In the 1st quarter of 2024, the Portuguese real estate market performed identically to the same period in 2023 in most sectors, concludes JLL in its most recent quarterly Market Pulse study. This trend was observed both in the commercial investment market and in the transactional segments of housing, hotels, retail and logistics. The exception was the office sector, where activity grew considerably compared to the previous year. It should also be noted that, in some of the sectors analyzed, the scarcity of supply available for immediate occupation continues to create conditions for price and income growth, even in a scenario of less expansive demand.
“A start of the year with moderate activity was already expected. This is always a period of greater expectation regarding the evolution of the economy, especially due to inflation and rising interest rates. The holding of the elections contributed to increasing the uncertainty that naturally predominates at the start of the year, leading economic agents to become more cautious in their investment decisions. The market’s response to a greater level of uncertainty was to “wait and see”, both in the commercial and residential markets”, explains Joana Fonseca, Head of Strategic Consultancy & Research at JLL.
In the 1st quarter of this year, 260 million euros were invested in commercial real estate, differing little from the same period last year (-5%) or from the average of the last three years (+6%). In the hotel sector, the number of guests and overnight stays in the first two months of the year showed slight improvements compared to 2023 (5% and 3%, respectively), as well as occupancy levels, which reached 60% in Lisbon and 53% in Porto in the 1st quarter, in both cases two percentage points more than in the 1st quarter of 2023. In housing, JLL estimates that demand in this quarter is still slightly lower than in the same quarter of the previous year, however, the most recent trend is for stabilization at levels of transactions, highlighting the good dynamics of sales in the plant for different projects and also the maintenance of activity among international buyers. In retail, sales also signal a residual variation of around 0.5%, highlighting the operational stability of the different retail real estate formats.
The office segment stands out positively from the rest, registering a notable recovery compared to the previous year, with take-up more than doubling in both Lisbon and Porto, with 73,700 m2 and 18,000 m2 taken, respectively. It is also worth noting the behavior of industrial and logistics real estate, in which occupancy shows a year-on-year drop of 20%, although as a result of the lack of supply to absorb, as rents continued to rise.
According to Joana Fonseca, “the scarcity of available properties suited to demand requirements continues to influence market behavior in the most diverse segments. Therefore, despite a natural slowdown in demand over the last year, there have been no downward adjustments in prices and rents and there have even been increases in value in some segments. This is especially visible in housing, logistics and hotels, while sectors such as offices and retail sustain their prime rents at very robust levels.”
In hotels, average daily rates are at maximum levels for this period of the year in Lisbon (€139) and Porto (€99), with an impact on RevPAR, which reached €83 and €52, respectively. In housing, without prejudice to the fact that last year there was a drop of almost 19% in sales, prices at national level maintain an upward trend, which even slower, continues to reach around 8% (INE data). In the 1st quarter, prices should maintain this trend, either due to the mismatch between demand and supply or the persistent increase in construction costs. In logistics, there was an increase in prime rents in most areas of the Lisbon and Porto regions, continuing the behavior of recent quarters. In retail, the note is that rents have stabilized in different formats, with the exception of street commerce in Porto, where the trend is towards an increase, especially on Avenida dos Aliados, which reached €55/m2. Prime office rents remained, in general, stable, remaining at €28/m2 in Lisbon (Prime CBD) and €19/m2 in Porto (CBD Boavista).
“After the 1st quarter, the market once again proved its resilience in situations of greater uncertainty or adversity. And, now that we already have a new Government in office, with the announcement of the rectification of many measures that are especially penalizing for the sector in which a reduction in the conditions of access to credit and the control of inflation levels is anticipated, the perspective is that the year 2024 will progressively recover the dynamics of demand in the different sectors, maintaining the consequent stimulus of appreciation”, notes Joana Fonseca.
