Portugal Real Estate Investment Jumps Over 50% 

Portugal Real Estate Investment Jumps Over 50% 

Real estate investment in Portugal soared over 50% in 2024, reflecting a strong recovery and optimistic forecasts for 2025, according to Savills.

Portugal’s real estate investment landscape has experienced a remarkable resurgence, with growth exceeding 50% as the sector rebounds from previous challenges. According to Savills, the real estate investment market exhibited significant dynamism throughout 2024, presenting optimistic indicators for the forthcoming year. By the end of 2024, real estate investments in Portugal are projected to reach an impressive €2.387 billion, marking a substantial increase of 51% compared to the previous year, largely attributed to the anticipated recovery of the sector following a more tumultuous 2023.

In this revitalized market, the retail sector emerged as the most dominant player, amassing €1.166 billion in investments—a staggering 104% increase from the prior year. Savills attributes this performance to the rejuvenation of the retail segment, particularly within the shopping center subcategory, which accounted for 20% of total investments. This revitalization is a direct consequence of enhanced consumer spending and strategic repositioning efforts.

Supermarkets followed closely, representing approximately 19% of the overall investment volume. This asset class has proven to be particularly appealing to investors, evidenced by significant transactions such as the acquisition of extensive supermarket portfolios. Meanwhile, the hospitality sector captured 20% of total investments, despite experiencing a 15% decline compared to the previous year. Nonetheless, this segment remains strategically vital within the real estate investment context, given Portugal’s global standing as a premier tourist destination.

The alternatives sector also witnessed a noteworthy surge, with investment volumes soaring by 114% to reach €274 million. This increase is largely driven by the rising demand for Purpose-Built Student Accommodation (PBSA) and Senior Living assets, reflecting contemporary demographic trends and an increasing emphasis on specialized housing solutions.

Conversely, the office sector, which had suffered one of its worst performances in 2023, rebounded in 2024, emerging as an attractive asset class for core and core-plus investors, with an investment total of €310 million—a 94% increase. Savills notes that the decline in interest rates played a pivotal role in restoring market confidence, while the resurgence of in-person work underscored the importance of office spaces in fostering collaboration and organizational culture.

Additionally, the industrial and logistics market experienced an 83% increase in investment. Savills elucidates that, while volumes in this sector may not yet rival those of other asset classes, the robust fundamentals of the occupational market and the quality of the built environment are driving heightened interest in new project developments. This trend is anticipated to culminate in significant investment growth in logistics development by 2025.

These compelling figures underscore the strengthening of investor confidence and affirm the competitiveness of the Portuguese market, with 81% of the investment volume attributed to foreign investors, particularly from France, Spain, and South Africa. Notably, investment and asset management funds accounted for 62% of the total capital deployed.

Prime yields have remained stable throughout the year, with the office segment yielding 4.75% and shopping centers at 6.25%. Retail parks maintained a yield of 7%, while supermarkets and logistics sectors remained steady at 5.5%.

As we look ahead, the dynamism that characterized the Portugal’s real estate investment market in 2024 is expected to persist into 2025, with Lisbon and Porto emerging as the primary investment hubs. However, an increasing number of investors are turning their attention to peripheral and emerging regions, such as the Algarve and the North, where tourism and competitive costs present enticing opportunities. Savills anticipates that portfolio diversification will become a priority for investors this year, as they continue to focus on traditional segments like retail and offices while exploring new avenues in expanding sectors such as hospitality and living.

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