MARKETBEAT
COUNTRY SNAPSHOTS
PORTUGAL
A Cushman & Wakefield Research Publication
PLEASE CLICK ON THE APPROPRIATE SECTOR TO VIEW
ECONOMY
OFFICE SECTOR
RETAIL SECTOR
INDUSTRIAL SECTOR
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www.cushmanwakefield.com/research
Q1 2014
MARKETBEAT
ECONOMIC SNAPSHOT
PORTUGAL
Q1 2014
A Cushman & Wakefield Research Publication
BROAD-BASED RECOVERY
MARKET OUTLOOK
The Portuguese economy continued to
recover from the recession, with the third
consecutive quarter of positive growth in
Q4 2013. Exports continued to drive
growth on the back of higher
competitiveness and rising demand from the country’s main
trading partners. However, the recovery has become more
broad-based, with investment gaining significant momentum in
response to higher export orders and government spending rising
as a result of relaxed austerity.
GDP:
A recovery expected in 2014.
Inflation:
Expected to remain ultra low this year.
Interest rate:
On hold.
Employment:
Improvements expected to continue.
ECONOMIC INDICATORS*
GDP growth
2011
-1.3
2012
-3.2
2013F
-1.4
2014F
1.1
2015F
1.3
FLOURISHING EXPORTS
Consumer spending
-3.3
-5.3
-1.7
0.8
0.8
2.1
Foreign trade exceeded expectations and is expected to continue
to drive the economy, especially given ongoing improvements in
external demand, rising confidence, successful structural reforms
and ongoing competitiveness gains on the back of falling real
wages. Exports are expected to gradually lift domestic demand,
with booming tourism providing an additional impetus.
Rising confidence and higher export orders led to a strong
recovery in business investment. Consumer confidence is now
close to the pre-recession levels on the back of recent sharp falls
in unemployment and positive news from the rest of the
economy. Indeed, consumer spending grew robustly in Q2 and
Q3, before faltering in Q4, and is now expecting to gain further
momentum as indicated by solid retail sales at the start of the
year. Obstacles for domestic demand remain, with tight credit,
high levels of debt and deflation limiting firms’ ability to expand
and high unemployment, austerity, stagnant wages and
indebtedness impeding consumers’ purchasing power. On a
positive note, the budget deficit fell to a surprisingly low 4.9% of
GDP in 2013, below the 5.5% target. Further deleveraging will be
facilitated by faster growth and falling bond yields (4% in March).
Portugal is expected to grow by 1.1% in 2014 and 1.3% in 2015.
Exports will remain an important driver of growth, albeit a slight
slowdown from the strong 6% rate seen in 2013 is expected as
temporary effects in the fuel trade dissipate. Foreign investment
is also expected to boost the economy, with the real estate
sector in particular seeing elevated interest thanks to atractive
pricing and the ‘golden visas’ policy. The domestic economy is
expected to see positive expansion as well, albeit one constrained
by deleveraging by the government, consumers and corporations.
Deflation is also a risk to growth. The final assessment on
Portugal’s three-year €78bn bailout in May 2014 is likely to result
in an Irish-style exit.
Cushman & Wakefield LLP
43-45 Portman Square
London W1A 3BG
www.cushmanwakefield.com/research
Industrial production
Investment
Unemployment rate (%)
Inflation
-0.9
-6.1
0.8
2.0
-10.5
-14.4
-6.6
2.3
2.1
12.7
15.7
16.3
15.3
15.2
3.7
2.8
0.3
0.2
0.8
US$/€ (average)
1.39
1.28
1.33
1.30
1.25
US$/€ (end-period)
1.29
1.32
1.38
1.27
1.23
1.4
0.6
0.2
0.2
0.1
10.3
10.7
6.3
4.6
5.3
Interest rates: 3-month (%)
DOMESTIC OBSTACLES
OUTLOOK
ECONOMIC SUMMARY
Interest rates 10-year (%)
NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc
ECONOMIC & POLITICAL BREAKDOWN
Population
10.5 million (2013)
GDP
US$ 220.3 billion (2013)
Public sector balance
-4.9% of GDP (2013)
Public sector debt
129% of GDP (2013)
Current account balance
0.5% of GDP (2013)
Parliament
Social-Democratic Party and Popular
Party coalition
President
Aníbal Cavaco Silva
Prime Minister
Pedro Passos Coelho
Election dates
October 2015 (Legislative)
January 2016 (Presidential)
ECONOMIC ACTIVITY
5.0
5.0
2.5
2.5
0.0
0.0
-2.5
-2.5
-5.0
2003
2005
2007
2009
GDP GROWTH (annual %) - left
2011
2013 E 2015 F
-5.0
INFLATION (annual %) - right
Source: Cushman & Wakefield
This report has been produced by Cushman & Wakefield LLP or use by those with an interest in commercial property solely for information purposes. It is
not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. The
report also refers to these economic sources: Consensus Economics Inc.; The Economist; Reuters; Capital Economics; Oxford Economics Ltd; Centre for
Business & Economic Research. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information
contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of
opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to
receive information from Cushman & Wakefield LLP or any related company, please email [email protected] with your details in the body of
your email as they appear on this communication and head it “Unsubscribe”. ©2014 Cushman & Wakefield LLP. All rights reserved.
