JLL OFFICES Lisbon Edifício Heron Castilho Rua Braamcamp, nº 40 - 8º 1250-050 Lisboa Tel: +351 213 583 222
Market
Porto Edifício do Lago, Bloco B Rua Prof. Mota Pinto 42S, Escritório 1.11 4100-353 Porto Tel: +351 225 431 099
PEDRO LANCASTRE
PATRÍCIA ARAÚJO
MARIANA ROSA
FERNANDO FERREIRA
Managing Director pedro.lancastre@eu.jll.com
Head of Retail patricia.araujo@eu.jll.com
Head of Office Agency & Corporate Solutions mariana.rosa@eu.jll.com
Head of Capital Markets fernando.ferreira@eu.jll.com
PATRÍCIA BARÃO
MARIA EMPIS
FERNANDO VASCO COSTA
KARINA SIMÕES
Head of Residential patricia.barao@eu.jll.com
Head of Strategic Consultancy & Research maria.empis@eu.jll.com
Head of Development Solutions fernando.vascocosta@eu.jll.com
Vice-President, Portugal Hotels & Hospitality karina.simoes@eu.jll.com
Market 360˚ | Real Estate Portugal - January 2017
360˚
Real Estate
AMI 8654
www.jll.pt
PORTUGAL
COPYRIGHT © JLL IP, INC. 2016. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them. Printing information: paper, inks, printing process, recycle directive.
January 2017 Bi-annual Publication
INDEX INTRODUCTION 3 ECONOMY 4 OFFICE 7 RETAIL 13 INVESTMENT 19 RESIDENTIAL 23 DEVELOPMENT 29 HOTELS 31
PEDRO LANCASTRE MANAGING DIRECTOR
If more industries in Portugal were to demonstrate the health and performance indicators of our real estate, we would definitely be one of the most solid countries in the European Union. Portuguese real estate is going through a remarkable stage and everything indicates that it is going to be a lasting one. Investors’ strong interest in Portuguese real estate is committed. If we are able to understand and support their investment strategies with no major changes in fiscal policy, there are not many reasons why this positive wave should not continue. The liquidity barometer of commercial real estate is indicative of this growth. Taking into account the business pipeline for 2017 with all things remaining equal, investment levels should exceed a billion for the third consecutive year, a barrier only once surpassed in the past, in 2007. The occupational sectors which support this positive investment dynamic, are also going through a positive period. Demand remains active in offices and retail whereas in the residential and hotel sectors, the speed of apartment sales and new hotel openings is absolutely extraordinary. There are, however, some challenges ahead but a good reaction is expected from the several parties involved. I highlight only 3 of them: 1) The lack of new offices and pipeline can damage not only real estate but also national economy. If international companies are not able to find modern, fully-equipped offices that completely meet their requirements and their high quality standards in our market, they will quickly look for alternatives elsewhere to set up their businesses. 2) Another major challenge is the real estate development of large existing plots in Lisbon, such as the Feira Popular, Amoreiras and Alcântara, among others. These large-scale projects require development from the root and, in addition to revitalizing these areas, constitute an essential structuring element for the entire city. 3) The third major challenge, from a political and macroeconomic nature, is related to the stability of our country. Ratings of international agencies and purchase of debt by the ECB are not directly controlled by us. On the contrary, fiscal stability depends entirely on internal will. These are two fundamental pillars where any change strongly impacts the stability of the country. I believe that all entities competent to influence the course of these events will rise up to the challenge and that we will have another extraordinary year in real estate.
Market 360° Portugal
3
ECONOMY Year of uncertainties with a positive outcome According to the Bank of Portugal, GDP grew by 1.2%, which is below the forecast and below the growth recorded in 2015 (1.5%). The external market carries on making crucial contributions, while the internal component, due to some budget constraints, has evolved less dramatically. The economic growth of the country was mostly affected by the investment, reflecting some expectations from investors and employers about the evolution of the Portuguese economy. Nevertheless, unemployment followed its downward path, a consequence of labor legislation recently approved to give the market more leverage. In the budget plan, the public deficit is expected to close out with a value below 3%, allowing Portugal to exit the excessive deficit procedure. This slight reduction of the deficit was mainly
4 Market 360° Portugal
achieved by an increase in revenue, namely through an increase in indirect taxes, the “tax pardon” launched at the end of last year and some public expenditure captivity.
2017 and under pressure factors The country remains under surveillance by the European institutions and the DBRS, the only financial agency credited by the ECB that keeps Portugal above “junk” level. 2017 is expected to run in line with what was registered in 2016: financial constraint and modest economic growth. This year will also be dependent on some geographical expectations. After three unexpected political outcomings, decisive elections will take place in Germany, France, Italy and the Netherlands, all of which will test the true union and the political and economic project of the European Union.
