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Portugal’s high transaction volumes seem to defy crisis

(L to R) Francisco Horta e Costa, CBRE; Paulo Silva, Savills; Eric van Leuven, Cushman & Wakefield; and Roger Maxwell Cooke, Lar España Real Estate.

Despite the crisis caused by the pandemic, transaction volumes in Portugal are close to historical highs, delegates heard at the Lisbon REinvestment Talks, an online event on RealX.Global organised by Iberian Property and Real Asset Media.

“Real estate transactions have reached €2.3 billion to date, which is more than the same time last year and the third historical high ever recorded,” said Eric van Leuven, managing partner Portugal, Cushman & Wakefield. “By the end of the year, however, we expect the total to reach €2.7 billion to €2.8 billion, less than the €3.3 billion recorded in 2019 but not dramatically less.”

The reason is that the year started with a bang in the Portuguese market but the market then came to an abrupt halt when Covid-19 hit. Q1 continued the positive trend already seen in 2019, with the highest take-up every, record volumes and significant interest from international investors. Q2 coincided with lockdown and Q3 saw a tentative recovery.

“The recovery has been slower than we anticipated,” said van Leuven. “We were hoping to be back to normal by September, but it hasn’t happened. Demand is slowly recovering after months of suspension of all decision-making processes.”

Two large deals skew transaction figures

The transaction numbers are positive, but skewed by a couple of exceptionally large deals that happened in Q1 before the storm:  the sale by Sonae Sierra and APG of 50% of the Sierra Prime portfolio to Allianz and Elo (the Portuguese portion, comprising 4 shopping centres, is worth €800 million) and the sale of Lagoas business park in Lisbon to Henderson Park for €421 million.

“We expect investor interest to pick up in 2021 and there’s certainly no lack of liquidity in the market,” said van Leuven. “But there will be a flight to safety and quality and a steering towards less risky assets and sectors like offices, PRS and Logistics.”

In this uncertain environment there will be winners and losers, experts agreed.

“The definite winners will be core markets, income-generating assets, regional hubs, equity buyers and distressed real estate funds, because there is more space for them in the market,” said Francisco Horta e Costa, managing partner Portugal, CBRE. “Family offices will also be winners, because they are cash-rich and agile and now that they have less alternatives they are paying more attention to real estate.”