Despite the pandemic, the Portuguese real estate market has shown itself resilient and dynamic and logistics seems to lead investors’ interests (not just in Portugal).
This what the experts gathered at the webinar «Tendências e Desafios 2021» (Trends and Challenges 2021), organised this week by APPII, VI and Ci., defended. During the debate moderated by António Gil Machado, from VI, Eric van Leuven, from Cushman & Wakefield, stated that «logistics is currently the segment all investors seek. There is not a day goes by, the specialised press does not mention logistic or multifamily operations». It shows «a substantial change of paradigm», and reminds us of the previous preference for offices and retail which dominated the last few years.
Eric van Leuven confirmed the greater demand for assets close to urban centres, where «the offer is lacking, and it has been 10 years since we had new logistics on a large scale. The assets which exist right now do not meet the demands of modern distribution». Hence, «we currently have several domestic and foreign developers positioning themselves to create the offer necessary to meet that demand, as is the case of Merlin Properties».
He further recalled that «many years ago we warned that, with the growth of e-commerce, logistics should also grow. In 2020 there was an increase in demand», and he highlighted the great activity from food companies which are, simultaneously, occupants, owners and real estate developers. Paulo Silva, from Savills, defended that «it is only at the level that we are at (with ecommerce representing around 20% of retail sales in 2020) that we notice the need to increase logistics».
João Nuno Magalhães, from Predibisa, also confirmed that «Porto started having a great demand for last mile logistics, many operators wanted to increase their operation in the North of the country, and were looking for warehouses close to the cities. We have some developers looking for opportunities».
The same cannot be said about retail, intrinsically connected to logistics, which has suffered more with lockdowns. But Eric van Leuven is confident on a «revenge spending» and on a shopping spree when the pandemic is controlled. But he recalled that the «physical retail’s situation did not start last year, a transition from physical to virtual stores was already under way. Physical stores will need to reinvent themselves, opening more distribution channels beyond the store».
In the same debate, Pedro Lancastre, from JLL, witnessed the real estate development recovery, after having stopped during the pandemic and he sees positive signs in the logistic and office segments. He is convinced that «we have a good atmosphere, within a more mature and resilient market, with Portugal more and more under the radar», which, according to Pedro Rutkowski, from Worx, «was never as frequent as right now».
Paulo Silva witnessed «a very intense activity» on real estate investment and development products, especially with the latter: «it is a shelter behaviour which allows betting on a product which will be ready after the pandemic».
Francisco Horta e Costa, from CBRE, said he was convinced «we will not live 2020 in crisis mode, surely not like the last one. The signs we have at the start of 2021 are moderately optimistic, we see a market that is working, with many positive signs, especially housing and offices, and with a rather dynamic investment market».
«Build to rent» with untapped potential
Build to rent is perhaps the second most in demand segment to invest right now, right after logistics.
Pedro Rutkowski has no doubts regarding the potential this segment can have in Portugal: «the question is always: taxes and a very interventive State, with little dynamic for creating operations with private companies and a very complex legal system». And he defended stimulating the public-private partnership concept, so as to «accelerate» the housing offer. Paulo Silva considered that «the State should only act where the economic agents do not and create the conditions for investment to be attractive».
Pedro Lancastre believes asset prices within the different segments are in line with investors’ expectations, with the possible exception of multifamily: «the future rental prices cannot be in line with investors’ expectation, within a 10% to 15% divergence. We know this market is still very green in Portugal», he justified.
Providing some market context, Confidencial Imobiliário’s Ricardo Guimarães, pointed out the market’s resilience and the fact that, despite the pandemic, housing prices slowed down in their increases, but did not drop, with the latest numbers pointing towards a 2.6% yoy increase in February. On the other hand, there were drops in Lisbon and Porto’s city centres, more dependent on tourism. And peripheral cities, such as Oeiras, are growing, 15% in this case.
Offices will continue, for «dozens of years»
«We will have to live with offices for dozens of years», stated Paulo Silva, dispelling the idea that remote work is here to stay.
According to him, «the least agreeable thing about being employed is the time and costs necessary to commute. And after people started working from home, it will be a challenge to bring them back. That is why it is very important to highlight the concern with the quality of collaborative spaces», a trend which was accelerated by the pandemic.
Pedro Rutkowski attested that «demand remains higher than expected», because of the pandemic. «Offer is starting to be differentiated, with more energetic and environmental concerns», and he does not see an effective reduction of the area per worker. He also highlighted that «Portugal is in a very favourable position in terms of competitiveness».
In Porto, João Nuno Magalhães predicts occupancy rates will be similar to those of 2020. «we are reasonably optimistic».
Pedro Lancastre also believes prices will remain firm in this segment, and that «a leased office building would be worth as much or more this year than last year», despite all the uncertainty.
Nevertheless, «we need quality offices», recalled Paulo Silva, according to whom «developers are very proactive in the search for terrains», in particular in Lisbon, where «it is already practically impossible to find offices to rehabilitate in quantity and quality».
APPII concerned with State’s lack of support to companies
Hugo Santos Ferreira, from APPII, left in this webinar a sentiment of confidence in the market, but also some concern with public investment policies or the State’s intervention on the market.
He believes that, «right now, for many investors, the main enemy is not the pandemic, but rather the State, from whom investors have been running away due to the bureaucracy».
On the other hand, regarding the Recovery and Resilience Plan, or the Long-term Building Recovery Strategy, he is concerned with the fact that they don’t include «green bonds», because «it is important to remember our new public policies are paid with European funds, all based on sustainability and circular economy. We appeal to the unification of all large real estate developments which may assist our public policies and our rulers in fixing the country’s issues. We find it strange that there are no subsidised loans through these "green bonds" for this type of operations». This is due to the fact that, mainly in terms of housing, «the offer will not be enough to cover the country’s needs. The state has always shown us it is not a good real estate developer, and developers and investors want to be a part of the national public strategies. To disregard the private sector in these public policies makes us fear for the future», he shared.