ANNUAL GDP GROWTH % 2
1.6%
1.5%
1.4%
1.2%
0.9%
1
2016
1.5%
1.2%
0 -1 -1.3%
-2 -3
-2.9%
-1.4%
-3.2%
-4 2009
2010
2011
2012
2013
2014
2015
2016 f
2017 f
2018 f
Source: Bank of Portugal
UNEMPLOYMENT RATE % 20 16.2%
15.5%
13.9%
15
12.7%
12.4%
10.8%
10
11.2%
10.7%
9.5%
7.6%
5
0 2008
2009
2010
2011
2012
2013
2014
2015
2016 f
2017 f
Source: Statistics Portugal; Eurostat (forecast)
PRIVATE CONSUMPTION 2.1% 1.7% 1.3%
2016 f 2017 f 2018 f
EXPORTS 3.7% 4.7% 4.7%
INFLATION RATE 2016 f 2017 f 2018 f
€
0.8% 2016 f 1.4% 2017 f 1.5% 2018 f
Source: Bank of Portugal Market 360° Portugal
5
6 Market 360° Portugal
OFFICE MARKET
TOP 5 DEALS
Trends 2017 SANTANDER TOTTA BUILDING New Offices Area
Zone 3
MARIANA ROSA
TENANT
OPERATION TYPE
Santander Totta
Expansion Area
TORRES DE LISBOA New Offices Area
Zone 3 HEAD OF OFFICE AGENCY & CORPORATE SOLUTIONS
This year, the office market should present the same dynamism observed in 2016. Companies are still active in the search for offices and there is in fact a great demand for large areas, especially by international companies choosing Lisbon and Porto to set up their shared services centres. Portugal is extremely competitive to host this type of facility. Comparing to other European cities, our country shows several competitive advantages, not only financially but also in terms of quality of life. However, the shortage of supply in some areas and the insufficient quality of many available spaces may soften international demand. I believe, therefore, this is a very opportune and crucial moment to develop new office buildings or refurbish old ones. A good example is the Lisbon riverside zone, which became an emergent area in the office sector due to the construction and refurbishment of office buildings, giving new life and a new face to this zone with great potential.
9,800 sq m
7,887 sq m
TENANT
OPERATION TYPE
Manpower
Expansion Area
TORRE OCIDENTE New Offices Area
Zone 3
6,122 sq m
TENANT
OPERATION TYPE
BNP Paribas
Expansion Area
ELEVO BUILDING, ALFRAPARK Western Corridor
Zone 6
5,889 sq m
TENANT
OPERATION TYPE
Nokia Solutions
Office Change
TORRES DE LISBOA New Offices Area
Zone 3
5,137 sq m
TENANT
OPERATION TYPE
Global Media Group
Office Change
Source: JLL / LPI Market 360° Portugal
7
The office market remained dynamic throughout 2016, having been greatly impacted by large transactions. The total volume transacted in 2016 was in line with the previous year and not higher mainly due to the low level of available quality stock with relevant size. The market activity was noticeable in the zones that
have a greater supply of large office spaces. The New Offices Area, which historically did not show a high volume of take-up, became the most active zone in 2016 due to the availability of a large area of great dimension. Although all sectors are showing high levels of activity, call centres and back office services companies are the ones that most contribute to this dynamic.
TAKE-UP VOLUME sq m 232,623
NUMBER OF DEALS
201,432 200,000
144,513 146,742
150,000
201
126,529 115,628
105,057
101,974 87,649
100,000
77,802
50,000
0 2007 Source: JLL / LPI
8 Market 360° Portugal
2008
2009
2010
2011
2012
2013
2014
2015
2016
TAKE-UP
EVOLUTION
2016
2016 vs. 2015
NET TAKE-UP 2016
146,742 sq m
+1.5%
54%
Source: JLL / LPI
TAKE-UP BY ZONES
DEAL AVERAGE AREA
2016
2016
15%
ZONE 1
20%
e
g era Av
ZONE 2
2013
730 sq m 2015
2014
30%
2016
ea Ar 562 sq m
35
529 sq m
28
418 sq m
ZONE 3
qm
23 13
5%
als
De
ZONE 4
s 00
,0
e1 ov b a
5%
ZONE 5
17%
ZONE 6
8%
ZONE 7
Source: JLL / LPI
NEW SUPPLY
PIPELINE
sq m
2017 and 2018
90,600 sq m
140,000
TOTAL
120,000 100,000 80,000
77,651
67%
85,604
SPECULATIVE
61,270
60,000 34,631
40,000
21,705
41,100
49,500
21,485 21,061 23,779
20,000 0 2009
2010
2011
2012
2013
EXISTENT
2014
2015
2016
2017 f 2018 f
PIPELINE
Source: JLL Market 360° Portugal
9
Among the operations carried out in 2016, the net take-up dominated, represented by several expansion area operations and by the entry of new companies in the Lisbon region. Its share increased compared to previous years, which reflects the performance recovery period that most companies are profiting from. The average area per operation has increased again, thus confirming the mentioned trend, with a number of operations above 1,000 sq m that sits closer to the values registered in the pre-crisis period. In the face of this evolution, although still scarce, the completion of new office buildings is now beginning to emerge. In 2016, three buildings were completed: the Building 9 of Lagoas Park, in Zone 6 (with 4,900 sq m), the D. Luis I Building, in Zone 4 (with 10,000 sq m) and the Santander Building II, in Zone 2 (with 8,600 sq m). Among these, the first two were speculatively developed. Until the end of 2018, the new speculative supply will increase, which demonstrates the confidence developers are placing in the positive evolution of the office market. The Historic & Riverside Zone are gaining notoriety as a new location to install companies. To meet demand in this area, several office projects are underway, bringing in new 30,000 sq m in total, none of them, however, speculative.
Since the peak registered in 2013, the vacancy rate has already decreased by 380 bps, the lowest value since 2009. The timid development of new high quality buildings, coupled with market dynamism, are at the origin of this decrease, leading to the occupation of offices that have long been in the market and that despite the non-prime location, match the demand requirements, namely large areas per floor. The highest availability decrease was felt in Parque das Nações, which is today the zone with the least available area. The consolidation of growth in the sector has brought to the market a greater negotiating balance between tenant and landlord. From this perspective, there has been a gradual reduction of incentives consequently leading to an increase in rents, with 2016 continuing the positive trend initiated in 2015.
