MARKET UPDATE PORTO
MAY, 2023
Uma publicação Cushman & Wakefield
01
ECONOMY
02
OFFICES
03
RETAIL
04
INDUSTRIAL & LogIsticS
05
HOSPITALITY
07
INVESTMENT
///////////////////////////
AGENDA
06
RESIDENTIAL
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Metropolitan Area
of Porto
Following a period of recovery after the pandemic crisis, Portuguese economic activity slowed down from the second quarter of 2022, due to the effects of the war in Ukraine, particularly as a result of increasing geopolitical uncertainty and the European energy crisis.
Gross Value Added
Household disposable income
Unemployment rate
+6.0%
+1.6%
+7.2%
On the other hand, the change in household disposable income slowed to 1.6% and the unemployment rate reached a two-decade low.
Economic Indicators 2022
Despite the context of a general increase in prices and deterioration in the confidence of economic agents during 2022, the Porto Metropolitan Area ("PMA") recorded a Gross Value Added ("GVA") growth of 6.0%, according to Moody’s.
Source: Moody's (may 2023)
Source: Moody's (May 2023)
The current outlook is for a slowdown in the region's economic activity in 2023, followed by a recovery in 2024. The household disposable income is expected to grow on average 3.6% during the current year , slowing down next year; with the unemployment rate temporarily rising in 2023, correcting as early as next year.
+0.5% / +2.5%
+3.6% / +2.7%
8.0% / 7.5%
1
Influenced by a sharp increase of the indicator in the last quarter of 2022, which contributed to the annual average forecast for the current year being higher (by 3.6%) than last year's annual average.
Economic Forecasts 2023/2024
Economic forecasts 2023/2024
Greater
Porto
TAKE-UP
COMPLETIONS (2022/23)
Average Deal Size
UNDER CONSTRUCTION
VACANCY RATE
58,500 sq.m (+3%)
590 sq.m (+22%)
8.0% (-0.9 p.p.)
63,700 sq.m
97,100 sq.m
770 sq.m (-14%)
2022
Q1 - 23
DEMAND
7,690 sq.m (+32%)
SUPPLY
1.65 million sq.m
STOCK
Source: C&W; PPI
AVERAGE DEAL SIZE
Take-up by semester and average area transacted
The total office stock currently stands at 1.65 million sq.m of Gross Lettable Area ("GLA"), spread over approximately 520 projects. The city of Porto boasts the majority of the supply, with 900 thousand sq.m of offices in close to 270 buildings. After a fall in 2020, as a result of the impacts of the pandemic, demand has been gradually recovering, with 58,500 sq.m transacted in 2022, an increase of 3% over the previous year. The first quarter of 2023 shows an acceleration of this trend, with an year-on-year growth of 22%. Among the largest deals of the last 15 months are several pre-lets, namely in Porto Business Plaza – by SaltPay (4,740 sq.m) and Natixis (3,200 sq.m) – and the occupation by coworking Spaces (IWG group) of 4,500 sq.m in Joana D'Arc. In 2023, the largest transaction to date corresponds to the sale of 2,560 sq.m to a company in the Other Services sector in a building on Rua Companhia dos Caulinos (Matosinhos). Between 2022 and 2023, CBD Baixa (Zone 2) and Matosinhos (Zone 6) have seen the most activity, together aggregating more than 60% of the take-up; with the TMT's & Utilities sector accounting for 45% of the occupied area.
Source: Cushman & Wakefield; PPI *January to marçh
Grande
Main transactions
After a gradual increase up until 2021, the vacancy rate has been correcting downwards, currently standing at 8.0% (about 1 percentage point below 2021). On the other hand, since 2022 nine buildings have been completed, totaling 63,700 sq.m, of which only one quarter is vacant. The demand for quality spaces continues to support the increase in future supply for the next 3 years, currently at 131,200 sq.m; of which 97,100 sq.m are under construction, with 40% of its occupancy already secured. Among these the second building of the ICON Offices by Civilria (13,400 sq.m); the office component of the reconversion of the former Matadouro de Campanhã by the Porto Municipality (12,500 sq.m); and the future headquarters of the Liga Portugal in Porto (14,600 sq.m) are among the most significant.
Source: Cushman & Wakefield; PPI
Main projects inaugurated
Fonte: Cushman & Wakefield
Main projects under construction
Average and prime rents
The prime rents in the city of Porto are practiced in Boavista, considered to be Greater Porto’s CBD, which have remained stable since 2018, at €18/sq.m/month. Nevertheless, due to the lack of quality supply and greater latent demand, most of the other areas saw prime and average rents increase.
