Key City Performance: Porto
Porto, the second largest city in Portugal after Lisbon, is witnessing an unprecedented surge in foreign investment in the real estate sector, thereby giving a substantial boost to the local economy. Its stature as a regional business center, along with its expanding expatriate community, unparalleled quality of life and growing real estate opportunities, render it as an emerging and promising investment destination within Europe.
Porto and the northwestern region of Portugal play a pivotal role in the national economy, boasting a GDP of €79 billion. This region’s significance contributes to nearly half of Portugal’s exports and employs over 40% of the country’s workforce. Porto stands out for its robust labour market and flourishing entrepreneurial ecosystem.
Almost 40% of transactions in the real estate sector in Q1 2023 were carried out by foreigners. This remarkable influx of interest from both corporations and individual’s positions Porto as a preeminent centre of business. The burgeoning expatriate population acts as a catalyst for foreign investment and over the past five years, the number of foreign residents has more than doubled, experiencing a staggering 140% surge since 2016.
The city’s pleasant climate, captivating architecture, and vibrant cultural scene, prove irresistible to foreigners seeking to establish themselves in this urban paradise. Additionally, the surge in tourism has resulted in heightened demand setting a record of 28 million tourists by 2022. In addition, the robust job market has fostered a steady appetite for long-term leases in the residential sector in spite of the decline in confidence due to the current macroeconomic environment and widespread increase in prices following the upward path left by 2022, a year in which house prices rose by more than 14%.
Porto’s residential real estate market has witnessed a substantial increase in demand of 22% in comparison to Q1 2022. Similarly, the Office sector in Porto has seen a 32% y-o-y growth with an increase of 7,700 sq.m. reflected in 13 transactions. The sector has a vacancy rate of only 5.5%, much lower than Lisbon (9.2%) or Barcelona (9.4%). The Industrial and Logistics sector is also showing formidable results with total sq.m. forecast to increase between 2023 and 2024 by more than 130,000 sq.m, as prime yields in the sector stand at 5.5%. Retail is also witnessing an increase in demand as Porto experiences a total of 126 new shops openings in Q1 2023. Thanks to the growth in tourism, prime yields in Hospitality stood at 5.75%. Furthermore, as of Q1 2023, the sector also went through a significant increase of 63% y-o-y in overnight stays as well as a 17% y-o-y rise in average occupancy rate.