Monthly Update -
Covid 19

Economic overview

Fiscal & economic policy response in Portugal continues, with short and medium term decisions: (i) Approval of the supplementary budget program to support the economic recovery, aiming at reducing second-order effects (effects with lasting negative effects in the economy) as well as boosting employment and investment and (ii) Finalization of the creation of Banco Portugues de Fomento, which will serve as a more direct and efficient support mechanism for firms from 2021 onwards.

Despite differences across countries and the overall uncertainty in the market, economics forecasts for the 2020 downturn have worsened each month as the crisis has gone on. In Portugal, the economic downturn is being smoothed by, among others, the real estate and construction sector.

As lockdowns are lifted, confidence is returning and easing of restrictions & confidence to go out appear mutually reinforcing.

Residential sector

May registered a positive trend in sales evolution across Portugal. A newly created index from Confidencial Imobiliario indicated that in the first month of economic reopening, the Sales Volume Index registered an increase of 23% regarding April (-41% compared with January levels). April was registered the most significant decrease, with -53% in sales volume activity.

In the investment market, despite differences across countries, Financial reporting has highlighted the resilience of residential landlords across Europe, with high rent collection evidences.

Market players have reinforced the importance of the financing entities in the current market conditions, both for development investments as well as for final consumers.

Office sector

Take-up in May registered a significant decrease compared to 2019 levels, as new tenants' decisions regarding new spaces were still postponed until market activity restarts.

Nevertheless, as the countries continue their economic reopening, the occupation market is starting to register increases in demand for new spaces. It is still not clear if structural changes are due in the takeup levels, with firms still redesigning their new office space needs and current contractual conditions.

In the investment market positive sentiment continues, with increasing activity in the market, with several transactions resurfacing – while liquidity continues to be available, the return to normal level of activities from most firms are enhancing activity in the market and increasing confidence for new investments.

Retail sector

While economic growth outlooks are still very uncertain, consumers are keen to pick-up consumption habits. With most of the shopping centers reopening, footfall registered positive indicators, enhanced by a potential additional willingness to consume from current customers.

Comparing with previous crisis, it is possible to understand that product pricing discount were relatively low so far, with retailers focusing on sales growth as well as protecting their margins.

Covid-19 effect could have positive in the post-recovery, accelerating innovation solutions. Solutions that facilitate consumption while protecting health& safety are proliferating across Europe.