Source: Cushman & Wakefield
NEW OPENINGS
HIGH STREET RETAIL
845 million sq.m
TOTAL SUPPLY IN RETAIL SCHEMES
F&B
224 thousand sq.m
2
TOTAL SUPPLY IN HIGH STREET RETAIL (Porto)
140 (+40%)
75%
47%
35 (+6%)
61%
48%
Source: C&W
Dados deflacionados e ajustados de efeitos de calendário e da sazonalidade; Índice com base 2015 = 100
Fonte: INE
No trimestre anterior ao inquérito
Até 2024
The Porto Metropolitan Area has the second largest volume of retail schemes in Portugal, with more than 30 projects and around 845,000 sq.m of GLA. This figure represents 21% of the total national area, only surpassed by the Lisbon Metropolitan Area with 36%. The municipality of Vila Nova de Gaia has the highest concentration of supply in the region, 220,000 sq.m of GLA; mostly in the traditional shopping centre format (87%). For the next 3 years, there is no prospect of an increase in the total stock, either by new openings or expansions. On the other hand, and partially thanks to the recovery of tourism, high street retail in the city of Porto has once again registered a high levels of activity, currently counting 1,300 units offering more than 224,000 sq.m of sales area; with more than half of this area located in the Baixa area.
Retail demand aggregated by Cushman & Wakefield shows a recovery since the pandemic, with 140 new openings in 2022, up 40% from the previous year, and an estimated total area of 48,000 sq.m. In the first quarter of 2023, this growth slowed to 6% year-on-year with 35 transactions.
Amostra não aleatória da procura de retalho agregada pela Cushman & Wakefield baseada em fontes públicas e trabalho de campo direcionado
New
openings
In 2023, the predominance of high street retail continued, despite its decrease to 61% between January and March of this year, due to the greater weight of transactions in stand-alone units and markets. Over the last 15 months, 23% of the new supply occurred in Baixa , an area that is benefiting from some major urban regeneration projects, such as the renovation of the Bolhão Market and the Bonjardim project. On the other hand, the restaurant sector continued to dominate, accounting for about half of the number of transactions.
Non-random sample of retail demand aggregated by Cushman & Wakefield based on public sources and targeted fieldwork.
BY FORMAT
BY SECTOR OF
In 2022, prime high street rents registered an increase in the Baixa area, influenced by a growth in demand and shortage of supply. In the remaining areas, as well as in the shopping centres format, values remained stable, a general trend that continued during the first quarter of 2023.
Prime
rents
Following a significant increase in 2021, the occupational activity in the industrial & logistics sector in Greater Porto slowed down last year, with 106,200 sq.m transacted, a year-on-year drop of 32%. Still, in the first quarter of 2023 the volume recorded was already 2% above the first half of the previous year, to which the acquisition of the 29,000 sq.m of the Itron building in Vila Nova de Famalicão contributed. This corresponds to the second largest transaction since 2022, after Olicargo's 33,800 sq.m in the Ribeirão Logistics Centre, in the same municipality. Also noteworthy is the activity registered in the Ermida Industrial Zone (Santo Tirso), where 4 transactions were registered, totaling 43,000 sq.m.
7,080 sq.m
106,200 sq.m
(-32%)
(-23%)
Source: Cushman & Wakefield; IPI
32,000 sq.m
(+5x)
16,000 sq.m
3
5 times above the same period
Fonte: Cushman & Wakefield; IPI
The greater dynamism of the sector continues to fuel the development of new projects, highlighting, among the recent completions, Garland´s logistics centre in Gaia with 38,000 sq.m; Stelia Aerospace (Airbus group) 20,000 sq.m assembly plant in Ermida Industrial Zone; and the 12,000 sq.m expansion of Mercadona's logistics block in Póvoa de Varzim.
Source: Cushman & Wakefield; IPI (Industrial Prime Index) *January to march
Among the main future supply for the next 3 years, the Ermida Industrial Zone stands out once again, where the new 22,680 sq.m factory of the multinational WEG is under development, , and Aldi will install its new 40,000 sq.m logistics platform . In addition, Medway is developing the future Lousado Terminal in Vila Nova de Famalicão, which will total 220,000 sq.m. These will shortly be joined by other projects, the construction of which will begin soon, namely Panattoni Park (Valongo), Valongo Business Park and Gaia Park.
Excluindo combustíveis e lubrificantes
Considering the existing supply, the rental values of logistic spaces registered a transversal increase in 2022, stabilizing in the first half of 2023.
Similar to the trend observed at country level, Greater Porto recorded a recovery in tourism activity throughout 2022, which was maintained in the first 3 months of the current year. During the past year, this evolution was also observed among tourists arrivals, both at the Francisco Sá Carneiro airport and the Leixões Port; notably the latter, which even exceeded the 2019 figures by 22%, reaching the second all-time high, and a record number of cruise stopovers (112).
