A JLL study reveals that, despite the uncertainty caused by the pandemic, the sector has everything to remain dynamic and on the investors' radar.
Given the impossibility of predicting and controlling the future, scenarios can be drawn up for what is to come, based on indicators and experience. And everything points to the fact that, even in the face of the uncertainty generated by the Covid-19 pandemic crisis, real estate is back in business and show up resilient in a year that, according to JLL, will be “positive”, despite everything. THE diversification will be the watchword, with emerging segments to open the doors to new businesses, at the same time as the traditional sectors will have to reinvent themselves. Pedro Lancastre, general director of the consultancy, says he is optimistic and “moderately confident”, noting that the sector “is not stopped” and that it will continue to resist and be seen as an investment refuge.
If “resilience” was the watchword in the real estate market in 2020, “diversification” will be the dominant trend in 2021, according to JLL. This is, in fact, one of the main conclusions of the Market 360º study, presented this Tuesday, January 26, 2021, in which the consultant presents a balance of the real estate market activity in 2020 and launches the perspectives for its development this year.
For the general director of JLL, Portugal “keeps” the attractiveness factors that, in recent years, have distinguished us internationally. “We have a place on the global map and we can capture a slice of the greatest liquidity which will be aimed at the real estate market in the current situation, in which the interest rates will remain low. In addition, we are well positioned to take the lead in the race to attract more talent and more companies, and may also be an important hub for many people who will start working from home”, defends the responsible.
Pedro Lancastre recalls that the pandemic has boosted trends that were still "shy", such as the telecommuting and online commerce, and that this necessarily implies structural changes in the role of offices and retail, as well as in the relationship with its users, since they are no longer spaces of mere convenience to be spaces of experience. “It is inevitable that these two types of real estate will reinvent themselves, as that is the only way they can be attractive, whether from the perspective of occupation or investment. This is a moment of great transformation, but also of new opportunities”, defends the general director of JLL Portugal.
Bet on alternative segments
The alternatives segment continues to expand and is under the “eyes” of those who want to invest. A trend that should also mark this year. Gonçalo Santos, Head of Development, recognizes that, despite an insignificant break in the licensing rhythm (-5%), the promotion sector is affected by the uncertainty brought about by the pandemic, “with prudence remaining as a strategy of many operators ”, also referring to other structural constraints, such as the delay in licensing and restrictions on funding.
Still, the responsible reveals that 2020 had a lot of activity, especially assets for use residential, the “pandemic champion” segment which should maintain a positive performance throughout this year. In his perspective, the way in which the vaccination plan will take place and this 3rd wave of the pandemic will be decisive for the resumption of confidence in the sector.
Housing, he says, will be one of the most dynamic segments in real estate development in the short term, with a wide range of targets, including both projects for sale and lease, in addition to alternative uses including student and senior residences . “There is a lot of liquidity and great opportunities in the Portuguese market, so that, once confidence is restored, the year has conditions for the start of very relevant operations in the promotion”, he adds.
THE home built for lease (multifamily) it is, therefore, one of the emerging segments with the greatest attention from investors and developers, with Portugal presenting a very consistent potential demand base and very attractive development opportunities compared to other European markets – this study produced by JLL, and featured in idealista/news, explains what it is and what strength this segment may have in the country.
Without wanting to go into too much detail about the project, Gonçalo Santos revealed that an operation was under 'due diligence'. 500 fireworks for Almada, with a part dedicated to leasing. “It's well under way”, he adds.
Residential remains “firm” and the layout of the houses is already changing
The residential segment remains “firm and showing its race”. The words are from Patrícia Barão, Head of Residential of the consultant. The responsible makes a very positive balance of the year 2020 for this segment, adding that the number of homes sold was only 8% below the previous year (2019), but that, on average, more was invested for each house.
Even with a drop in the number of units, there was a business volume similar to 2019, with about 25.6 billion reached in the country. You international buyers maintained interest in Portugal and should continue here. “Portugal remains on the radar of international investors. We are a safe country that offers extraordinary conditions. This year will be very dynamic for the residential market”, he guarantees.
