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News Release

Cannes - Mipim - Lisbon

Portuguese real estate investment falls 46% to €637 million in 2008

Jones Lang LaSalle discloses “The investment market in Portugal” at the MIPIM


Jones Lang LaSalle today disclosed the “Investment Market in Portugal” report during the MIPIM property fair, which relates the performance of Portuguese real estate investment in the year of 2008. According to the company, real estate investment transaction volumes in Portugal totalled €637 million, which is approximately 46% down of the previous year and 63% lower than in 2006.

The fall was especially sharp in the retail sector, where direct investment volumes were 3.5 times lower than in 2007. Even so, this sector accounted for 23% of the volume transacted in Portugal. The hotel and office markets led the investment volume, each with a share of 30%, although the former comprises a single operation to the tune of €180 million. The industrial real estate segment and logistics accounted for 8% of the investment.

Manuel Puig, Managing Director of Jones Lang LaSalle in Portugal, explains that “real estate investors will be glad to see the back of 2008, given the sharp fall in the volume of investment. A combination of factors such as the collapse of the financial sector, interest rate rises, lack of liquidity of real estate investment funds, rise in oil prices and the difficulty in gaining access to credit, led to this reduction in activity.”

As for the origin of the investment, cross border investors led the way, accounting for 75% of all the capital invested in real estate in 2008. Investors from the Middle East top the list, with 30%, which is explained by a single operation in the hotel market – the purchase of the Meridien Portfolio. The United Kingdom (13%), Germany (9%) and France (8%) are the other major countries in terms of origin of direct investment made in Portugal last year. The domestic investors, accounting for with 26% of the investment made, continue to be dominated by real estate investment funds, which undertook 13 of the operations that took place in the market in 2008.

The worsening economic climate throughout 2008 had an immediate impact on the value of the assets, which were readjusted, and which resulted in a rise in the yields. In the prime assets this rise was around 75 basis points, but in non-prime assets it may have risen to 125 basis points. In terms of sectors, especially noteworthy was the rise of 125 basis points in the prime yields of shopping centres between 2007 and 2008. However, it should be pointed out that this adjustment is more noticeable in terms of valuation than in actual terms of business carried out, owing to the lack of completed deals.

Pedro Lancastre, Head of Capital Markets of Jones Lang LaSalle in Portugal, states: “This situation is down to the increase in the cost of financing and the loss of confidence by credit entities. These two factors have generated pressure in the returns demanded by the major investors.”

Jones Lang LaSalle expects the number of transactions in Portugal to increase in 2009, driven both by the greater liquidity of the real estate investment funds caused by the fall in interest rates and the ongoing adjustment in the value of the assets, which can also be a factor that boosts the market.

“The interest rates rises over the past year led to an increase in the redemptions of the unit shares of the real estate investment funds, and at the same time a reduction in the volume of subscriptions, given the more attractive conditions for time deposits. However, with the fall in interest rates in 2009, it is expected that the profitability of the real estate investment funds will make them more competitive, increasing their liquidity,” adds Pedro Lancastre.

The manager goes on to draw attention to the fact that “maintenance of the yields similar to some more solid European markets is currently a factor that prevents cross-border investors from opting for national assets”.