MARKETBEAT
OFFICE SNAPSHOT
PORTUGAL
Q1 2014
A Cushman & Wakefield Research Publication
OVERVIEW
The beginning of 2014 was been
characterised by an increase of confidence
in the market, accompanied by higher
activity in demand in the office sector.
Improvements in the economy following a
prolonged recession have also been seen and this is beginning to
filter down to the office market.
OCCUPIER FOCUS
Take-up in the first quarter of the year reached a total of 17,300
sq.m, still low but significantly up on the same period of 2013.
Demand is characterised by small floorplates below the 1,000
sq.m mark, re-emphasised by the fact that only one deal was
above this area during Q1. Zones 5 (Parque das Nações) and 6
(Western Corridor) continue to be the most sought after.
Reducing operational costs is still the key driver of demand and
with landlords keen to limit void periods there is a clear
preference to offering incentives such as rent free periods, rent
phasing and/or contribution to fit-out costs rather than lowering
the gross rents.
Ongoing adjustments to the pipeline reflect the ‘wait-and-see’
approach adopted by developers and the lack of development
financing particularly for speculative schemes. There is currently
just under 50,000 sq.m of space under construction, of which
50% is pre-let, and this will help to erode some of the overhang
of supply and nudge the vacancy rate closer to 11.6% over the
course of the year.
INVESTMENT FOCUS
The current wave of investor demand which is looking at
Southern Europe is now targeting Portugal, looking for product
and returns which cannot be found in other markets. There are a
few local and international investors which have funds in
liquidation and which will become sellers. Rising levels of activity
are anticipated despite the challenges that remain in the
occupational market.
OUTLOOK
The office market is expected to benefit from a relative
improvement in the economy. The current outlook for 2014 is a
moderate rise in demand and a gradual decline in the vacancy
rate. Downward pressure on rents will begin to diminish, but it is
expected that incentives will need to adapt accordingly first.
Investor interest should continue for well-priced assets before a
more substantial pick-up in the occupational sector takes place.
Cushman & Wakefield LLP
43-45 Portman Square
London W1A 3BG
www.cushmanwakefield.com/research
MARKET OUTLOOK
Prime Rents:
Pockets of prime rental growth as demand
increases, albeit from a low base.
Prime Yields:
Yield come under pressure as interest rising
for Portuguese assets.
Supply:
The lack of speculative construction will hold
supply stable as excess space is released.
Demand:
Cost cutting and efficiency gains are still the
main drivers of demand in the market.
PRIME OFFICE RENTS – MARCH 2014
MARKET (SUBMARKET)
Lisbon (Zone 1)
€
SQ.M/MTH
19.00
€
SQ.M/YR
228
US$
SQ.FT/YR
29.2
Lisbon (Zone 2)
16.00
192
24.6
Lisbon (Zone 5)
15.00
180
Lisbon (Zone 6)
11.00
132
GROWTH %
1YR 5YR CAGR
2.7
-0.5
-3.0
-1.2
23.0
0.0
-2.5
16.9
-4.3
-4.7
PRIME OFFICE YIELDS – MARCH 2014
MARKET (SUBMARKET)
(FIGURES ARE GROSS, %)
Lisbon (Zone 1)
CURRENT
QUARTER
7.00
LAST
QUARTER
7.50
LAST
YEAR
7.75
HIGH
7.75
10 YEAR
LOW
5.75
Lisbon (Zone 2)
8.25
8.50
8.50
8.50
6.00
Lisbon (Zone 5)
8.00
8.25
8.50
8.50
6.00
Lisbon (Zone 6)
10.00
10.25
10.25
10.25
6.25
NOTES:
Lisbon Zone 1: Avenida da Liberdade (Prime CBD)
Lisbon Zone 2: Avenidas Novas (CBD)
Lisbon Zone 5: Parque das Nacoes
Lisbon Zone 6: Western Corridor (Decentralised)
With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of
Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very
much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used
as a comparable for any particular property or transaction without regard to the specifics of the property.
