and rents are expected to remain at the 2009 levels.
According to Jones Lang LaSalle, 2009 was one of the worst ever years on record for Portugal’s real estate market. This was chiefly due to the economic crisis that was strongly felt both at national and international levels, resulting in declining performances in practically all segments.
Only projects with guaranteed chances of success went ahead and the same attitude is likely to prevail in the coming months regarding the provision of new supply. There was a steep fall in investment, the report shows.
In 2009, the real estate investment market in Portugal transacted €393million, which was 44% less than in 2008, with 65% of this volume transacting in the second half of the year. The retail sector saw the largest fall in volumes last year compared with previous years where it was the most dynamic sector and proved extremely attractive for foreign investors.
‘Despite the sale of the Torre Oriente completing in the second half the year, 2009 generally witnessed smaller transactions of volumes between €3 to €10 million, mostly in the retail sector in stand-alones,’ said Pedro Lancastre, head of Capital Markets at Jones Lang LaSalle Portugal.
The logistics and industrial warehouse market, like all others, was equally affected by the economic crisis and consequent slowdown in companies’ activity. The take up of new space stagnated, and the only reason it did not suffer large decreases is because a large proportion of the development in this sector takes place only after pre-leasing agreements have been reached, the report adds.