Portugal commercial real estate investing is set to experience significant growth in 2025, with Cushman & Wakefield projecting an 8% increase in investment volume. This surge is expected to reach a remarkable €2,560 million, highlighting the sector’s resilience and potential for lucrative opportunities.
As the global economy continues to evolve, the commercial real estate sector in Portugal is poised for significant growth. According to the latest report from Cushman & Wakefield, the investment volume in commercial real estate is expected to increase by 8% in 2025, reaching an estimated total of €2,560 million. This article delves into the factors driving this growth, the current trends in the market, and what investors can expect in the coming years.
The Resilience of the Portuguese Real Estate Market
The 44th edition of Marketbeat Portugal, published in Spring 2025 by Cushman & Wakefield, highlights the resilience of the Portuguese real estate market. In 2024, the market witnessed a substantial increase in transaction volumes, largely fueled by foreign capital. The report indicates that the recovery of the retail sector was particularly noteworthy, accounting for half of the total investment volume of €2,380 million in 2024. This resurgence is a testament to the market’s ability to adapt and thrive, even in challenging economic conditions.
Factors Contributing to Growth
Several key factors are anticipated to drive the growth of commercial real estate investment in Portugal in 2025:
- Macroeconomic Stability: The gradual reduction of interest rates is expected to create a more favorable environment for investment. As borrowing costs decrease, both domestic and international investors are likely to resume transactional activities, further stimulating the market.
- Convergence of Buyer and Seller Expectations: As market conditions stabilize, the expectations of buyers and sellers are expected to align more closely. This convergence is likely to enhance market liquidity and encourage more transactions.
- Compression of Prime Yields: The retail sector has already experienced a compression of prime yields, and this trend may extend to other asset classes. As yields compress, investor interest is expected to remain strong, driving further investment into the market.
Sector Performance in 2024
The distribution of capital invested in 2024 reveals significant insights into the performance of various sectors within the commercial real estate market:
- Retail Sector: The retail sector emerged as a frontrunner, accounting for 50% of the total investment volume. This recovery signals a renewed confidence in consumer spending and the potential for growth in retail spaces.
- Hotel Sector: The hotel sector followed closely, representing 21% of the total investment. With tourism on the rise, the demand for hospitality spaces is expected to continue its upward trajectory.
- Office Sector: Accounting for 14% of the total investment, the office sector remains a critical component of the commercial real estate landscape. The shift towards hybrid work models may influence the demand for office spaces, but the sector is expected to adapt.
- Alternative Assets: The emergence of alternative assets, particularly student residences, has solidified its presence in the market, representing 11% of the total investment. This trend reflects changing demographics and the increasing demand for specialized housing solutions.
The Role of Foreign Capital
Foreign investment has played a pivotal role in shaping the Portuguese commercial real estate market. In 2024, international capital accounted for over 70% of total investments, with European investors, particularly from France and Spain, dominating the landscape. This influx of foreign capital not only boosts the market but also brings diverse perspectives and investment strategies that can enhance the overall quality of the real estate sector.
The Rise of Sustainability and ESG Criteria
In recent years, there has been a growing emphasis on sustainability and the integration of Environmental, Social, and Governance (ESG) criteria in real estate investment decisions. The 2024 report from Cushman & Wakefield indicates that this trend is set to continue in 2025, with a focus on decarbonization, climate adaptation, financial transparency, and biodiversity preservation.
The Importance of ESG in Real Estate
The integration of ESG criteria has become a strategic imperative for investors in the commercial real estate sector. As Eric van Leuven, Managing Director of Cushman & Wakefield in Portugal, notes, “The real estate sector is in the epicenter of a profound transformation, driven by rigorous demands and the growing demand for sustainable and aligned buildings with ESG practices.” This shift reflects a structural change in the sector, where sustainability is no longer an option but an essential prerequisite for competitiveness and long-term economic success.
Certification Trends
The demand for sustainable building certifications, such as BREEAM and LEED, has surged in recent years. In 2024, the number of certifications issued nearly tripled compared to the previous year, with a notable prevalence in the office and retail sectors. Additionally, the WELL certification, which focuses on occupant well-being, saw five distinctions awarded in 2024, all within office buildings. This trend underscores the increasing importance of sustainability in attracting investment and meeting the expectations of tenants and consumers.
The commercial real estate market in Portugal is on the brink of a significant transformation, with projections for 2025 indicating continued growth and resilience. The anticipated 8% increase in investment volume, driven by macroeconomic stability, alignment of buyer and seller expectations, and a focus on sustainability, presents a compelling opportunity for investors. As foreign capital continues to flow into the market and the demand for sustainable practices intensifies, Portugal is set to emerge as a key player in the European commercial real estate landscape. Investors who recognize and adapt to these trends will be well-positioned to capitalize on the opportunities that lie ahead.
