LISBON OFFICE MARKET
ANALYSIS OF THE MOST ACTIVE OCCUPIER SECTORS IN GREATER LISBON’S OFFICE MARKET MARCH 2009
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Executive Summary
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Overview
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TMT & Utilities
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Financial Services
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State, Europe & Associations
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Conclusions
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Contacts
Cushman & Wakefield Av. da Liberdade, 131 – 2º 1250-140 Lisbon, Portugal www.cushmanwakefield.com
Despite the current economic climate, 2008 was a record year in terms of office market activity with the highest ever recorded takeup of more than 230,000 sqm. Today’s office sector appears to be better prepared than many others to overcome the difficult economic climate that currently exists in Portugal. Past developments should be carefully examined and the most dynamic sectors in this area studied, as a lesson for the future. Sectors such as TMTs & Utilities, Financial Services, State, Europe & Associations were the most dynamic, having accounted for around 45% of recorded demand of approximately 500,000 sqm in the 2003-2008 period.
OVERVIEW 2008 was one of the Lisbon office market’s best years in terms of occupancy. In a year clouded by economic crisis in Portugal, this property subsector recorded its highest ever level of demand, with transactions of more than 230,000 sqm. Although the Lisbon Courts deal in Office Parque Expo was one of the major factors fuelling such an excellent level of performance, in the current economic climate, 2008 was also a year in which many other transactions took place. In such a climate, a careful look should be taken at past events in this market which, after years of crisis at the start of the last decade, now appears to be better prepared than other sectors to overcome the difficult economic climate, in Portugal. This Business Briefing has been produced for the purpose of analysing and characterising demand and aims to give an overview of the most active sectors in the Lisbon office market, over the last few years. An analysis of the demand recorded over the 2003-2008 period, shows that the most active occupiers in the Lisbon office market operate in three sectors of activity: TMTs & Utilities, Financial Services and the State, Europe and Associations, accounting for an average annual take-up of more than 43% since 2003. BUSINESS BRIEFING
MARCH 2009
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ANALYSIS OF THE MOST DYNAMIC OCCUPIER SECTORS IN GREATER LISBON’S OFFICE MARKET
A CUSHMAN & WAKEFIELD PUBLICATION
WEIGHT OF SECTOR IN TAKE-UP - 2003-2008
TMT’S & UTILITIES
250,000 200,000
m2
150,000 100,000 50,000 0 2003
2004
2005
2006
2007
2008
Consulting & Legal
Government, Europe & Associations
Pharmaceutical and Health
Other Services Financial Services
Consumption Products TMT's & Utilities
Company Services Not Identified
Source: Cushman & Wakefield and LPI, December 2008
The TMTs & Utilities sector includes technology, media, telecommunications, public sector and utilities companies and was the most active sector in the Greater Lisbon office market in the 2003-2008 period. 241 transactions took place since 2003, with a total take up of 183,500 sqm, representing the largest volume in terms of all sectors of activity. The average transaction area was 760 sqm, the lowest of the three sectors under analysis.
The highest level of demand recorded in this sector was in the Parque das Nações and Western Corridor office areas. This preference can be explained by the existence of new buildings, with large floorplates, designed to cater for the needs of such companies. Prime examples of this demand are two Portuguese companies occupying whole buildings located in Parque das Nações: Novabase (Caribe Building) and Sonaecom (Mar Mediterrâneo Building). Another trend appears to be the choice of Portugal, with its skilled, competitively priced labour pool to centralise several of these companies’ shared services centres, in Europe. Cisco Systems has set up a European group sales support centre in Lagoas Park, with an area of approximately 6,300 sqm, T-Systems has taken an area of 1,100 sqm in Taguspark and Fujitsu Services was the first company to lease space in Torres Colombo, with an area of 6,000 sqm. This trend is unlikely to change, with Portugal continuing to be an attractive country for such companies.
