Jll annualreport2016

Page 1

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

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


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