RECENT PERFORMANCE
5.0%
10.00%
9.00%
2.5%
8.00%
0.0%
7.00%
6.00%
-2.5%
5.00%
4.00%
-5.0%
Mar-09
Mar-10
Mar-11
AVERAGE PRIME YIELDS (left)
Mar-12
Mar-13
Mar-14
RENTAL GROWTH (right)
Source: Cushman & Wakefield
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes.
It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman &
Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change.
Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman
& Wakefield LLP or any related company, please email [email protected] with your details in the body of your email as they appear on this
communication and head it “Unsubscribe”. ©2014 Cushman & Wakefield LLP. All rights reserved.
MARKETBEAT
RETAIL SNAPSHOT
PORTUGAL
Q1 2014
A Cushman & Wakefield Research Publication
OVERVIEW
While the country’s economic conditions
are starting to improve, activity in the retail
market has witnessed a marked increase in
the first quarter. The majority of retailers
appear to have moved into a new cycle,
less concerned with cost reductions and focusing on reinventing
or introducing new concepts.
OCCUPIER FOCUS
Occupier demand continues to rise, with retailers eager to take
advantage of the interesting opportunities available. High street
retail in Lisbon and Porto remain the most dynamic markets.
The emergence of several new start-ups in the sector continues,
partially due to the current economic conditions. This pattern is
mostly evident in the food and beverage sector where innovative
and award-winning concepts have thrived. As a result, there is an
increasing demand for high street space, not only in prime
locations but also in non-conventional pitches where there are
now new clusters of specific retail segments. This trend is
manifest not only in Lisbon but also in Porto, where there is for
example active interest in the trendy area of Clérigos.
The development pipeline has adjusted to the domestic market,
with the only project expected during 2014 being the expansion
of Setúbal’s Jumbo Hypermarket into Alegro Setúbal shopping
centre.
INVESTMENT FOCUS
International investors are now targeting shopping centres and
other retail formats, and there are a number of transactions
currently in the pipeline. On the back of a strong occupier
market, high street assets in Lisbon are attracting demand from
private and institutional investors. Interest has nonetheless been
evident across the retail sector, pushing prime yields down in Q1
by 50 basis points for high streets and by 25 basis points for
shopping centres and retail warehouses.
OUTLOOK
The gradual recovery in demand is expected to continue
throughout 2014, laying the ground for more stability and
consistency in the retail sector, but with prime assets still the
most sought-after products. This demand will also be shaped by
the robust performance of established international retailers and
by the constant increase in tourist numbers, both factors which
have had a positive impact on the fortune of other international
players.
Cushman & Wakefield LLP
43-45 Portman Square
London W1A 3BG
www.cushmanwakefield.com/research
MARKET OUTLOOK
Prime Rents:
Higher demand is expected to exert upward
pressure on rents.
Prime Yields:
Rising investor interest and a hardening in
yields.
Supply:
Low pipeline.
Demand:
Higher activity, but still focused on prime high
streets.
PRIME RETAIL RENTS – MARCH 2014
HIGH STREET SHOPS
Lisbon (Chiado)
Lisbon (Avenida Liberdade)
RETAIL PARKS
Portugal
€
SQ.M/MTH
90
€
SQ.M/YR
1,080
US$
SQ.FT/YR
138
GROWTH %
1YR 5YR CAGR
2.9
1.1
80
€
SQ.M/MTH
8.50
960
€
SQ.M/YR
102
123
US$
SQ.FT/YR
13.1
3.2
1.3
GROWTH %
1YR 5YR CAGR
0.0
-3.2
PRIME RETAIL YIELDS – MARCH 2014
HIGH STREET SHOPS
(FIGURES ARE GROSS, %)
CURRENT
QUARTER
6.50
Lisbon (Chiado)
Lisbon (Avenida Liberdade)
RETAIL PARKS
(FIGURES ARE GROSS, %)
Portugal
SHOPPING CENTRES
(FIGURES ARE GROSS, %)
Portugal
LAST
QUARTER
6.75
LAST
YEAR
7.00
6.50
7.00
CURRENT
LAST
QUARTER QUARTER
10.25 10.50
CURRENT
LAST
QUARTER QUARTER
7.50
7.75
7.25
LAST
YEAR
10.25
LAST
YEAR
7.75
HIGH
7.00
7.25
HIGH
10.50
HIGH
7.75
10 YEAR
LOW
6.00
6.00
10 YEAR
LOW
5.75
10 YEAR
LOW
5.00
With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of
Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very
much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used
as a comparable for any particular property or transaction without regard to the specifics of the property.