FINANCIAL SERVICES The Financial Services sector, comprising, inter alia, banks, insurance companies and brokerage services has been highly active over the last few years. It was the most dynamic sector, in 2003, in taking up more than 35,500 sqm. An area of 122,500 sqm representing 117 transactions with an average area of 1,624 sqm has been taken up since then. Lisbon is no exception to other large cities worldwide. The traditionally preferred location for Financial Services sector, is the Central Business District (CBD), with the highest rental levels and a grouping of similar types of companies which also helps to maintain the zone’s attraction. The main transaction in this sector was in the CBD, where BES Group took up 7,400 sqm in Edifício Marquês de Pombal, 3. Reference should also be made to Generali Seguros’s occupancy of 4,000 sqm of Edifício Duque de Palmela,11 and Barclays Bank’s occupancy of 5,300 sqm of Edifício Palmela. The limited supply existing in the city centre, however, occasionally forces companies looking for large areas to consider other zones. This may help to explain why companies such as Banco Cetelem occupied 5,500 sqm in Torres de Lisboa (Zone 3), with BNP Paribas having occupied 5,500 sqm in the Art’s Business Centre in Parque das Nações (Zone 5). 2
BUSINESS BRIEFING
MARCH 2009
STATE, EUROPE & ASSOCIATIONS TAKE-UP EVOLUTION BY SECTOR - 2003-2008 100,000 75,000 m2
The largest transaction of the last few years, in 2008, involved a public institution, from the State, Europe and Associations sector. 62,000 sqm of office space in Office Park Expo (Parque das Nações), was fully taken up by the Ministry of Justice. A total number of 25 departments from this ministry will be moving into this ten-building office complex in 2009.
50,000 25,000 0 2003
2004
Financial Services
2005
TMT's & Utilities
2006
2007
2008
Government, Europe & Associations
This deal had the effect of making the Source: Cushman & Wakefield and LPI, December 2008 State, Europe and Associations the most active sector in the Greater Lisbon office market in 2008, which, being responsible for transactions of 98,000 sqm, repeated its achievement of 2004 when it was also the most active sector, with transactions of 37,000 sqm. 58 transactions comprising 168,000 sqm have been completed since 2003, occupying an average area of 2,952 sqm (1,857 sqm excluding the Lisbon Courts). Parque das Nações, Zone 3 (New Office Zones) and the Western Corridor were the zones with the highest volume of area occupancy in this sector. It should not, however, be necessarily concluded that their predominance signifies that this is the sector’s zone of preference. Even greater consideration is given to the cost factor in these cases and they are constrained by market availability owing to the fact that the average areas involved are large. There have been many cases of buildings which have been fully occupied. In addition to the Ministry of Justice, special reference should be made to the occupancy of 11,800 sqm in the Edifício José Malhoa, 39, by the Santa Casa da Misericórdia and the occupancy of 10,500 sqm in Taguspark by the Portuguese Foreigners and Borders Department. These three operations took place in 2008 and represent a trend which is expected to continue, with this sector expected to account for a significant activity level in 2009.
CONCLUSIONS The Portuguese economy is expected to go through a very difficult period. Lower GDP growth, a fall in private consumption and increased unemployment, will undoubtedly have a constraining effect on the office market’s current prospects. Demand will naturally be constrained by the evolution of these variables, as the sine qua non for the performance of any sector, whose economic climate, in 2009, will bear no resemblance to the past. Companies are expected to implement more stringent cost control mechanisms, with current tenants bringing greater pressure to bear on the renegotiating of contracts, as well as a reduction in areas occupied. Demand, in the current economic climate will be more attuned than ever to quality of supply and the most competitive rental values. The TMTs & Utilities, Financial Services and State, Europe and Associations sectors, which have been major players in the office market’s recent past, will naturally continue to be among the most active, although there is likely to be a slowdown in the financial sector, which has been one of the most badly affected by the crisis. Occupancy by the state and major public and semipublic bodies (essentially in the utilities sector) are expected and may give the market some respite.
BUSINESS BRIEFING
MARCH 2009
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ANALYSIS OF THE MOST DYNAMIC OCCUPIER SECTORS IN GREATER LISBON’S OFFICE MARKET
A CUSHMAN & WAKEFIELD PUBLICATION
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BUSINESS BRIEFING
MARCH 2009
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