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Real Estate

Portuguese market has opportunities, despite inflation

New players are interested in a market with substantial scope to grow

4 MIN READ October 26, 2022

Most European countries are facing high interest rates and inflation. Despite this, developers can still see opportunities in Portugal in 2023.

Pedro Vicente, CEO of Overseas, a new player in the Portuguese real estate market, has been working in the area for almost 20 years and observes that two sectors have attracted the most attention in the country in recent times and present opportunities for investors: logistics and offices.

“Portugal is still slightly below the European average in e-commerce, which should change soon. Many operators are arriving in Portugal for this sector,” he explains.

When it comes to offices, the scenario is slightly different: “Portugal has very outdated and limited office parks. Fortunately, this situation - especially in Lisbon and Porto - is changing, and the occupancy levels that we see in new projects are quite steady, indicating that this sector is, in fact, a sure bet,” says Vicente.

For 2023, he predicts a scenario that includes the softening of construction prices and, in the case of residential construction, a slight contraction in the domestic market. However, these circumstances will also present opportunities for foreign investors, who have been demonstrating more interest in recent years, he states.

“The domestic market is still unsophisticated and has substantial room for growth. And as such, with the difficulties in supply, Portugal is still a suitable refuge at a time like this to welcome investment in the sector,” says Vicente.

Overseas’ plans are ambitious, with the company introducing itself to the market this October through five projects in Lisbon and Comporta, a tourist area that is becoming increasingly popular in Europe. These projects are set to create 133 residential units, 4 stores, 33,000 square metres of gross construction area, and an investment of €130 million.

The executive hopes that the focus on ESG will be a market differentiator, not just paying lip service to the practice, but pushing to achieve tangible goals: “All buildings constructed will have zero CO2 or close to zero, and all will be certified. It’s something we’re not planning to give up”.

War, COVID, and inflation: How this affects the market

With an inflation rate of 9% and feeling the effects of the global challenges presented by COVID-19 as well as the war between Ukraine and Russia, Portugal is facing difficulties including material supply and rising construction prices.

“Inflation is already producing effects that we believe will result in a contraction in real estate credit agreements and the house purchasing power of the Portuguese,” says Vicente.

However, the CEO is quick to stress that he is not talking about bubbles bursting or a serious crisis in the sector such as that seen in 2008. Instead, he refers to the contraction of a market that has completed a solid growth cycle.

On the other hand, he points out that this will pose a serious problem for the country - both for the citizens and the government - because Portugal does not have an established rental market. “This is primarily because there are no houses for rent in Portugal, and secondly, the availability of housing for the Portuguese middle class is extremely limited,” explains Vicente.

Although this situation presents a number of challenges, it also opens a range of avenues for new opportunities that Overseas hopes to explore going forward.

If you’re interested in following the real estate market and having the opportunity to meet key players, check out our upcoming events and apply for membership.

Written by Gabriela Colicigno and Rory Hickman
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