Portugal: logistics in demand as spec developments return

Portugal is still behind other European countries when it comes to online shopping but there is real momentum behind the shift in consumer habits now, delegates heard at Real Asset Media’s Portugal Investment Summit, organised with Iberian Property, which took place recently on the REALX.Global platform.

“Online retail penetration was 3% in 2015, but it doubled to 6% in 2020 and it is expected to reach 8% in 2025,” said Sally Bruer, partner, logistics and industrial insight and strategy EMEA, Cushman & Wakefield.

Growth is continuing, but it is still below that of other southern European countries. The online penetration rate in Italy, for example, was at 2% in 2015, behind Portugal, but it shot up to 7% in 2020 and it will reach 12% by 2025, well ahead of Portugal.

But the consensus is that there is no going back on the online shopping trend, so the penetration rate will keep going up.

In the bricks-and-mortar world, more retail park space has been delivered, driven by homewares and supermarkets, while shopping centres are not doing well.

From supermarkets to shopping centres retail is polarised

“Retail is very polarised in Portugal, with supermarkets, retail parks and DIY and homewares stores doing very well, while shopping centres are suffering and investors are really wary because there is no security of income,” said Paulo Sarmento, head of capital markets, Cushman & Wakefield Portugal. “But there are asset management opportunities for underperforming shopping malls.”

At the moment it is all about logistics, as demand continues to increase. Speculative developments have come back, with 120,000 sq m of build-to-suit space taken up this year, more than half of the total take-up.

“Speculative developments by the likes of Panattoni are being snapped up really quickly,” said Bruer. “There are development opportunities in Portugal as well as opportunities to upgrade and improve older buildings, realise a value upshift and capture burgeoning demand.”

Investors are under enormous pressure to increase allocations to logistics, but the problems are lack of supply and cost.

“There is a lot of demand for last-mile logistics, but there’s huge competition for space and it’s very expensive,” said Sarmento. “One solution could be converting shopping centres into last mile hubs, but it is not easy and it’s also a question of valuation. Owners are reluctant to accept it because they don’t want to lose value.”