In 2019, investment volume in the Portuguese office sector was €1.1 billion. Major investors, such as Deka Immobilien, Cerberus and Avignon Capital, invested for the very first time in Portugal, marking a turning point in the way a number of key international players perceive the Portuguese office market.

Vacancy rates averaged 5.2%, the lowest rate ever recorded in Lisbon. In select areas of the Portuguese capital, particularly in the prime CBD, rents surpassed €25/sqm per month, while yields compressed below 4.0% – an unprecedent figure. These figures are forecast to improve further owing to a number of international corporations, including Teleperformance, Sky, Uber and SAP, finding Lisbon a hotspot to set up operations. The main reasons for this stem from the competitive corporate tax rates, low labour costs compared to other EU member states and skilled labour, specifically in tech and engineering-related roles.

Today, there is an evident mismatch between supply and demand in Lisbon. Demand for non-placed office area was north of 300,000 sqm at year end in 2019, whereas available stock was approximately 180,000 sqm. In our view, therefore, there are compelling arbitrage opportunities, particularly for refurbishment and repositioning projects in Lisbon and Porto, to meet the requirements of major tenants.