STOCK 2016
4.64M sq m
VACANCY RATE %
LISBON
30.0
2016
25.0
22.5%
20.0 15.0
10.1%
10.1% 9.3% 8.5% 7.0% 7.0% 3.6%
10.0 5.0 0.0 2007
2007
2008
2008
PRIME CBD
Source: JLL / LPI
10 Market 360° Portugal
CBD
2009
2009
2010
2010
NEW OFFICES AREA
2011
2011
2012
2012
HISTORIC & RIVERSIDE ZONE
2013
2013
2014
2014
PARQUE DAS NAÇÕES
2015
2015
WESTERN CORRIDOR
2016
2016
TOTAL
PRIME RENT €/sq m/month €21.00
€18.50
€18.00
€18.00
€18.00 €16.00
€18.25 €15.00
€15.00 €14.50
€14.50
€15.00
€15.00
€14.00 €13.00
€14.50
€12.00
€10.00 PRIME CBD
CBD
NEW OFFICES AREA
Q4 2016
HISTORIC & RIVERSIDE ZONE
2013 LOWEST VALUE
PARQUE DAS NAÇÕES
WESTERN CORRIDOR
2007 HIGHEST VALUE
Source: JLL
PRIME RENT 2016
18.5€/sq m/month
Parque das Nações and the Western Corridor were the zones with the highest rent fluctuation from the lowest peak, but for different reasons. In Parque das Nações, the increase in rents was due to the significant reduction of available space during the previous years, originated by the evolution in demand and the lack of new supply. In the Western Corridor, although vacancy remained high, the increase in prime rent was mainly influenced by the strong levels of demand for a higher quality offer. Despite having remained stable during 2016, Prime CBD showed a positive evolution which will impact the future, namely with the lease of the entire Torre da Cidade building (with 19,500 sq m), located in Av. Fontes Pereira de Melo (Zone 1).
The office market in Porto is also enjoying a strong evolution on the demand side.
Natixis, for example, occupied 5,200 sq m in the Santos Pousada building, and several companies such as call centres and back office services are in fact very active searching for office spaces. Their main requests being: proximity to public transports, large spaces per floor, good technical infrastructures and attractive rents. The combination of all these factors has been difficult to find with the current offer, and for that reason several pipeline buildings are arising to meet the required and expected conditions, such as the Urbo Business Center project, located next to the NorteShopping, presenting more than 2,000 sq m per floor and 11,000 sq m in total, of available offices. Rents have remained stable, with growth prospects, even with slight increase, one of the competitive advantages of the Porto market.
Market 360° Portugal
11
OFFICES ZONES LISBON
ORIENTE
CR IL/I C17
LISBON AIRPORT
Av. de Be rlim
ALVALADE
a Rom
CIDADE UNIVERSITÁRIA
Av. Lusíada
ROMA
rech
al G
ome
s da
Cos
ta
Av. E. U. A. a Repúblic Av. da Outubro
os
Av. 5 de
.d Av
AREEIRO
ten
ba
m Co
CAMPO PEQUENO
tes
2.ª Circular
rna
e eB
ue
d Av.
IL/ IC1
7
SETE RIOS
nriq
COLÉGIO MILITAR
Av. Almirante Gag
B do Av. de Av.
BENFICA
il
ras
CAMPO GRANDE
OLIVAIS
Av. Ma
tável ontes nto C Av. Sa
l Eixo Norte-Su
AMADORA
r
ircula
2.ª C
o Coutinho
PONTINHA
Reis Av. Almirante
mp
nca raa
R. B
e
ad
rd
ibe
R
no
ula
erc
H A.
aL
R.
MARQUÊS DE POMBAL .d Av
RATO
r uia Ag
a
Pi
Alm
A.
uiar
A. Ag Av. Joaquim
ria
iran
nio ntó
PARQUE EDUARDO VII
AMOREIRAS
a .M
SALDANHA
te D
CR
.A Av
PRAÇA DE ESPANHA
A5
. He
Av. Duque D’Ávila
A5
MONSANTO FOREST PARK o Av .I
nf
an
te
Sa
nt
e Av. de Ce ut
a
Av. da Po nt
bertas Desco Av. das
7 IC1 IL/ CR
TERREIRO DO PAÇO CAIS DO SODRÉ
lho Av. 24 de Ju
BELÉM
CHIADO
arlos I
C Av. D.
ALGÉS
SANTA APOLÓNIA
BAIXA
TAGUS RIVER
a
di Av. da Ín
A2/SUL ALGARVE
25 DE ABRIL BRIDGE
ZONE Prime CBD CBD New Offices Area Historic & Riverside Zone Parque das Nações Western Corridor
Source: JLL / LPI
12 Market 360° Portugal
TAKE-UP sq m
VACANCY RATE
21,086
7.0%
PRIME RENT RENT FORECAST €/sq m/month 18.50
27,981
8.5%
15.00
43,375
9.3%
15.00
4,246
7.0%
14.50
7,282
3.6%
15.00
25,644
22.5%
12.00
RETAIL MARKET
TOP 5 NEW OPENINGS
Trends 2017 FOREVER 21 Centro Colombo, Lisbon
1,200 sq m
1ST STORE IN PORTUGAL
PATRÍCIA ARAÚJO
VERSACE Avenida da Liberdade, Lisbon
472 sq m
HEAD OF RETAIL 1ST STORE IN PORTUGAL
The New Year starts with very good perspectives for the retail sector, benefiting from a direct impact from both the tourism and real estate investment dynamism in this segment, already showing results. We are definitely moving into an expansion period of new international brands, but the Portuguese population has also surprised us with new cosmopolitan concepts. Demand is huge and the market is responding effectively. In shopping centres, there are expansion projects lined up to welcome these brands, as well as changes of image necessary to keep projects appealing to consumers. The consumption experience has gained an importance that goes far beyond the purchase itself, which forces shopping centres in operation to surprise their visitors, even those with good results. A note for Porto: it is foreseeable that 2017 will keep the on-going renovation of the high street retail sector, bringing an extension of the commercial streets beyond Santa Catarina and Clérigos, which will gain a new life.
