Commercial property in Portugal has been strongly affected by the international economic crisis, in addition to the country’s high austerity situation, increasing unemployment rate and lowering levels of confidence. 2012 ended with a 3.2% contraction of the GDP and a record unemployment rate.
As a result, in 2012 some of the property market sectors registered the lowest levels of take-up since the beginning of the century. Exception to the prime high street retail that continues to show a good performance. Also in the tourism sector, the market evidenced an interesting recovery, with an increase of almost 6% in the number of overnight stays.
Property development has slowed down significantly in all sectors and the majority of the few buildings constructed were built-to-suit.
The investment market was also negatively affected in 2012, due to the lack of financing and high-risk potential of the country. As a result, 2012 registered the lowest ever level of investment, and prime yields increased in all sectors, with exception to high street retail.
CBRE and the law firm Uria Menendez - Proenca de Carvalho launched the "Urban Lease Law Guide", in order to clarify the main changes introduced with the new reform. In addition, CBRE has produced a study showing that the New Lease Law will boost the real estate investment market.
CBRE and Garrigues launched the Guide to Property Investment in Portugal, The Property Handbook. It is a practical handbook with all the essential information to support foreign investors in the Portuguese market, while explaining the legal and tax implications associated with investments in Portugal.
Gross office take-up in the final quarter of the year was around 39,200 sq m which is approximately 47% more than the total recorded in the previous period and the highest quarterly take-up of the year. The major occupier of this quarter was the Portuguese telecom company ZON, which moved to a new 12,500 sq m building.
Prime rents continue to be under pressure, with falls registered in zones with higher vacancy rates.
Office prime yields have suffered new adjustments in some zones of the city, including in CBD 1 where this indicator moved out to 8.25%.
There were 3 office buildings completions in the analyzed period, totaling circa 24,000 sq m.
2013 pipeline adds 39,350 sq m to the existing stock and the majority of this area is speculative development located in the CBD.
In the 4th quarter of 2012, the Lisbon office prime rental values decreased again in some zones of the city, as well as in Porto. However, in the most prestigious business zone of Lisbon (CBD 1), this indicator remained stable during this period, continuing this year’s trend.
In the retail sector, only the Porto high street retail recorded a decrease in the prime rent value, of 17%. Also the Porto warehouse and logistics assets registered a decrease in prime rental values at the end of the year.
In Q4 2012 there was an outward movement in prime yields in the majority of the Portuguese property sectors. The Porto office sector experienced a higher adjustment with a 50 b.p. increase in prime yield. An y-o-y analysis shows that only the Lisbon prime high street retail was resistant to a price reduction.