Cushman & Wakefield, a leading global real estate services consultancy, recently published the Marketbeat Spring 2023 - a semi-annual report that summarizes the activity of the national real estate market in 2022, highlighting the main trends that will mark the market in 2023.
Offices
The office market will experience a stabilization of lease values in all zones, in addition to an increase in availability, due to an upward trend in the vacancy rate, resulting from the release of areas for subletting by some of the largest occupants in the technology sector, which are going through a phase of reduction in occupancy, after three years of sharp expansion.
The management of the work model will also impact the market, as it will make organizations rethink the organization of their spaces, with the aim of starting to be seen as meeting, collaboration, learning and sharing points.
Retail
Retail in 2023 will undergo a change in store concepts and the synergy between physical and digital, with the aim of favoring the consumer experience.
New types of concept stores, which favor personalized layouts and experiences, and sustainable and circular economy stores will have greater weight, taking into account the relevance of ESG criteria.
Industrial & Logistics
The industrial and logistics segment will see a greater absorption of logistics spaces by online commerce, due to the increase in this type of purchase, which means that there is a greater demand for logistics properties, which ends up increasing the shortage of available properties. and the lease amounts of these assets.
Urban (proximity) logistics will continue to register a high demand, taking into account that companies have been redesigning their logistics operation to obtain efficiency gains.
Portugal will also benefit from an increase in nearshoring, so that companies can guarantee the stock of their products. Finally, the data logistics market is expanding, and several transactions have already taken place at a national level, with Portugal being on the radar of the major data center operators, thanks to the country's strategic location.
Hospitality
The expansion trend of the hotel offer will continue in the coming years, with close to 130 projects expected to open by 2025 – which will represent 11,300 rooms, mostly in 4 and 5 star hotels (30% and 33% respectively), located mainly in the metropolitan areas of Lisbon and Porto.
Despite the increase in the cost of living, the desire to travel and continue to do tourism will remain, with the luxury and low-cost segments being less exposed to fluctuations.
In this way, investors will continue to bet on the strong recovery and prospects for continued growth in the leisure and lifestyle segment and will seek out less conventional hotel concepts, making hotel concepts increasingly integrated with long-term stays, co-living , student and residential accommodation.
Residential
Sale
The lack of measures that promote new construction for the middle segment will contribute to the market continuing to function in an unbalanced way, fueling the rise in prices while the rise in interest rates and the difficulty for families to finance themselves will contribute to the continued focus on of promoters in the high segments.
Lease
The lack of confidence shown by developers, investors and landlords in the legal framework and in the fiscal policies that govern urban leasing in Portugal has just been aggravated by the measures recently announced by the Government, anticipating the maintenance of the rise in rent values, in view of the growing demand and lack of supply.
The excessive fiscal impact and the inappropriate general regulation of urban construction will continue to contribute to the lack of a specific product developed from scratch for the housing rental segment, also encouraging the rise in rental values.
Student Residences / CoLiving
Despite the high number of new projects that have opened in the last five years, demand from students, expatriates who come to work in Portugal, young professionals and young couples continues to increase, remaining above supply, particularly in Lisbon and Porto .
In the student segment, the ratio of number of beds to number of displaced students remains below that of the main European cities, but with a tendency to rise given the number of projects announced for the next 3 years.
Portugal is increasingly a destination for foreign students, qualified foreign workers and digital nomads. Given the enormous limitations in the housing market, it is inevitable that there will be significant growth in this alternative housing segment.
Senior Residences
For the next three years, the total capacity is expected to increase by 800 beds with most private operators choosing to develop projects with more than 100 beds.
However, as Portugal is one of the countries with the most aging population in Europe, it needs more assisted residences for the elderly on private initiative and with quality services. The offer has increased, but it is still clearly insufficient.
However, the growth of this segment may be threatened, on the one hand, by the difficulty of most Portuguese families in sustaining high monthly payments and, on the other hand, by the difficulty in hiring specialized personnel, especially in locations outside large urban centers.
Promotion
Housing promotion will remain on the agenda, with a focus on residential projects for the high and luxury segments, motivated by the growing demand from foreign buyers.
On the other hand, there continues to be a major imbalance between demand and supply of housing, especially in the middle segment – which will continue to motivate developers and investors to look for innovative solutions to develop more homes for the middle class.
However, the recent measures announced by the government for housing leave out tax benefits for new construction and the optimization of the time for licensing allotments, so several larger-scale residential projects should continue to be postponed – a problem for investors, despite the slight improvement in other attractive conditions, such as less pressure on construction costs.
In the office area, we will verify the demand for more practical, modern and, above all, efficient options from an environmental and energy point of view, which will allow the old spaces to be converted to housing or tourism in central locations, allowing a new cycle of urban rehabilitation in the cities of Lisbon and Porto.
Commercial real estate investment
In a context of rising interest rates and greater financing difficulties, a slowdown in real estate investment activity is expected in 2023. Even so, and with around €2,700 million of transactions in various stages of negotiation, estimates point to this year there is a volume slightly below the average of the last 5 years. To this amount may be added €1,300 million in currently suspended transactions, as well as the usual off market transactions. The robustness of this entire pipeline is not necessarily the same as in previous years, given some difference in price expectations between sellers and buyers.
Among the forecasts for the current year, the office and hotel sectors maintain the primacy, adding a third of the forecasted volume each; followed by a retail recovery, with 21% of demand, influenced by the acquisition of food stores.
Sustainability
Portugal currently has several buildings in the commercial real estate market in different stages of certification (from design to operation). Among sustainable building certificates (for new construction/rehabilitation and buildings in use), there has been a notable increase over the last three years for BREEAM and LEED certificates. The former have greater expression, with close to 80 certified buildings, of which 90% relate to buildings in use and more than half of the retail sector. In terms of LEED, which includes more than 30 certified buildings, there is an equal distribution between new construction/rehabilitation and buildings in use, with offices in the lead.
Regarding the WELL certification, focused on the use of the building and the well-being of its users, since, although its implementation starts in the construction phase, it is only obtained in the operation phase, there are still no buildings with this distinction at the national level. Even so, with close to 40 registered projects, all in offices, it is expected that soon there will also be certified buildings in this area.
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Source: Casa Sapo