This article is the responsibility of CBRE
In this interview, Miguel Alvim, head of the transactional area dedicated to real estate development at CBRE, takes an extensive tour of the sector and the possibilities it offers to local and international investors. In addition, some challenges that real estate developers are trying to overcome in the current national real estate context are also discussed, as well as the regions that attract the most investment in addition to Lisbon and Porto.
In the real estate development area, do you see that investors are still largely concentrated in Lisbon and Porto or are there other regions of the country that can consistently attract investment?
The demand from investors and developers is directly linked to the perception of where the demand from end users or consumers is. In this sense, Lisbon and Porto will always be the privileged destinations. But the radar is no longer only focused on the center of the cities and has also been focused on the neighboring municipalities.
The promoters are focused on finding solutions that satisfy internal demand, necessarily in areas with less pressure and larger-scale projects, in a search for efficiency to control costs and keep the starting price affordable for Portuguese families. It has been a remarkable journey and there are several successful examples, from Solyd, Krest, Fortera, among many others.
On the other hand, we have seen a growing interest between Tróia-Melides-Alcácer and the Costa Vicentina in general. The geographical situation and the natural beauty are the main levers of these wonderful places in our country, which actually, at present, have an insufficient offer to satisfy the demand. Other high-quality promotions will soon appear, such as Costa Terra or Pestana Porto Covo.
What sectors show the greatest potential for real estate development in our country?
The residential sector, in its different models, is always one of the biggest focuses, even more so at this stage, when there is a shortage of supply for Portuguese families. However, there are several others to mention. Tourism has become relevant again, with prospects for a very solid year 2022, having already registered a higher number of overnight stays in May than in 2019, the result of a combination of efforts to promote the excellence of Portugal abroad, both Tourism Portugal and the private sphere, through the most varied agents in the sector.
However, the sector that will clearly grow this year is the industrial and logistics sector. There are several national and international funds, most center or more opportunistic, with an interest in this area. However, in Portugal there is an unsustainable shortage of qualified real estate supply for logistics operators, which makes the market for developable land very interesting. The growing trend of demand for land for industrial or logistics development has already occurred in recent years in Europe and Spain and is now reaching Portugal with great force, with entries from VGP, Panattoni or Montepino, among many others.
In short, I would highlight the residential sector, which is more stable, the tourism sector, with good performance in a year of recovery, and the logistics sector, with impressive demand.
Miguel Alvim, Associate Director – Development at CBRE Portugal
What are the main obstacles to real estate development in Portuguese cities and are there solutions to overcome them?
The real estate business is characterized by a high degree of complexity and delay in the respective transactions, especially when compared to movable property, with a quick and simple transaction, and with very high production costs. By their nature, developers take some risk, but the current situation exacerbates it in an unsustainable way.
Among various obstacles, such as the fiscal framework, the lack of qualified labor, the difficulty of financing, etc., I am basically referring to two factors: firstly, the unpredictability and delay of the licensing processes, which condition business plans seriously and many times make unfeasible investments of the most varied scales. It is urgent to give transparency to the process and open the doors of the municipalities, promoting frank, clear and agile communication, before and after the projects are submitted for consideration. In addition to digitization, which has already begun, and some other challenges, transparent communication will be key to streamlining processes, improving the lives of municipal employees, holding them accountable, and allowing promoters to manage more efficiently.
Second, more recently, we have seen a lot of uncertainty about construction costs. The increase in the cost of raw materials together with the increase in the cost of labor makes financial and treasury management very challenging, at any stage of the process, whether in project definition and positioning, construction or sale. . Inflation and the unpredictable increase in cost make it impossible to define the starting price and there are already delays in the launch of pre-sales, or alternatively, the definition of high prices, both in a naturally defensive attitude of the promoters. State and local authorities play a key role in streamlining urban planning procedures and the private sector must continue the solid path it has taken to become more efficient. The risk and benefit end up being shared by all.
What types of investors are entering our country and what differentiates them from “resident” investors?
There has been an important evolution in the last decade and, at the moment, Portugal is part of the radar of any international investor. We are a country that offers extraordinary conditions, great opportunities in a healthy market (perhaps, sometimes, there is a lack of transparency and quality of information), a reasonably stable political and legislative framework but, above all, very competent agents aligned with the highest standards. .
For these reasons, we see a very frequent phenomenon that is that international investors, interested in entering Portugal, establish alliances with local promoters for the development of projects, structurally trusting in the work developed here.
On the other hand, we also see several international investors opening offices in Portugal with their own staff, highly motivated to establish themselves in our country. Currently it is difficult to distinguish between resident investors and new investors since the quality required and offered is similar.
The distinction should be rather temporary, as agents today are incomparably more sophisticated and professional than those that existed in Portugal a decade ago.
Source: Observadora