Source: INE; APDL, C&W
12.6 million
(+116%)
TOURISTS ARRIVALS (2022)
109 thousand
(+1,115%)
AIRPORTS
CRUISES
1.0 million
52.1%
€45.3
In 2022, the number of overnight stays in tourist accommodation in the municipality of Porto more than doubled, to 4.8 million, above the values of 2019; with RevPAR averaging €69.7, and the occupancy rate rising to 61.7%. This trend continued during the first quarter of 2023, with relevant year-on-year growth, namely 63% in overnight stays, 65% in RevPAR and 17 percentage points (p.p.) in the occupancy rate.
Municipality
OVERNIGHT STAYS
REVPAR
UNEMPLOYMENT RATE
(+63%)
(+17 p.p)
(+65%)
Source: INE, C&W, Turismo de Portugal
4.8 million
(+156%)
61.7%
(+28 p.p.)
€69.7
(+136%)
TOTAL SUPPLY
NEW OPENINGS (2022/2023)
11 Hotels 740 Rooms
140 Hotels 9,600 Rooms
In tourist accommodation establishments In hotel establishments In hotel establishments
4 5 6
4
5
6
Total supply by category
The city currently has close to 140 hotel establishments, offering a total of 9,600 rooms. Most of the investment is in higher category projects over the past few years, half of the accommodation units are in 4-star projects, followed by the 5-star with 22%.
Overnight stays and RevPar
Source: INE *January to march
Source: Cushman & Wakefield, Turismo de Portugal
Até 2025
1 star
2 stars
3 stars
4 stars
5 stars
1,0 milhões
52,1%
€45,3
Since 2022, the city has seen 11 new openings, almost all of which are in 4-star category units, adding 740 new rooms to the supply. The estimated future supply for the next 3 years totals 5 new hotels with 460 rooms, with 5-star establishments adding 48% of this supply, among which the 120-roomOporto Story Hotel.
Main
Em estabelecimentos de alojamento turístico
Em estabelecimentos hoteleiros
4,8 milhões
61,7%
€69,7
11 Hotéis 740 Quartos
140 Hotéis 9.600 Quartos
RESIDENTIAL:
NR OF APARTMENTS SOLD
AVERAGE ABSORPTION TIME
AVERAGE PRICE
DISCOUNT AND ADJUSTMENT RATE
-7%
7 months
Source: SIR / Confidencial Imobiliário (SIR Ci)
SALE
€3,790/ sq.m
(+3%)
NR OF APARTMENTS ON OFFER
€4,080/ sq.m
(-3%)
5,530
(-18%)
€2,870/ sq.m
(-1%)
Apartment for sale - Q1-23 (accumulated 12 months)
7
In parentheses percentage change compared to the same period of the previous year
845 mil m
224 mil m
According to data from SIR / Confidencial Imobiliário, over the last 12 months there was a slowdown in the sale values of apartments in Porto, largely due to the increase in inflation and interest rates, and the resulting deterioration of families’ spending power. In year-on-year terms, supply indicators registered a slight increase of 3% in the average asking price, and on the other hand a fall in the same order in the volume of properties for sale. The number of apartments sold reflected a sharp drop of 18%, with transaction values stabilizing at €2,870/sq.m. Reversing the trend of recent years, the highest values were recorded in the Historic Center, at €3,290/sq.m, followed by Foz, at €3,160/sq.m; to which contributed the sharp fall of 20% in the contracted values in the latter. Conversely, the largest year-on-year increase (+16%) occurred among the Peripheral parishes, reaching an all-time high of €2,570/sq.m, which nevertheless continues to represent the lowest values per zone.
In this context, the average discount and adjustment rate increased to 7%; although the absorption time decreased by 1 month, to 7 months.
Sales values for apartments
Source: SIR Ci *Accumulated value 12 months
Sales
7 meses
Novos e usados
Source: Cushman & Wakefield; SIR Ci
5.530
€2.870/m
RESIDENCIAL:
NR OF LEASED APARTMENTS
-2%
2 months
RENTAL MARKET
€14.0/sq.m /month
NR OF APARTMENTS ON SUPPLY
550
(-36%)
430
(-20%)
€13.3/sq.m /month
(+21%)
Apartment for rent - Q1-23 (accumulated 12 months)
The shortage of available supply in the rental market worsened in the last year, with a drop in the number of apartments on offer of 36%, and consequent increase in the average asking values to €14/sq.m/month. In this context, the number of apartments leased in the last 12 months also decreased (-20%), with the average contracted rent in the municipality of Porto increasing in the same order of values, to €13.3/sq.m. The highest rents continued to be practiced in the same zone, namely in Foz, at € 14.2/sq.m/month. Similar to the sales market, despite maintaining the lowest average values, the increase of 27% among the Peripheral parishes is noteworthy, where contracted values increased to €12.1/sq.m/month. The discount and adjustment rates also reflected the mismatch between demand and supply, correcting 3 p.p.; with the absorption time halved, to 2 months.
