Portugal : Lisbon office marketMarch 2017
- Lisbon attracts international investors, led by the Americans, the French and the British
- Record year for the office market
- Buoyant investment market
Record year for the office market
2016 ended with a total take-up volume of 145,000 m², which represents the highest level since 2009. There was a significant increase of the new supply (+67% compared to 2015), but most of new office space was either owner occupation or pre-lease agreements. The vacancy rate followed its downward trend and dropped to 10.1%. Office supply in Lisbon is in a binary state with a mix of speculative developments structural vacancy composed of obsolete properties that need renovation. Prime rents experienced a slight upward pressure due to the lack of quality supply in a market facing a strong demand.
Projects planned for 2017 are still scarce considering the high level of demand although take-up is expected to stabilise in 2017, in line with the results observed over the past two years. The attractiveness of Portugal is focused on the technology sector that is bringing new entrepreneurs who contribute the office demand.
Rental values will be under pressure and are expected to rise, mainly due to the lack of new supply.
Buoyant investment market
The office investment market registered a volume of €634 m. (83% of the commercial real estate investment market), confirming the strong appetite of investors for offices in strategic locations, safe leases and high levels of return. The market attracts international investors, led by the Americans, the French and the British.
In 2017, the volume of investment is expected to exceed the €1 bn mark, driven by portfolios that entered the market in 2016 for which negotiations are expected to conclude during the first half of the year. Although the office market presents a very attractive mix for investors due the healthy occupational market, it has limitations imposed on it by the scarcity of quality assets in target locations.