Go back 10 years and the Lisbon Europe knows today was a very different place. Similar to Spain, Portugal suffered greatly during the Global Financial Crisis, resulting in widespread unemployment and a halting of the development pipeline across commercial and residential real estate.

Nevertheless, with investment into commercial real estate standing at €3 billion in 2018, and vacancy rates across the board expected to drop even lower in 2019, it is clear that appetite for this buzzing Atlantic city is back in a big way.

Boasting strong fundamentals including a great quality of life, excellent infrastructure, a thriving tourist industry, and 300 days of sunshine a year, this city ticks a lot of boxes for investors looking to deploy capital.

The last five to six years have seen a huge increase in cross-border investment (which stood at 18 per cent in 2012 compared with 90 per cent today) – 23 per cent of which is from Asia and 24 per cent from France. Looking at specific sectors, it’s offices and retail that saw the largest amounts of investment over the last 12 months, accounting for 69 per cent of the total volume.

Lisbon has become a popular choice for companies looking to expand into Iberia (take-up in 2018 increased 20 per cent year-on-year) and, as a result, the development pipeline for prime CBD and emerging office zones has had to play catch-up – almost 200,000 sq m (approx. 2,153,000 sq ft) of prime space already confirmed for the next two years.

The expected entry of more new supply in the coming years will undoubtedly cause further increases in prime office rental values as the capital soars in popularity with a multitude of sectors. The city’s buzzing start-up scene means that there is also a lot of interest for shared office space from companies like Google, Teleperformance and BNP Paribas.

It’s a similar story in retail. The historic centre and the CBD remain the most visited places with streets such as Rua do Carmo averaging footfall of over 4,000 people each hour. With an increasing rise in popularity and booming tourist industry, Lisbon has fast become a solid investment option for both domestic and foreign buyers.

2018 saw major players from Spain, France and the US taking an interest in a range of high street assets and shopping centres including Dolce Vita Tejo, Almada and Montijo Forum and Sintra Retail Park.

Closely linked to retail, the logistics sector has also seen a flurry of activity thanks to the continued rise in online shopping. Although 2018 did not see as high a level of take-up as 2017 (217,257 sq m in 2017 compared with 170,040 sq m in 2018 – approximately 2,339,000 sq ft and 1,830,000 sq ft respectively), major players have snapped up space, resulting in very low vacancy rates and a tightening of yields. This trend is expected to continue in 2019.

So is there any bad news for Lisbon? It would appear not at present. Alongside a positive outlook for commercial real estate, which is expected to maintain its dynamics based on capital liquidity, the city boasts strong political and economic stability as well generous tax incentives.

Lisbon is expected to continue to be a market with excellent investment opportunities and good prospects for return on capital.

Further information

Read more: MIPIM Matters 2019