BRANDY & MELVILLE Chiado, Lisbon
365 sq m
1ST STORE IN PORTUGAL
ADIDAS Restauradores, Lisbon
300 sq m
2ND HIGH STREET UNIT SHOP IN PORTUGAL
ARMANI EXCHANGE Santa Catarina, Porto
600 sq m
2ND HIGH STREET UNIT SHOP IN PORTUGAL
Source: JLL Market 360° Portugal
13
Retail developments
After a few years without the completion of new shopping centres, in 2016 two projects were concluded: the Nova Arcada and Rio Retail Park. For 2017 and 2018, two new shopping centres and the NorteShopping expansion are already planned, totaling 119,500 sq m.
The retail market remained active throughout 2016, both in the retail developments and in the high street retail sectors. In the shopping centres, the dynamism is mainly felt within the prime assets. However, some secondary assets have made an effort by reshaping and repositioning their concept, which coupled with new consumer habits, has been essential for their survival. Examples are the refurbishment of the Fonte Nova Shopping Centre and the food-courts of the Amoreiras Shopping Center and Mar Shopping Matosinhos.
The shopping centres prime rent rose in the first quarter of the year, reaching the maximum value ever recorded. This increase revealed the tenants’ growing demand on prime assets. Retail parks prime rents remained stable and should remain the same throughout 2017.
NEW SUPPLY sq m Several shopping centres are reformulating and repositioning their concept to attract retailers and consumers
400,000 300,000
318,306 296,890 214,847
200,000 94,519
100,000
112,238 78,583
0 2007 2008 2009
2010
2011
Source: JLL
14 Market 360° Portugal
21,000
0
0
6,000
0
2012
2013
2014
2015
EXISTENT
PIPELINE
98,419
2016
2017 f 2018 f
STOCK
PIPELINE
2016
2017 and 2018
SHOPPING CENTRES PRIME RENT 2016
119,500 sq m
3.6M sq m
100€/sq m/month
Source: JLL
2016 CONCLUDED PROJECTS AND PIPELINE RIO PARK MONÇÃO
10,583 sq m
NOVA ARCADA BRAGA
2016
68,000 sq m
After a few years without the completion of new shopping centres, two new projects were concluded in 2016
EXPANSÃO NORTESHOPPING MATOSINHOS
2016
21,000 sq m 2018
ÉVORA SHOPPING ÉVORA
16,419 sq m 2017
MAR SHOPPING ALGARVE LOULÉ
82,000 sq m 2017 Source: JLL
PRIME RENTS €/sq m/month SHOPPING CENTRES
RETAIL PARKS
+25%
+11%
90€
90€
2010
2011
80€
2009
95€ 85€
85€
85€
2012
2013
2014
2015
100€
10€ 9€
2016
2009
2010
9€
9€
2011
2012
9.5€
2013
10€
10€
10€
2014
2015
2016
Source: JLL Market 360° Portugal
15
High Street Retail High street retail has greatly benefited from the continuous tourism boom from the Portuguese consumer habits, but also from the dynamism created by the leasing law amendment coupled with the general improvement of economic conditions.
+
Tourism Growth
+
New Consumer Habits
+
Better Life Conditions
+
Leasing Law Amendment
The historical zones stood out the most, yet some residential districts noted a rising dynamism, like Campo de Ourique and Alvalade. Within the historical zones, Chiado stands out as a prime zone where, given the full take-up of the main axis, secondary streets have gradually noted a rising moment, registering the new opening of 2016. Baixa is the zone that has most benefited from tourism, where the vacancy rate is very low on the main axis. However, there are still important openings throughout the year and the available spaces are quickly taken. Avenida da Liberdade shows some vacancy at the moment, given the rise in new projects resulting from
16 Market 360° Portugal
the refurbishment of several buildings. The year of 2016 registered a record with more than 10 new openings, validating the high demand in this zone. Cais do SodrĂŠ has been an up and coming zone in the trendy / alternative segment, being more geared towards restaurants. The arising of Ribeira Market and several residential projects, coupled with the recent activity in the office market, placed this zone on the map as one of the main retail zones. After the increase recorded in 2015, prime rents remained stable, with the exception of Baixa, which in Rua Augusta rose to the same level of Avenida da Liberdade. High-street Retail in Porto has been also very dynamic, benefiting from tourism. Rua de Santa Catarina, considered as a prime zone and where the mass market brands are concentrated, recorded an increase in rents throughout 2016. The zones of ClĂŠrigos, Aliados and Flores / Mouzinho da Silveira have also emerged as main high-street Retail zones, with restaurants predominating in the latter.
