Porto's real estate market activity shows the region's greater attractiveness, reveals Cushman & Wakefield's "Porto Market Update".
Source: Cushman & Wakefield
Author: Newsroom
Despite the slowdown in national economic activity, in 2022, the real estate market of Porto registered transversally positive demand volumes, with the first quarter of 2023 showing resilience in several sectors, according to the latest edition of the "Porto Market Update", published by Cushman & Wakefield sent to the
SUPERCASA News team.
Andreia Almeida, Associate and Director of Research & Insight at Cushman & Wakefield, states that "during the period under review, some historical highs were reached, demonstrating the increased attractiveness of the region, including among international companies. This greater dynamism continues to be partially constrained by the shortage of quality product supply suited to current demand criteria, which should gradually be bridged as new projects enter the market."
Offices:
After a drop in 2020 as a result of the impacts of the pandemic, demand in Greater Porto has been gradually recovering, with 58,500 sq m transacted in 2022, a 3% increase over the previous year. The first quarter of 2023 shows an acceleration in this trend, with a year-on-year growth of 22%. Among the biggest deals since last year are several pre-lettings, namely in the Porto Business Plaza - by SaltPay (4,740 m²) and Natixis (3,200 m²) - and the occupation by coworking Spaces (IWG group) in Joana D'Arc (4,500 m²).
After gradual increases until 2021, the vacancy rate has corrected to 8.0%. On the other hand, since 2022, 9 buildings have been completed, with a total of 63,700 m², of which only a quarter is unoccupied. The demand for quality space continues to support the increase in supply projected for the next 3 years, currently at 131,200 m². Among these, 97,100 m² are under construction and with 40% occupation already secured, highlighting the second building of Civilria's ICON Offices project, the office component of the reconversion of the old slaughterhouse in Campanhã, and the future headquarters of Liga Portugal in Porto.
Although prime rents in the Boavista CBD (Zone 1) have remained stable at €18/sqm/month since 2018, in most other zones there has been an increase, including among average rents, given the shortage of quality supply and higher latent demand.
Retail:
Aggregated retail demand by Cushman & Wakefield shows a recovery in the Porto Metropolitan Area since the pandemic, with 140 new openings in 2022, 40% above the previous year; growth that slowed to 6% year-on-year. In the first quarter of 2023, there was a slowdown in this growth, to 6% year-on-year, with 35 operations.
High street retail maintained its leadership, with the downtown area concentrating 23% of the new supply in the last 15 months, an area that has seen some relevant refurbishment works, such as the renovated Mercado do Bolhão and the Bonjardim project. On the other hand, the restaurant sector continued to dominate.
The high street commerce maintained its primacy, with the Baixa area concentrating 23% of the new supply in the last 15 months, an area that has seen some relevant refurbishment works, such as the renovated Mercado do Bolhão and the Bonjardim project. On the other hand, the restaurant sector continued to dominate, representing about half of the number of transactions.
In 2022, prime rents in high street retail registered an increase in the downtown area, influenced by an increase in demand and shortage of supply. In the other zones, as well as in the shopping center format, values remained stable, a trend that continued across the board during the first quarter of 2023.
Industrial & Logistics:
After an expressive increase in 2021, Industrial & logistics occupational activity in Greater Porto slowed by 32% last year, with 106,200 m² having been transacted. Still, in the first quarter of 2023 the volume recorded is already 2% above the first half of the previous year. The largest transaction since 2022 corresponds to Olicargo's own occupation of 33,800 m² in the Ribeirão Logistic Center (Vila Nova de Famalicão); the activity registered in the Ermida Industrial Area (Santo Tirso) also stands out, with 4 transactions for a total of 43,000 m².
Among the main future supply for the next 3 years, new property in the Industrial Area of Ermida, where the new factory of the multinational WEG is under development (22,680 m²) and Aldi will install its new logistics platform (40,000 m²). Additionally, Medway is developing the future Lousado Terminal (Vila Nova de Famalicão), which will total 220,000 m². In addition to these, other projects will soon begin construction, namely Panattoni Park (Valongo), Valongo Business Park and Gaia Park.
Considering the existing supply, the rental values of logistics spaces recorded a transversal increase in 2022, stabilizing in the first quarter of 2023.
hotel management:
Similar to the trend at the national level, the city of Porto recorded a recovery in activity throughout 2022, including with the number of overnight stays in tourist accommodations doubling to values above 2019. The first quarter of 2023 indicates that this trend will continue, with relevant year-on-year growth, namely 63% in overnight stays, 65% in RevPAR and 17 percentage points in the occupancy rate.
The city currently has nearly 140 hotel establishments, with a total of 9,600 rooms; with half of them in 4-star projects, followed by 5-star projects with 22%, showing the higher investment in higher category projects over the last years. Since 2022, the city had an additional 740 rooms in 11 new openings, almost all of them in 4-star category units. Estimated future supply over the next 3 years totals 5 new hotels with 460 rooms, half of which are 5-star properties.
Residential:
According to data from the SIR / Confidencial Imobiliário, over the last 12 months, there has been a slowdown in the sale values of apartments in the municipality of Porto, to which will have contributed the increase in inflation and interest rates, and consequent worsening of the purchasing power of families. In homologous terms, the supply indicators registered on the one hand a slight increase of 3% in the average asking price, and on the other a drop of the same order in the volume of properties for sale. As for demand, the number of homes sold reflected a sharp drop of 18%, with transaction values stabilizing at €2,870/m².
In the rental market, the shortage of supply available on the market became more pronounced last year, with a 36% drop in the number of units on offer, and a consequent increase in the average asking price to €14/m²/month. In this context, the number of apartments rented in the last 12 months has also reduced (-20%), with the average rent contracted in the municipality of Porto increasing in the same order of values, to €13.3/m².
Investment:
The institutional real estate investment in the Metropolitan Area of Porto is currently going through a path of consolidation, in a context of some scarcity of institutional investment product supply. Thus, since 2022, €267 million were transacted in commercial real estate, of which only €1 million between January and March 2023. Compared to the trend in Portugal, the market is characterized by a greater weight of domestic investors, which since last year have aggregated 38% of the volume invested.
Influenced by several sizeable transactions in the hospitality sector, this sector led demand, representing 61% of total investment, with €164 million, followed by the retail sector, which attracted 18% of transaction volume, with €49 million. The office and industrial & logistics markets accounted for 11% and 9% of total transactions, respectively.
In a context of greater uncertainty regarding the evolution of the global economy, prime yields registered transversal increases in 2022 and the first quarter of 2023, namely to 5.50% in industrial & logistics, 5.75% in high street retail and 6.25% in shopping centers and offices.
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