Everyone is talking about Lisbon

Everyone is talking about Lisbon now”, says a private equity investor, as the Portuguese capital takes the top spot on the Emerging Trends Europe leader board.
This may surprise, as Lisbon is a small market – but it is offering outsize returns. The CEO of one Iberian firm expects to get almost 10 percent rental growth this year from its Lisbon office portfolio.
The growth is fueled by high demand from international corporates looking to expand. “Portugal has become a popular location
to locate service centres and business process outsourcing.
It is a combination of still relatively cheap labour and real estate, and a great quality of life,” says one agent. Tenants have to compete for space and supply is low – large, prime buildings are almost non-existent.
The city’s ongoing residential boom is an issue because it has exacerbated the shortage of office sites. “There will be an undersupply for the next two to three years, certainly,” believes one local player. Consequently, there is opportunity to do speculative office development or refurbishment.
Lisbon is also benefiting from Barcelona’s fall from grace, with some investors admitting to switching capital from Catalonia to Portugal.
“In the previous peak, the market was mainly Portuguese property funds and German funds who were all essentially looking for the same type of product,” says one local interviewee. “Today there is such a diversity of capital: of origin, of risk profile, of asset classes targeted. There are a lot of NPLs being sold, so you’ve got hedge funds and more opportunistic players as well as core.”
Retailers are generally doing well: Portugal has low internet penetration, thriving tourism and a population that likes to shop, partly because the retail destinations are attractive. Logistics lags the other sectors, though there are opportunities due to the outdated stock.
“Now the crowd is there, it is getting more competitive,” says one private equity partner, “but it’s still very interesting.”
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