PARQUE DAS NAÇÕES
HIGH STREET RETAIL ZONES
MAIN NEW OPENINGS IN 2016 LISBON
LISBON MARQUÊS DE POMBAL COLINA DE SANTANA
RUA CASTILHO
AVENIDA DA LIBERDADE
RATO
MARTIM MONIZ
PRÍNCIPE REAL
CHIADO
ALFAMA
BAIXA
TERREIRO DO PAÇO
CAIS DO SODRÉ
RIO TEJO
BAIXA Benfica Paul’s Reinventing Lisbon Walkers Kiko SANTA APOLÓNIA Calçado Guimarães Geox/Sketchers CHIADO Mc Donalds Brandy Melville John Tweed Claus Porto Paez PRÍNCIPE REAL Khiel’s
Main new openings in 2016
PRIME RENT €/sq m/month
SEGMENT
Chiado
120
Trendy
Avenida da Liberdade
90
Luxury
Castilho
30
Premium
ZONE
AV. DA LIBERDADE Samsonite Rituals Loja das Meias Versace Bulgari Pinko Armani Exchange Adidas Scalpers Charcutaria Lisboa
Baixa
90
Mass Market
Príncipe Real
40
Premium / Alternative
Cais do Sodré
35
Alternative Trendy
RENT FORECAST
CAIS DO SODRÉ Segundo Muelle Muito Bey Cobre Bar Loja da Comporta CASTILHO Sá Morais Mentol Castilho 71
Source: JLL
Record of more than 10 new openings through 2016 in Avenida da Liberdade
Market 360° Portugal
17
HIGH STREET RETAIL ZONES
MAIN NEW OPENINGS IN 2016 PORTO
PORTO
SANTA CATARINA New Balance Muy Mucho
ALIADOS
Armani Exchange Adidas SANTA CATARINA
MIRAGAIA
Oysho Havaianas CLÉRIGOS Tiger
CLÉRIGOS
Calzedonia Samsonite Anselmo Joalheiros Wycon FLORES / MOUZINHO DA SILVEIRA
FLORES / MOUZINHO DA SILVEIRA
FONTAINHAS Nutellandia
Main new openings in 2016
PRIME RENT €/sq m/month
SEGMENT
Santa Catarina
60
Mass Market
Clérigos
35
Trendy
Aliados
40
Premium
Flores / Mouzinho da Silveira
30
Alternative
ZONE
RENT FORECAST
Source: JLL
Clérigos, Aliados and Flores / Mouzinho da Silveira have emerged as high street retail zones
18 Market 360° Portugal
CAPITAL MARKETS
TOP 5 DEALS
Trends 2017 CAMPUS DA JUSTIÇA, LISBON Office
235 M€
BUYER
GLA
“Family Office” International
78,600 sq m
ALGARVESHOPPING + ESTAÇÃO VIANA Retail
177 M€
FERNANDO FERREIRA HEAD OF CAPITAL MARKETS
After a year with some uncertainty that eventually dissipated, 2016 ended with a good investment volume in the context of the national market dimension, which confirms strong investor appetite. Although 2017 will demand the same financial requirements from Portugal, the year starts on a positive note, with the certainty that many investors with different profiles and diversified geographies will continue focused in our country. Thus, and given that main attraction factors relating to the sector and the market remain the same – financial market volatility, minimum interest rates, tourism growth and political stability – 2017 is expected to maintain an investment level in line with the one registered in the previous year, once again highlighting the retail and office sectors.
BUYER
GLA
CBRE GIP
64,000 sq m
CONTINENTE SUPERMARKETS PORTFOLIO Retail
164 M€
BUYER
SALE’S AREA
M&G
56,000 sq m
MONUMENTAL, LISBON Office + Retail
60 M€
BUYER
GLA
Merlin Properties
22,450 sq m
NOS BUILDING, LISBON Office
50-55 M€
BUYER
GLA
International Private
14,400 sq m
Source: JLL
Market 360° Portugal
19
2016 proved to be a year of great vitality, registering, however, lower volumes than those of 2015. Besides the fact that a lot of investment was channeled to residential development projects in the centre of Lisbon and Porto, the real reasons for this decrease seem to be related to the lack of quality of supply and the discrepancy of expectations created around the value of non-core assets, rather than to the demand itself, which
ORIGIN
continues to feel quite strong and heterogeneous regarding the type of investor profiles and their locations. It is consensually acknowledged that the almost â‚Ź 2,000 million invested in 2015 were extremely positive figures, regarding the dimension of the national market. This was originated by numerous favorable factors that came together in a single year, such as the great market liquidity, very attractive yields and a lot of core assets supply.
COMMERCIAL REAL ESTATE INVESTMENT VOLUME MILLION EUROS 1,764
2016
85
%
1,254
1,253
INTERNATIONAL
927
760
15
704
%
393
NATIONAL
2007
2008
2009
2010
190
126
2011
2012
NATIONAL Source: JLL
20 Market 360° Portugal
312
2013
INTERNATIONAL
2014
2015
2016
INVESTMENT VOLUME
EVOLUTION 2016 vs. 2015
2016
MOST ACTIVE INVESTOR 2016
1,254M €
-29%
53% INVESTMENT FUNDS
Source: JLL
INVESTMENT ORIGIN 2016
35%
UNITED KINGDOM
23% Core European investors are the most active ones
FRANCE
15%
PORTUGAL
10% SPAIN
5% USA
Source: JLL
12%
OTHERS
VOLUME BY SECTOR 2016
43% OFFICE
38%
RETAIL
INDUSTRIAL
OTHERS
3% 16% Source: JLL
Market 360° Portugal
21
PRIME YIELDS % 9.50 9.00
8.00
8.00
7.50 7.00
6.75 6.75
6.50
6.00 5.50 5.50
5.25
5.00 5.00 OFFICE
SHOPPING CENTRES
Q4 2016
22 Market 360° Portugal
RETAIL PARKS
HIGH STREET RETAIL
2007 LOWEST VALUE
INDUSTRIAL & LOGISTICS
2012 HIGHEST VALUE
Past trends have persisted: most of the invested capital comes from abroad, more than half of it served by investment funds, and the retail and office sectors continue to concentrate much of the transacted turnover volume.
countries and other classes of assets, and the gap between yields and the return on classes of risk-free financial assets, which is now 500 bps when the previous market peak (in 2007) was 100 bps, creating room for possible one-off reductions.
