Despite the budget consolidation plans implemented by the Portuguese government having met with the approval of the main international agencies, no transactions were carried out by foreign investors in the first half of 2013, who accounted for an average of 46% of total transactions in the past decade.
This pattern is bucking the trend seen elsewhere in Europe, where foreign investment has played an important role in most sectors, rising by 15% compared with growth of 5% in domestic investment.
Eric van Leuven, managing partner of Cushman & Wakefield says “Despite activity by foreign investors in the real estate sector having been non-existent in the first half, some interest in our market has been expressed by foreign buyers. These range in nature from the family offices to opportunist funds (normally from the US) and more recently, more traditional European real estate and pension funds. Though they have different yield objectives (with opportunist funds being more demanding, and family offices and funds having a longer term vision), they are unified in their perception that Portuguese realty, which has always stood out for its quality, is now offering attractive prices too".
As regards to investment volumes by activity sector in Portugal, the retail sector accounted for circa 89% of the total investment in the first half, mainly bolstered by the aforesaid sale of 50% of CascaiShopping. It was followed by the offices sector, which accounted for 10% of the total amount invested, and the industrial sector, making a modest contribution.
In Europe, the retail and industrial sectors have played a more predominant role in realty growth over the year, expanding by 14% and 13%, respectively, with the office sector reporting the best performance in the last quarter, rising by around 4% to a total of 15.1 billion euros, i.e. 47% of the market.
Prime yields have been restated on a generalised basis since May 2007, although the greater impact has been in terms of the devaluation of assets in the secondary market. In June 2013 the prime yields stood at 7% for street trade, 7.75% for shopping centres and offices and 9.75% for industry. The yields ranged between 100 and 275 basis points compared with the market peak in 2007. Uncertainty as to when the domestic economy will make a recovery is reflected in stagnation of yield prices in the last two quarters, and prices are expected to hold until the end of the year.