Portugal’s commercial real estate market saw a robust growth of 10% in 2025, with total investment reaching €2.67 billion, according to Cushman & Wakefield. Notably, foreign investors accounted for 60% of all capital invested, highlighting strong international interest despite not reaching historic highs.
Retail Leads, Offices Slow Down
Retail properties captured the largest share of investments at 29%, while offices followed at 26% despite a general decline in the office sector. Hotel investments made up 20% of the total, showing resilience with over 80 new hotels and 4,800 additional beds added this year. Alternative assets, including student and senior residences, accounted for 13%, and the industrial and logistics sector received 11% of the capital.
However, office space absorption dropped significantly—down 23% in Lisbon and 51% in Porto—mirrored by a 30% decrease in logistics demand. Retail openings fell by 20%, though the restaurant sector remained dynamic.
Rising Rents Signal Quality Shortage
Commercial rents, especially in prime areas, continued to rise even as occupancy dropped. This suggests a shortage of high-quality properties rather than a lack of demand. Yields—which move inversely to prices—were compressed across most sectors, signaling asset appreciation. Notable exceptions included Lisbon offices, steady at a 5% yield.
Outlook: Affordable Housing and Domestic Growth
While foreign investment remains significant, it leaves room for local investors to expand. Looking forward, affordable housing, particularly in the fringes of major cities, is identified as a key challenge and opportunity for 2026. Government measures could unlock growth, while policy improvements for build-to-rent developments may further boost the sector.
Cushman & Wakefield concludes that developers able to overcome current legal and technical hurdles—and meet the demand for affordable homes—will be well positioned as the market continues its positive trajectory.