Apartment Values
Rental Market
Apartment rental values
Institutional real estate investment in the Porto Metropolitan Area ("PMA") is currently on a consolidation trajectory, in a context of some shortage of institutional product. Thus, during the last 15 months, €267 million in commercial real estate were transacted, of which only €1 million between January and March 2023. Compared to the trend observed in Portugal, the PMA market is characterized by a greater proportion of Portuguese investors, who since last year have aggregated 38% of the total transaction volume.
TOTAL VOLUME
FOREIGN INVESTMENT
HotELs
€267 million
62%
Investment in Commercial Real Estate 2022 and Q1-23
Institutional investment in finished real estate product and income; excludes properties traded in a portfolio and whose geographical breakdown has not been possible to account.
8
Investment by semester
Em caso de intervalo na coluna “Valor (M€)”, o cálculo deste indicador tem por base o valor médio do intervalo
Investment by sector
Due to the influence of several large transactions in the hospitality area, this sector led the demand, representing 61% of the total invested, with €164 million. Among others, the largest portfolio transaction ever in this sector, the acquisition by DK of the Crow portfolio from ECS Capital, includes three hotels in Vila Nova de Gaia, the acquisition value of which is estimated in the region of €40-50 million. This was followed by the transactions of two 5-star hotel units, namely The Lodge Hotel and Hotel Infante Sagres, acquired respectively by Azora Capital for €40 million and by Gaw Capital for between €34-38 M. The retail sector attracted 18% of the transactional volume, with €49 million; with the main transaction being the purchase by the Domingos Névoa Group of Shopping Centre Cidade do Porto from Teixeira Duarte for €28 million. The office sector accounted for 11% of the total volume, with the largest deal involving the acquisition by Corum Asset Management of the Heroísmo 283 Building for €16 million. The industrial sector followed, with a weight of 9%, including the purchase of 2 assets of Rangel by M7 Real Estate for €8 million.
In a context of greater uncertainty regarding the evolution of the global economy, prime yields recorded increases across the board in 2022 and the first quarter of 2023, to 5.50% in industrial & logistics, 5.75% in high street retail and 6.25% in shopping centres and offices.
Main investment
transactions
In case of an interval in the column "Value (M€)", the calculation of this indicator is based on the average value of the range Commercial Real Estate Component in the Porto Metropolitan Area Unit value per key (€/key)
9 10 11
Investimento institucional em produto imobiliário acabado e de rendimento
Yields
MARKET UPDATE PORTO,
MAY 2023
For further information or additional copies of this or other reports, please contact: MARKETING & COMUNICATION Miguel Sena miguel.sena@cushwake.com Tel.: +351 213 224 757 Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more. For additional information, visit www.cushmanwakefield.com © 2023 Cushman & Wakefield. All rights reserved. Cushman & Wakefield Av. da Liberdade, 131- 5º 1250-140 Lisboa Av. Da Boavista, 1837- 8º 4100-133 Porto www.cushmanwakefield.com
HEAD OF PORTUGAL Eric van Leuven eric.vanleuven@cushwake.com TRANSACTIONS Paulo Sarmento paulo.sarmento@ cushwake.com RESEARCH & INSIGHT Andreia Almeida andreia.almeida@cushwake.com OFFICES Carlos Oliveira carlos.oliveira@cushwake.com RETAIL João Esteves joao.esteves@cushwake.com INDUSTRIAL, LOGISTICS & LAND Sérgio Nunes sergio.nunes@cushwake.com HOSPITALITY Gonçalo Garcia goncalo.garcia@cushwake.com DEVELOPMENT & LIVING Ana Gomes ana.gomes@cushwake.com
INVESTMENT David Lopes david.lopes@cushwake.com BUSINESS SPACE & RETAIL INVESTMENT David Lopes david.lopes@cushwake.com ESG Ana Luísa Cabrita analuisa.cabrita@cushwake.com ASSET SERVICES Bruno Silva bruno.silva@cushwake.com ASSET RETAIL MANAGEMENT André Navarro andre.navarro@cushwake.com PROJECT MANAGEMENT Carlos Pueyo carlos.pueyo@cushwake.com VALUATION & ADVISORY Ricardo Reis ricardo.reis@cushwake.com BUSINESS DEVELOPMENT Isabel Correia isabel.correia@cushwake.com
