LISBON & PORTO OFFICE& INVESTMENT HALF-YEAR 2018

Transcription

1 LISBON & PORTO OFFICE& INVESTMENT HALF-YEAR 2018

2 2 H1 Portugal EXECUTIVE SUMMARY Portugal s property market continues to experience a growth surge, increasingly exceptional in Europe. The office market, both in Lisbon and Porto, are on course to, once again, break records at the end of the year. The investment market will follow the same upwards path and with 6 months left, investment volume is already close to the end of last year s figures. The second half of 2018 will prolong the exceptional upwards path, Portugal s property market has been experiencing Gustavo Castro Research Prime rents threatening to reach all-time highs, absorption breaking records on a yearly basis and prime yields decreasing from already all-time lows, is the portrait of Lisbon and Porto office markets. All this, in heavily constrained markets on the supply side, which has not been responding adequately to a demand surge, proving to be unable to accommodate a rapidly increasing international demand. After years with a lacklustre office pipeline, Lisbon s office market will have m² of new office space by the end of the year, while, in Porto, there will be, almost m², of new office space by the end of The appetite for larger office areas is also a common characteristic of both cities, while further highlighting the increasing international demand. Multinational companies arriving in Lisbon and Porto, international hotel chains seeking to open hotels in Porto and Lisbon, tourists breaking records, immigrants searching for appealing tax benefits have all combined to drive Portugal s property market upwards. As the property market goes up, international investors are discovering a safe-haven, where returns are still relatively higher than in more mature European markets and prices, while close to all-time highs, remain competitive in the European scene. All this in an expanding economy, where unemployment is low. However, it is ill-advised to turn a blind eye to the winds from Europe. Inevitably, the tide will turn and the property market will slow down. But that is not in Portugal s near horizon and, certainly, H2 will continue H1 upwards trend.

3 3 LISBON 2017H2 2018H1 TREND Office Take-Up m² m² 2017H2 2018H1 TREND Office Take-Up m² m² PORTO Portugal H1 Office Prime Rent 20,50 eur/m² 21,75 eur/m² Office Prime Rent 13,50 eur/m² 14,50 eur/m² Office Vacancy Rate 8.58% 8.10% Office Vacancy Rate 9,00% 8,50% INVESTMENT 2017H2 2018H1 TREND Investment Volume 950 m eur m eur Office Prime Yield (Lisbon) 5,25% 5,00% Office Prime Yield (Porto) 7,25% 6,75% High Street Retail Yield 5,00% 4,75% I&L Yield 7,50% 7,25% Sources: : Colliers International

4 4 H1 Lisbon FIGURE 1: NEW STOCK AND PIPELINE (M²) Pipeline New Stock FIGURE 2: VACANCY RATE AND VACANCY (M²) ,3% 12,1% 11,1% 10,2% 8,6% 8,1% 0 FIGURE 3: RENTS (EUROS/M²) Prime CBD Prime Periphery 20,50 21,75 18,50 18,75 18,50 18,50 11,50 11,50 11,50 12,50 13,50 12,50 Sources: Figure 1: Colliers International, LPI Figure 2: Colliers International, LPI Figure 3: Colliers International, LPI

5 5 HIGHER STOCK GROWTH STILL NOT ENOUGH For the first time in 7 years, total office New office space in H1 was spread stock is expected to increase more than throughout the city, with new buildings m². Still, it will be a mere 1,3% in Zones 1, 3, 4, 5 and 7. increase on total office stock. The size of the local market is The absence of relevant, internationalstandard, office developments has been in Zones 1 and 5, accounted for half of highlighted by the fact 3 office buildings restricting market s growth, limiting new office stock. demand driven expansion. Over the past 7 years, new supply has The largest building to be developed in been predominantly introduced in the a long-time will enter the market in H2 CBD, with larger vacant areas in the (Avenida Fontes Pereira de Melo). periphery (Zones 6 and 7). Lisbon H1 VACANCY DOWNWARD TREND CONTINUES Vacancy rate again, reached a 10-year low, closing H1 at 8,10%. Across the city, vacant areas have been dropping steadily. Since 2015, vacant areas diminished more than m², with the CBD accounting for more than two thirds of that reduction. Vacant new offices remain irrelevant, representing no more than 2% of total. The best performing area is Zone 5 (vacancy rate below 2,5%). Over the last 12 months, supply increased in Zone 5, for the first time since 2012 and, still, vacancy rate dropped (total vacant area below m²). Vacant areas in the periphery (Zone 6) have also dropped in 2018, with less m² available. PRIME RENTS UPWARD PATH DOES NOT SLOW DOWN With a stagnant office supply and a rapidly growing demand, prime rents in the CBD have increased 15% over the past 2 years. In the periphery, prime rents were also on an upwards trajectory until H1. With zone 6 accounting for a quarter of all office space occupied in Q2, a slight descent in periphery prime rents was recorded. At this point, average rents in the periphery have also decreased, approximately, 15%. In the remaining areas of the city, average rents have been increasing for a long time, with Zones 1 and 5 recording the highest average rents. The maximum rent was achieved, again, in Zone 1, prolonging a long-time trend.

