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Lisbon offices - market update

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After several years of dwindling demand, the office sector in greater Lisbon started the year with an upturn in sales, according to the latest data published by Cushman & Wakefield.

In the first half of 2014 some 120 transactions took place, amounting to nearly 41,100 m2 of occupied area, an increase of 60% over the same period of 2013, though still 11% less than the average for the last 5 years.

The largest transaction that took place was in Zone 2 involving 4,000 m2 at the Duarte Pacheco 7 building, which was occupied by Miranda Correia Amendoeira & Associados.

Two of the other large transactions also took place in Zone 2 this year: the occupation by Reditus of 3,300 m2 at the 5 Outubro 125 building and 1,500 m2 by Explorer Investments of at the Duarte Pacheco 17 building.

A shy upturn in demand and the continual decline in new supply in recent years have helped improve the vacancy rate.

This indicator currently lies at 11.9%, 30 base points lower than at the end of 2013.

With the exception of Zone 2, all other zones witnessed a contraction in vacancies, which will be partly justified by the correction of the future offers in recent years.

Real estate promoters are still proceeding cautiously, and a mere 54,200 sq.m of new office projects are forecasted for development in greater Lisbon by 2016.
This upturn in the market has been confirmed by rentvalues.

For the first time in 4 years prime yields have risen in greater Lisbon, which in March 2014 rose by 50 cents over 2013, and now stand at 19 €/sq.m./month, thereby returning to levels of June 2011.

Carlos Oliveira, Partner and Head of Office Agency at C&W said, “There are prospects for growth in the market over the remaining months of the year, which will build on the progress made in the first half, and demand is expected to rise is relation to previous years, with a subsequent improvement in the vacancy rate".