Patrícia Barão also recalled that prices remained stable throughout this past year, which is something “truly remarkable”, contradicting the most pessimistic scenarios of falling prices. Still, and for 2021, the responsible admits downward corrections. “I don't foresee a drastic reduction in prices. I predict that there will be some price correction in specific locations, due to the decrease in demand for these areas. They are corrections”, he explains.
For 2021, the responsible also highlights the growing diversification in the product to be made available, from the outset to target audiences, with an increase in the offer for the middle class, but also in the layout of the houses, which are being adjusted to meet post- pandemic, with greater integration of outdoor spaces and home office spaces.
Global liquidity on its way to real estate?
Despite the pandemic, 2020 was the third best year ever in real estate investment in Portugal, with 2,700 million traded and yields that remain at historic lows. According to the JLL study, more than half (55%) of this investment made in 2020 was concentrated in the first quarter of the year, when Covid-19 had not yet arrived in Portugal. The majority (40%) was channeled to the retail segment, followed by offices (34%) and hotels (16%). “This is proof that investors are still very attentive to Portugal and that they trust our market”, comments Fernando Ferreira, Head of Capital Markets.
As for 2021, he says, “there is no doubt that foreign investors will remain in the market and that, in parallel, there will be a diversification of investment sources, both in terms of nationalities and investor profiles”.
Fernando Ferreira explains that there is a lot of liquidity globally, “because a lot of capital that was previously directed to the financial market will be looking at real estate”. Therefore, according to the official, Portugal has good possibilities to capture a share of this liquidity, as it maintains solid indicators in the core segments and offers diversification in the segments to invest, "with very interesting yields, as is the case with the multifamily", although this diversification of investors and segments should also result in “lower average investment tickets”.
Offices and retail start to reinvent themselves
The more traditional real estate segments, such as offices and retail, are beginning to reinvent themselves, in an attempt to circumvent some of the obstacles brought about by the pandemic. The sanitary crisis has made teleworking mass, and some businesses have ended up being interrupted or postponed, says Mariana Rosa, Head of Leasing Markets Advisory, but again emphasizes that this will not dictate the end of the offices.
The responsible for JLL acknowledges that the pandemic caused the companies rethink their real estate strategies, “which delayed several processes and explains the break in occupation”. Even so, Lisbon registered a take-up of 138,000 m2 and Porto another 54,000 m2, with a tendency to demand for larger areas. Furthermore, in both cities, 30% to 50% of the offices under construction are already guaranteed occupancy, “which opens up good prospects for this year”.
Still, it's time to diversify, especially through the redesign and reinvention of spaces. Teleworking is here to stay, but several companies suffered from the lack of relationship between teams and it will be necessary to rethink this model. Everything points to a hybrid model, where working at home coexists with working at the office, a place increasingly destined for socialization, networking and collaborative work, according to the responsible.
“Companies are adapting to this new reality and an office that responds to these new needs will also become a driver of demand, along with location, technological capacity or corporate visibility”, explains Mariana Rosa.
Retailers will have to follow the same path of reinvention, one of the most affected by the pandemic, suffering from the closure of stores and restriction in the flow of people and tourists. Shopping centers and high street retail in tourist areas felt the negative effects of the pandemic, as well as restaurants, which stand out as one of the most penalized business areas.
"If, on the one hand, proximity and convenience commerce is here to stay, retail is going through a time of paradigm shift, in which the store can no longer be just a space for commercial exchange, but has to appeal to emotions and provide a experience for those who visit. This will have a major impact on the way retail real estate will be designed”, notes Patrícia Araújo, Head of Retail.
Industrial and Logistics "wins"
Also noteworthy is the re-invigoration of industrial and logistics real estate, which has to respond to an exponential increase in demand in the context of the e-commerce boom, being one of the segments that stands to gain from the new pandemic scenario.
“The volume of online sales has tripled and this has imposed the need for new storage units, especially in the last phase of the delivery process, the so-called last mile units. This increase in demand, which did not find an echo in the available supply, had a positive impact on rents in 2020. There is no doubt that this segment will have great dynamics this year in terms of demand, accompanied by the qualification of the offer”, notes Mariana Rosa.