Prime yields have remained stable throughout the year. This stabilization is explained by the yields compression to the reality of the national market, coupled with political and economic expectations throughout the year of 2016, not only in Portugal but also in Europe and around the world. More important than the yields low level, is the downward trend observed in the last 3 years (over 250 bps), the competitive level towards other
Although the future of the global economy is still an uncertainty, with the market having reached a certain maturity, alongside prices and yields that are breaking records, the real estate sector has proven relatively immune to the many turbulences with a preservation of the repositioning factors. It is therefore likely that high investment volumes will remain in the short / medium term, above â‚Ź 1,000 million per year.
RESIDENTIAL MARKET
TOP 3 NEW DEVELOPMENTS
Trends 2017 ALEXANDRE HERCULANO 41 Lisbon
21 APARTMENTS
90% sold in 5 months DEVELOPER
Louvre Capital
PATRÍCIA BARÃO HEAD OF RESIDENTIAL
LIBERDADE TERRACES Lisbon
Given the dynamic of current demand, boosted by new markets discovering our country on a daily basis, we predict an intensive upcoming year, with an increase in transaction volume. Avenida da Liberdade, Chiado and Príncipe Real will maintain their growing demand, mainly international, whereas, the area from Baixa to Graça will keep seeing investment focused on income products mostly through tourist rental.
22 APARTMENTS
77% sold in 5 months DEVELOPER
Lantia
From a supply perspective, several differentiating projects are expected to emerge throughout the year presenting new features such as layouts, finishing, infrastructures, equipment and also currently unusual services or amenities.
ALIADOS 107 Porto
In Porto, Baixa, which presented very interesting take-up rhythms in 2016 due to a combination of domestic investment recovery and an exponential increase of international investor demand, should maintain dynamic, with an important competitive advantage – namely lower sales values than other European cities.
23 APARTMENTS
74% sold in 5 months DEVELOPER
Nickel Real Estate
Source: JLL
Market 360° Portugal
23
the growing demand in Porto, mostly focused on the city historical centre. In Lisbon, the zones of Avenida da Liberdade, Chiado, PrĂncipe Real are already very consolidated zones and mainly focused on the international market, with emphasis in the high-end & luxury segment. In that same segment, the Estoril-Cascais zone, outside the city of Lisbon, was also very active, sought after by both the domestic and international market.
In 2016, the residential market remained as dynamic as in the previous two years, if not more. At the origin of this growing trend, were investment incentives and a retake of housing loans, which positively affected international and domestic demand. Both markets were active, with different behaviors, diversifying the type of product sought and generally benefiting all areas of Lisbon and beyond. 2016 was also marked by
EVOLUTION 2016 vs. 2015
NUMBER OF HOUSES SOLD LISBON and PORTO 50,000
Q1-Q3
42,751
28
%
LISBON
23%
40,000
37,679
35,317 27,546
30,000
20,000
20,106
26,938 24,251
22,196
21,352 17,808
16,440
PORTO
32,520
13,399
13,500
15,781
13,453
10,000
0 2009
2010
2011
2012 LISBON
Source: INE
24 Market 360° Portugal
2013 PORTO
2014
2015
Q1-Q3 2016
HOUSES IN NEW DEVELOPMENTS IN LISBON
HOUSING LOANS EVOLUTION
EVOLUTION 2016 vs. 2015
NUMBER 2016
2015-2016 (JAN-SEP)
+51%
+68%
840
Source: Bank of Portugal
Source: New Developments marketed by JLL | Cobertura
BUYER’S ORIGIN 2016
35%
PORTUGAL
14%
BRAZIL
65
FOREIGNERS
43
DIFFERENT NATIONALITIES
%
7%
FRANCE
3%
CHINA
2.7%
SOUTH AFRICA
2.7%
LEBANON
35.6% OTHERS
Source: Deals closed by JLL | Cobertura
SALES VALUES €/sq m LISBON 5,250
+19%
4,750
HIGH SEGMENT
4,250 3,750
+37%
3,250
TOTAL
2,750 2,250 2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: SIR
Market 360° Portugal
25
BUYING HOUSE IN THE MAIN EUROPEAN CITIES PRIME VALUE €/sq m
27,000
18,000
12,000
10,000
8,000
LONDON
PARIS
BERLIN
MADRID
LISBON
Source: JLL Research
Baixa, Alfama, Castelo, Graça and the surroundings of the Cais do Sodré, that used to reflect poor features with a limited dynamic, are now more consolidated thus witnessing a growing demand on income products, both for tourist rental and medium-long term. Other areas, such as Avenidas Novas, Lapa / Estrela, Campo de Ourique and the riverside areas of Alcântara, Junqueira and Restelo, are mainly sought after by the domestic customer. Supply has been following this dynamism, leading to new projects resulting mainly from refurbishment. The new supply is refreshed with highly differentiated features, historical elements or even incorporated art pieces; showing services and amenities in an increasingly hybrid product due to the innovative layouts maximizing
26 Market 360° Portugal
the relationship between areas and final price. The interior areas, equipped with good finishing, infrastructures and equipment, are being designed bearing in mind their final use and the outdoor areas are increasingly valued. However, even if the supply has been following the demand evolution in the buying and selling market, the long-term rental market has registered some product shortages, thus pushing up rent values. The real estate values have increased due to such dynamism, yet it is worth noting the registered upgrade in the housing stock in the historical centre of the city. Currently, the supply corresponds to much higher standards, naturally valued by demand; and reflected in the prices that especially prime assets can reach.
