Long live Lisbon

Turning back the pages to ten years ago and the Lisbon Europe knows today was a very different place. Similar to its neighbour, Spain, Portugal suffered greatly in the hands of the Global Financial Crisis resulting in widespread unemployment and a halting of the development pipeline across commercial and residential real estate. Nevertheless, with investment into commercial real estate standing at €3billion in 2018, and vacancy rates across the board expected to drop even lower in 2019, it is clear that appetite for this buzzing Atlantic city is back in a big way.

Boasting strong fundamentals including a great quality of life, excellent infrastructure, a thriving tourist industry, and not to mention the 300 days of sunshine a year, this city ticks a lot of boxes for investors looking to deploy capital here. The last five to six years has seen a huge increase in terms of cross border investment (which stood at 18% in 2012 compared to 90% today) – 23% of which is from Asia and 24% from France alone.

Turning now, however to specific sectors, it was offices and retail that saw the largest amounts of investment over the last 12 months – accounting for 69 per cent of the total volume.

Lisbon has become a popular choice for companies looking to expand into Iberia (take up for 2018 saw a 20% increase year on year) and, as a result, the development pipeline for prime CBD and emerging office zones has had to play catch up – almost 200,000 sq m (approx. 2,153,000 sq ft) of prime space already confirmed for the next two years. The expected entry of more new supply in the coming years will undoubtedly cause further increases in prime rent values as the capital soars in popularity with a multitude of sectors. The city’s buzzing startup scene means that there is also a lot of interest for shared office space from companies like Google, Teleperformance and BNP Paribas to save costs on rent and other overheads.

It’s a similar story in retail. The historic centre of Lisbon and the CBD remain the most visited places with streets such as Rua do Carmo averaging footfall of over 4,000 people each hour. With an increasing rise in popularity and booming tourist industry, Lisbon has fast become a solid investment option for both domestic and foreign investment. 2018 saw major players from Spain, France and the US taking an interest in a range of high street assets and shopping centres including Dolce Vita Tejo, Almada and Montijo Forum and Sintra Retail Park.

Closely linked to retail – more specifically e-commerce – the logistics sector has also seen a flurry of activity thanks to the continued rise in online shopping. Although 2018 did not see as high a level of take up as 2017 (217,257 sq m in 2017 compared to 170,040 sq m in 2018 – approx. 2,339,000 sq ft and 1,830,000 sq ft respectively), major players have been snapping up space which has resulted very low vacancy rates and a tightening of yields. This trend is expected to continue in 2019 as demand for strategically-placed industrial space increases.

So is there any bad news for this blossoming capital city? It would appear not at present. Alongside a positive outlook for the commercial real estate sector which is expected to maintain its dynamics based on capital liquidity, the city boasts strong political and economic stability as well generous tax incentives. Lisbon is expected to continue presenting itself as a market with excellent investment opportunities and good prospects for return on capital.