RECENT PERFORMANCE
8.00%
10.0%
7.00%
5.0%
6.00%
0.0%
5.00%
-5.0%
4.00%
-10.0%
Mar-09
Mar-10
Mar-11
Mar-12
AVERAGE PRIME YIELDS (left)
Mar-13
Mar-14
RENTAL GROWTH (right)
Source: Cushman & Wakefield
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes.
It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman &
Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change.
Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman
& Wakefield LLP or any related company, please email [email protected] with your details in the body of your email as they appear on this
communication and head it “Unsubscribe”. ©2014 Cushman & Wakefield LLP. All rights reserved.
MARKETBEAT
INDUSTRIAL SNAPSHOT
PORTUGAL
Q1 2014
A Cushman & Wakefield Research Publication
OVERVIEW
While there is a generally more positive
outlook for the economy this will take
some time to filter down to a more robust
performance of the industrial sector, with
overall activity expected to remain
relatively subdued. Rents were stable over the quarter, but
continue to be under downward pressure as demand still remains
limited with cost cutting and consolidation being the main themes
and few expansion plans in the horizon.
There was a very slight increase in the number of enquiries
registering interest in the market. This is driven by lower levels of
uncertainty, as well as occupiers looking to take advantage of the
current market conditions. In particular this applies to rents
which remain under downward pressure. This scenario allows
occupiers to reduce their overall occupancy costs while, at the
same time, afford to move into better quality space.
There are no significant schemes in the development pipeline as
lenders are reluctant to finance against real estate as collateral
given the small size and fragility of the occupational market at the
moment. The exception to this are some schemes that are being
developed for owner occupation, which will not have an impact
on the vacancy rate.
Rents are likely to decline for lower stock and
remain stable for the best product only.
Prime Yields:
Rising levels of investor interest which will put
downward pressure on yields.
Supply:
The dearth of speculative development will
help to erode vacancy rates.
Demand:
Demand is anticipated to remain stable, driven
by cost cutting.
PRIME INDUSTRIAL RENTS – MARCH 2014
Lisbon
€
SQ.M/MTH
4.00
€
SQ.M/YR
48.0
US$
SQ.FT/YR
6.15
Porto
4.00
48.0
6.15
GROWTH %
1YR 5YR CAGR
0.0
0.0
-11.1
2.7
PRIME INDUSTRIAL YIELDS – MARCH 2014
LOGISTICS LOCATIONS
(FIGURES ARE GROSS, %)
Lisbon
CURRENT
QUARTER
9.25
LAST
QUARTER
9.75
LAST
YEAR
9.75
HIGH
9.75
10 YEAR
LOW
7.00
Porto
10.00
10.25
10.25
10.25
7.25
With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of
Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very
much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used
as a comparable for any particular property or transaction without regard to the specifics of the property.
RECENT PERFORMANCE
10.00%
5.0%
9.00%
INVESTMENT FOCUS
No significant deals closed in Q1, but renewed interest from
international investors is anticipated. However, there is limited
product available and this is a major hurdle to higher volumes,
but in anticipation of better demand and more competitive
bidding prime yields have moved in, both in Lisbon and Porto
over the quarter to 9.25% and 10.00% respectively.
2.5%
8.00%
7.00%
0.0%
6.00%
-2.5%
5.00%
4.00%
-5.0%
Mar-09
Mar-10
Mar-11
AVERAGE PRIME YIELDS (left)
The outlook for the industrial market is relatively positive,
supported by positive industrial output indicators and exports, as
well as prospects for the growth of private consumption in 2014.
All of these will drive logistics activity in the domestic market.
However, the very low levels of demand recorded over the last
few years have fuelled considerably higher vacancies and some of
the space already completed is likely to be occupied in 2014,
affecting mainly the Greater Lisbon area.
Cushman & Wakefield LLP
43-45 Portman Square
London W1A 3BG
www.cushmanwakefield.com/research
Prime Rents:
LOGISTICS LOCATIONS
OCCUPIER FOCUS
OUTLOOK
MARKET OUTLOOK
Mar-12
Mar-13
Mar-14
RENTAL GROWTH (right)
Source: Cushman & Wakefield
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes.
It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources
which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete.
No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman &
Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change.
Our prior written consent is required before this report can be reproduced in whole or in part. Should you not wish to receive information from Cushman
& Wakefield LLP or any related company, please email [email protected] with your details in the body of your email as they appear on this
communication and head it “Unsubscribe”. ©2014 Cushman & Wakefield LLP. All rights reserved.
COUNTRY
SNAPSHOTS
PORTUGAL
Q1 2014
A Cushman & Wakefield Research Publication
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