PRIME RESIDENTIAL ZONES LISBON ORIENTE
IL/I C 17
LISBON AIRPORT
Av. de Be rlim
do Av.
Br
ROMA
tes ten ba om
CAMPO PEQUENO
a
ue nriq
IC1 7
iran
u Ag A.
Reis Av. Almirante
raa
H
e
ad
rd
ibe
R. B
A.
aL
R.
MARQUÊS DE POMBAL
o
lan
u erc
.d Av
nca
mp
A. Aguiar
RATO
a
Pi
iar
Ma
Alm
nio
Av. Joaquim
ria
SALDANHA
PARQUE EDUARDO VII AMOREIRAS
A5
te D . He
CR IL/
ntó .A Av
PRAÇA DE ESPANHA
A5
MONSANTO FOREST PARK
ALFAMA o Av .I
nf
an
te
Sa
nt
e
Av. de Ce ut
a
Av. da Po nt
bertas Desco Av. das
7
TERREIRO DO PAÇO CAIS DO SODRÉ
lho Av. 24 de Ju
BELÉM
SANTA APOLÓNIA
CHIADO
arlos I
CR
BAIXA
C Av. D.
IC1
ta
rn Be
Av. Duque D’Ávila
R.
Cos
AREEIRO
a Repúblic Av. da Outubro Av. 5 de
C os .d Av
de Av.
SETE RIOS
IL/
s da
Av. E. U. A.
2.ª Circular
ALGÉS
ome
vel
a
CIDADE UNIVERSITÁRIA
Av. Lusíada
al G
ntestá
Rom
COLÉGIO MILITAR
rech
to Co
ALVALADE
OLIVAIS
Av. Ma
Av. Almirante Gag
CAMPO GRANDE
de Av.
BENFICA
2.ª
asil
n Av. Sa
l Eixo Norte-Su
AMADORA
lar Circu
o Coutinho
CR
PONTINHA
TAGUS RIVER
a
di Av. da Ín
A2/SUL ALGARVE
25 DE ABRIL BRIDGE
ESTORIL/CASCAIS
ZONE
PRIME VALUE €/sq m
Chiado
5,500 – 8,000
Avenida da Liberdade
5,000 – 9,000
Príncipe Real
4,750 – 7,500
Historical Zone
4,000 – 6,500
Lapa / Estrela
4,000 – 5,500
Campo de Ourique / Amoreiras
3,000 – 5,500
Avenidas Novas
3,000 – 5,750
Colina de Santana
3,000 – 4,500
Riverside Zone
4,000 – 5,500
Restelo / Belém
3,500 – 6,000
Parque das Nações Estoril / Cascais
3,500 – 5,000 5,000 – 12,000
Source: JLL
Market 360° Portugal
27
28 Market 360° Portugal
DEVELOPMENT MARKET
TOP 3 DEALS
Trends 2017 FUNDO SETE COLINAS Lisbon
100-110 M€ GCA
72,000 sq m BUYER
German Pension Fund
FERNANDO VASCO COSTA HEAD OF DEVELOPMENT SOLUTIONS
DIÁRIO DE NOTÍCIAS BUILDING Lisbon For the current year now beginning, we expect a continuation of the previous year’s dynamics, at a moment when the Lisbon and Porto centres are already presenting finished buildings and therefore becoming more consolidated, with less development opportunities.
18-20 M€ GCA
8,600 sq m BUYER
International Developer
Following some indicators registered in 2016, we expect increased investor appetite for alternative projects to the “high-end” residential in less prime zones, destined for different residential segments, such as the domestic market or offices where a growth is expected regarding rents and students and seniors residences, taking advantage of our cities excellent conditions for their development. It is believed that the hotel and tourism market will also continue its growth, betting on the diversity of supply, supported by the increase in tourists but also by the average prices practiced.
DUQUE DE LOULÉ, 60 Lisbon
7-8 M€ GCA
7,000 sq m BUYER
Habitat Invest
Source: JLL Market 360° Portugal
29
and increasingly in the centre of Porto, for the development of prime projects, where buildings and projects transaction values have followed the growth trend of housing values in these locations.
The past year was another year of great dynamics in the real estate development market, with special emphasis on urban regeneration. Adapting and growing since 2013, the market has accompanied our country’s increasing notoriety for international investors / developers, but also, and above all, the growing interest in the residential and tourist market by international and national customers.
Also note the appearance of many investors without any real estate development track record, attracted by the low risk of these business and the prospect of better rates of return, when compared to other classes of investment assets.
Investor’s main focus continues to be in the historical centres of Lisbon
LICENSED BUILDINGS NEW CONSTRUCTION AND REFURBISHMENT WORKS REFURBISHMENT 2016 JAN-NOV
91% LISBON
73
%
PORTO
700
686
600 533
500
394
400 300
321
277
200
261 163
177 111
100
42
0 2012
2013
2014 LISBON
Source: INE
30 Market 360° Portugal
2015 PORTO
2016 Jan-Nov
HOSPITALITY MARKET
TOP 3 NEW OPENINGS
Trends 2017 MEMMO PRÍNCIPE REAL Príncipe Real
5-star ROOMS
41 OPERATOR
Memmo Hotels
KARINA SIMÕES VICE-PRESIDENT, PORTUGAL HOTELS & HOSPITALITY GROUP
PESTANA CR7 Baixa
There is a positive outlook for 2017 which will be a year of growth confirmation in the main activity indicators. On the one hand, there will be a growth consolidation in demand and, on the other hand, an increase of the hospitality supply, characterized by a greater diversity and qualification. Although all the policies and strategies implemented by the national players were essential and, in large part, responsible for this growth, it is crucial to remember the existence of exogenous factors that favored the hospitality sector; namely on the demand side, such as the difficult political, economic and social situation of some of our main competitors in the Mediterranean Basin. At this level I believe the greatest challenge for the coming year is to keep tourists loyal in order to prevent losing them once these destinations are back on track.