6 6 H1 Lisbon FIGURE 4: OFFICE TAKE-UP FIGURE 5: % TAKE-UP BY MARKET top % AVAILABILITY BY MARKET bottom Zone 1-4 (CBD) Zone 5 (Parque Nações) Zone 6-7 (Periphery) 59% 14% 27% Zone 1-4 (CBD) Zone 5 (Parque Nações) Zone 6-7 (Periphery) 41% 2% 57% FIGURE 6: CHANGE AND SECTOR TAKE-UP left CHANGE AND REASON BEHIND TAKE-UP right Others 1 pp Lawyers 16 pp Health 6 pp Financial Serv. 6 pp TMT's 8 pp Corporate Serv. 21 pp New Company 1 pp Expansion 10 pp Relocation 11 pp Sources: Figure 4: Colliers International, LPI Figure 5: Colliers International, LPI Figure 6: Colliers International, LPI

7 7 TAKE-UP FOLLOWS LAST YEAR FIGURES In H1, total take-up was just about the Deals larger than m² accounted same as in 2017H2. Given take-up in H1 for more than two thirds of total office is, usually, lower than in H2, total office take-up, up from 61% in take-up is expected to go up by the end On the other hand, deals smaller than of the year. 500 m² accounted for 17% of total deals, When comparing 2017H1 with 2018H1, a down from 24% in growth rate of 11% was achieved. 30% of all deals were closed for offices The preference for larger areas between and m². expanded further, with the average deal closing above 800 m² for the first time. Lisbon H1 PARQUE DAS NAÇÕES LED IN H1, BUT NOT FOR LONG After 2 irrelevant years, Parque das Nações came under the spotlight again, accounting for 14% of total take-up. The largest deal was recorded in this zone, with Teleperformance occupying m² at new building Infante D. Henrique. However, with less than m² available and no new building in the pipeline, this is not a trend expected to continue in H2. Lisbon s CBD is clearly predominant, even if it decreased office take-up overall weight by 10 pp. The periphery take-up remained virtually unchanged, absorbing a little under m² ( m² in 2017). The smaller average deal is also recorded in the periphery, close to 665 m². NEW COMPANIES AND EXPANSIONS DRIVE THE MARKET New companies in Lisbon have been increasing for 2 years, accounting for 12% of total office take-up. Companies expanding their premises have recorded a significant increase, however merely compensating a strong 2017 downwards adjustment. After a surge last year, lawyers and healthcare office facilities dropped back to 2016 figures. Financial services and state related office facilities are rapidly becoming irrelevant in the local office market. Corporate Services and TMT s were responsible for more than 60% of total office take-up. Since 2015, this is an ongoing trend, briefly interrupted in 2017, which highlights Lisbon s new office specialisation profile.

8 8 H1 Porto FIGURE 7: NEW STOCK AND PIPELINE (M²) Total Stock New Supply FIGURE 8: PERCENTAGE TAKE-UP BY SIZE BAND 2018 H H1 57% 16% 7% 11% 10% > m² m² m² m² m² 500 m² m² < 500 m² FIGURE 9: RENTS (EUROS/M²) Prime CBD 12,50 12,25 12,25 Prime Periphery 12,75 13,50 14,50 8,50 9,00 9,50 9,75 10,25 11,00 Sources: Figure 7: Colliers International Figure 8: Colliers International Figure 9: Colliers International

9 9 OFFICE DEVELOPERS REDISCOVER BOAVISTA Porto s office stock will record the Porto s office CBD has been, for largest leap in years, increasing overall decades, Boavista. However, Boavista is office stock by 6%. a consolidated and highly sought after area, hence new developments were And, in 2019, local office stock will scarce and, predominantly, tourism or increase even more, with a couple residential driven. of new developments expected to introduce an additional m² into The recent performance of the office Porto s office market. market (low vacancy in Boavista) has been shifting this preconception, with The most remarkable fact of Porto s more than m² expected to enter office expansion lies upon the location of the market, in the Boavista area. new office developments. Porto H1 TAKE-UP WILL BREAK RECORDS AGAIN In H1, Porto s office take-up has virtually matched total take-up in Following last year s trend, another large deal was completed, with BNP Paribas agreement to occupy Urbo Business Center accounting for just under half of total take-up. Urbo Business Center, close to the most important shopping centre in the north (NorteShopping) is expected to be completed in BNP Paribas deal was not the only one to be completed in that size band. Despite smaller offices take-up gained some traction - going from 10% of total take-up to a little above 20% - larger offices take-up is still prevalent. International companies continue to arrive in Porto, keeping alive a trend that is not expected to slow down, soon. PRIME RENTS CLOSE IN ON ALL-TIME HIGH Prime rents continue to increase, with virtually no vacant space in the CBD. The highest office rents are achieved in the best office buildings, in Boavista, predominantly, where tenants on lease ending agreements, try hard to secure the office space they occupy. The occupancy in the city centre has also been reverting a long time trend, driving local office rents up. The increased demand has also spread to the best buildings in the periphery (Matosinhos, Maia or V. N. Gaia), leading periphery rents upwards. Smaller local companies priced out of more central locations or newly arrived companies, for which location is not key, have been inducing this growth surge.

