Historic high in take-up sees supply dry up
2018 recorded around 200,000 sq m of lettings, surpassing values of the last 10 years. It will be hard to repeat in 2019 because the supply has diminished. Consequently 2019 will be the year of the refurbished office, since there are no substantial deliveries of new buildings until 2021/22. These include those planned for the Parque das Nações and the integrated development of Entrecampos, the plaza that is the starting point for three major avenues in the centre of Lisbon. Lisbon continues to be attractive as a business location and especially targeted by the technology sector, attracted by quality of life. The changing economy will bring more new entrepreneurs aiming to start businesses in Lisbon centre. We expect this to contribute to increasing demand for office space and put further pressure on the remaining vacant space. Subsequently we expect this to translate to increasing rental prices.
Large transactions see the investment market achieve a new peak
The Portuguese investment market reached a new peak in 2018 at €3.2bn thanks to a series of very large investment deals, especially in retail. Office investment in Lisbon was also very buoyant and amounted to €760m in 2018. Yields contracted to 4.25% (-50 bps vs. 2017).
Expectations for 2019 are optimistic as it is thought that the investment base will widen to include alternative assets such as student residences, assisted living and health facilities. These are new asset classes to Portugal and will attract investors wishing for diverse risk portfolios.