Key City Performance: Lisbon
Lisbon, the vibrant capital of Portugal, stands as a city of immense opportunities as it has climbed five places and comes in the eleventh place of most favorable European cities for real estate investment. The city’s quality of life continues to improve, as does the purchasing power of its population, making it an increasingly sought-after hub for attracting diverse investments. As Lisbon propels forward with rapid growth and promising market conditions, the potential for rewarding real estate opportunities only continues to expand.
With a population of approximately 530,000 inhabitants (3 million metropolitan population), it exerts a significant influence thanks to its growth in both the secondary sector and tourism. Whilst Lisbon boasts the highest purchasing power in the region, the city’s GDP per capita is relatively lower compared to the European average at c. €27,000. In 2022, the city boasted an impressively low unemployment rate of 5.7%, surpassing other major cities in the region such as Madrid, Barcelona, and Rome. Lisbon in conjunction with Portugal as a whole, is experiencing a remarkable period of growth. In 2022, Portugal’s economy witnessed an impressive growth rate of 6.7%, primarily fueled by the revitalization of the tourism industry and the gradual return to normality. The total real estate investment made in Portugal during the first quarter was €260 million.
In the Office sector, Lisbon’s vacancy rate stood at 9.2% in Q1 2023, whilst prime yields reached 4.5%, higher than Madrid’s 4.15%. As for the Hospitality sector, there was a significant 51% y-o-y rise in overnight stays, indicating an increase within one of the sectors which was hit the hardest by COVID-19. Additionally, ADRs stood at €128 and prime yields at 5.15%. On the other hand, the Industrial and Logistics sector registered the highest prime yield at 5.25%, with the most dynamic area being Carnaxide-Alfragide due to concentrating more than 50% of operations. Last but not least, in retail, new shop openings amounted to 41 in Q1 2023, and prime yields in neighborhoods like Chiado stood at 4.75%.
Lisbon, like in many other cities, has experienced a temporary slowdown in real estate investment. However, it is anticipated there will be a resurgence in the second half of the year. Following the uncertainties and disruptions witnessed in the initial months of 2023, it is expected that investment levels will rebound to the levels from prosperous 2022 throughout all real estate asset classes.