10 10 H1 Investment FIGURE 10: TRANSACTION VOLUMES Transaction Volume (million euros) Number of Transactions H FIGURE 11: PROPERTY INVESTMENT BY DEALS BAND > 250 m 150 m m 100 m m 50 m m < 50 m H1 FIGURE 12: PROPERTY INVESTMENT BY TYPE left BY REGION right 2% Others 34% Offices Others Porto 1% 6% 14% Hotels Lisbon 87% 50% Retail Centre 4% Algarve 3% Sources: Figure 10: Colliers International, RCA Figure 11: Colliers International, RCA Figure 12: Colliers International, RCA

11 11 PORTUGAL SHINES IN A SLUGGISH H1 Europe s H1 recorded 110 billion euros in real estate transactions, dropping almost 20% from last year s. Germany and UK, responsible for more than half of total property investment in Europe, decreased 30 and 10%, respectively. Out of the top 20 countries in Europe, half recorded drops higher than 25%, from last year, including, for example, Spain. The general feeling is one of slowing down across Europe, with Chinese investors and sovereign wealth funds acquiring less property. Portugal is among the few bright spots in Europe, with overall investment volume close to breaking last year s record, already surpassing 1,5 billion euros. The sunny investment landscape has even brought back deals above the 250 million euros threshold, absent from Portugal s market since Hence, the average investment deal also sky-rocketed, going from around 30 million euros to 50 million euros. International capital supplied 95% of total property investment, with British and French money accounting for 70% of total. Despite Europe s struggles, Portugal s rapidly growing trend is not expected to slowdown anytime soon and, certainly, not in H2. The record-breaking sale of Almada Forum, already completed in H2, will help drive Portugal s property investment upwards in H2. Investment H1 LISBON AMONG BEST PERFORMERS Lisbon captured almost 90% of Portugal s overall property investment. This surge propelled Lisbon into the top-15 of Europe s most active property markets, ahead of Milan, Copenhagen or Oslo. The gap between Lisbon and other regions is remarkable, with Porto, although second, not surpassing 100 million euros in property investment. Porto s predominant real estate investment is hotels, accounting for 75% of total investment in the region. Porto s hotel investment represents 35% of total hotel investment in Portugal. Hotel investment, already up 37% from end of year 2017 volume, accounts for 15% of all property investment in Portugal. Retail, also up 6% from 2017, represents half of total property investment, with 6 shopping centres changing ownership in H1, representing 86% of total retail investment. Coincidentally, or not, 4 of those 6 shopping centres were located in Lisbon and represented 80% of total retail investment. Office investment closed H1 above 500 million euros, largely thanks to Kildare s acquisition of Lagoas Park. Lisbon concentrated virtually all office investment in the country, with Porto recording one major deal, close to Avenida da Boavista. Immochan, acquiring 3 assets from Blackstone, and Ores Socimi, were the most active investors in Portugal.

12 12 H1 Investment INVESTMENT ORIGINS 50M NA 80M PT 180M ES 100M ME 20M DE 670M FR 440M UK Sources: Colliers International, RCA

13 Joaquim Chambel FOR MD Portugal MORE INFORMATION Gustavo Castro Head of Research Portugal Vasco Carvalho Offices Portugal Colliers International is top tier global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals. Colliers is the fastest-growing publicly listed global real estate services and investment management company, with 2017 corporate revenues of $2.3 billion ($2.7 billion including affiliates). Colliers has been operating in Portugal for more than 2 decades under Grupo IPG affiliation. With an enterprising culture and significant employee ownership and control, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide, and through its investment management services platform, has more than $20 billion of assets under management from the world s most respected institutional real estate investors. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing firms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services firm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row. This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. This report does not constitute and must not be treated as investment or valuation advice or an offer to buy or sell property. For the latest news from Colliers, visit colliers.com or follow us on and LinkedIn. Colliers International Largo das Palmeiras, Lisboa All rights reserved. Research & Forecasting