4-star ROOMS
82 OPERATOR
Pestana Hotel Group
VINCCI LIBERDADE
Avenida da Liberdade
4-star ROOMS
83 OPERATOR
Vincci Hoteles
Source: JLL Market 360° Portugal
31
The year of 2016 was a positive year for Portugal from a touristic point of view. The prospects of growth were confirmed, we have been awarded several high-level prizes and we have had the opportunity to reaffirm ourselves as high-standard organizers of events. In addition to these, an important driver benefiting the hospitality market was the increasing instability in competing tourist destinations, namely the Mediterranean Basin.
On the demand side, there was a general increase in the number of national overnight stays, in all tourist regions, from different home markets. Lisbon kept affirming itself as a fashionable European capital, reflecting the highest growth of overnight stays. It should also be noted that Portugal is not only attracting more tourists, but higher-level tourists as well, with a direct impact on Revenues and RevPar, thus bringing a clear benefit to the country’s economy.
OVERNIGHTS IN LISBON MILLION 9.06
10
ORIGIN 2016 JAN-SEP
81%
9 8 7
5.98
2007
2008
5.74
6.19
6.42
7.42
7.27
5 4
19
3
NATIONAL
6.11
6.80
6
INTERNATIONAL
%
8.43
2 1 0 2009
2010
2011
NATIONAL Source: Observatório Turismo de Lisboa
32 Market 360° Portugal
2012
2013
INTERNATIONAL
2014
2015
2016
Jan-Sep
OCCUPANCY RATE
AVERAGE DAILY RATE
LISBON
2016 (JAN-NOV)
REVPAR LISBON
2016 (JAN-NOV)
LISBON
2016 (JAN-NOV)
78% 2016 vs. 2015
€
+4%
91€
2016 vs. 2015
71€ +8%
2016 vs. 2015
+13%
Source: Observatório Turismo de Lisboa
OVERNIGHTS ORIGIN
19%
LISBON
2016 (JAN-SEP)
PORTUGAL
11%
FRANCE
Portugal is not only attracting more tourists, but higher-level tourists as well, with a direct impact on Revenues and RevPar
9%
SPAIN
7%
BRAZIL
7%
GERMANY
6%
ITALY
6%
UNITED KINGDOM
34%
OTHERS
Source: Observatório Turismo de Lisboa
HOTEL SUPPLY IN LISBON NO. OF ROOMS 25,000
19,371
20,000
15,000
14,828 14,163 14,583 22%
22%
23%
15,509 15,942 23%
23%
10,000
16,654 24%
17,451 23%
52%
52%
20,356
18,066 24%
24%
50%
50%
24%
51%
49%
53%
52%
52%
48%
19%
20%
19%
19%
19%
19%
23%
19%
19%
24% 6%
5%
5%
6%
5%
5%
6%
7%
7%
7%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Lisbon kept affirming itself as a fashionable European capital
5,000
0
5-STAR
4-STAR
3-STAR
2 AND 1-STAR
Source: Observatório Turismo de Lisboa Market 360° Portugal
33
HOTEL SUPPLY IN LISBON NO. OF ROOMS 800 707
700 600 500
419 400
334
300
239
215 200 101
100
94
65 0
0 2017 2-STAR
2018 3-STAR
4-STAR
5-STAR
N.D.
Source: Observatório Turismo de Lisboa
MAIN HOTELS IN PIPELINE LISBON 2017 HOTEL 1908 NO. OF ROOMS: 36
TURIM MARQUÊS DE POMBAL NO. OF ROOMS: 121 EUROSTARS CAIS DE SANTAREM NO. OF ROOMS: 91
HOTELS PIPELINE LISBON
MELIA CONVENTO DE SANTA JOANA NO. OF ROOMS: 160 TURIM BOULEVARD NO. OF ROOMS: 100
2018
23 hotels 2,175 ROOMS
MELIA LISBOA NO. OF ROOMS: 239 PALÁCIO LUDOVICE NO. OF ROOMS: 65 MOOV LISBOA CENTRO NO. OF ROOMS: 154 MOOV LISBOA ORIENTE NO. OF ROOMS: 180 Source: Observatório Turismo de Lisboa
34 Market 360° Portugal
From a supply perspective, there is a growing qualification and diversification of hotel assets. In addition to the increase registered in the opening of traditional tourist accommodation units, the refurbishment of units already in use proliferated, in order to adapt to the market’s new trends and demands. 2016 was also the year of Local Lodging affirmation as an alternative to traditional hotels, similar to what had already been observed in other European countries. Another confirming factor was the increased interest from international investors in our country seeking development of differentiated typologies of accommodation, such as student housing units. However and as expected, this euphoria around the national tourist market has impacted asset value. The difficulty in balancing supply and demand is creeping up on the market, as yields in line with those achieved in countries like Spain, France or the United Kingdom are demanded by owners even though, from an operational point of view, the KPIs are not aligned, which is consequently blocking a significant amount of transactions.
INDEX INTRODUCTION 3 ECONOMY 4 OFFICE 7 RETAIL 13 INVESTMENT 19 RESIDENTIAL 23 DEVELOPMENT 29 HOTELS 31
Market 360˚
Market 360˚ | Real Estate Portugal - January 2017
Real Estate
AMI 8654
www.jll.pt
PORTUGAL
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January 2017 Bi-annual Publication