MARKET STATUS
ECONOMIC SUMMARY - Q1 2025 AND OUTLOOK
The Portuguese economy recorded a 0.5% quarter-on-quarter contraction in the first quarter of 2025, reflecting a negative contribution from external demand, due to the fall in exports and the increase in imports, influenced by changes in US customs policy (taxes and small taxes). Year-on-year growth was 1.6%, supported by domestic demand. This result implied a downward revision of the annual growth forecasts for 2025, from 2.4% to 1.7%, reflecting the deterioration of the external context and the (increasing) uncertainty regarding consumption and investment decisions.
Despite this scenario, confidence indicators improved in May, with emphasis on the services sector and consumer sentiment. The economic climate indicator rose to 2.5% and the European Commission's economic sentiment index to 105.8 points, remaining above the long-term average. The figures for tourism were also positive: revenue from accommodation rose 12.6% compared to the previous year, and overnight stays increased by 9.2%.
Inflation rose again in May to 2.3%, maintaining the average for the last 12 months at 2.4%. The fall in the price of oil eased pressure on energy prices, and the monthly dynamics were lower than those recorded in the pre-pandemic period. Until April, the budget balance stood at 0.1% of GDP, reflecting faster growth in revenue (9.9%) compared to expenditure (3.3%), with a focus on tax and contributory revenue, while personnel expenses grew in line with the forecast in the State budget.
The Eurozone economy recorded growth of 0.4% quarter-on-quarter in Q1 2025, with positive contributions from domestic demand in Germany and Italy, and upward revisions to their respective GDPs. Year-on-year inflation stood at 2.0%, and core inflation at 2.4%. Even though markets are expecting a further cut in the deposit rate to 2.00% in June, the ECB is expected to adopt a cautious stance. Trade tensions create an asymmetric set of risks: on the one hand, disinflationary factors such as the slowdown in global demand and the reorientation of trade from China to Europe; on the other, potential inflationary pressures caused by disruptions in supply chains and reciprocal tariffs. The recent fluctuation of the euro illustrates this uncertainty. Analysts are therefore divided in their views between a further cut in interest rates at the meeting on 5 June or a cautious and expectant pause.
In the United States, despite the slight contraction of the economy in Q1 (-0.1% quarter-on-quarter), consumer confidence rose in May, boosted by the temporary suspension of tariffs. However, durable goods orders data suggest a slowdown in investment. The Fed has expressed concerns about the inflationary risks arising from the tariffs and their possible effects. Thus, the Federal Reserve maintains a wait-and-see stance, considering the current balance of the labor market and the resilience of the economy.
Sources: INE, BdP, BPI Research, Eurostat, Yahoo Finance; ECB, Turismo de Portugal
DEVELOPED ACTIVITIES
i. Current Management
ii. Achievements
Partial return of capital invested from project: PALMELA B
Conclusão do projeto: PORTAS DO MONTIJO
PORTAS DO MONTIJO
Capital 222.000€ | 19 Members
iii. Improvements and Evolutions
EVERYONE
COUNTS
REAL ESTATE MARKET TRENDS IN PORTUGAL - 2024
The Portuguese real estate market demonstrated high resilience and dynamism in 2024, with significant variations between its main segments: logistics, hotels, offices and residential. Despite a still uncertain international economic context, the sector benefited from more favourable financing conditions, moderate economic growth and structurally solid demand, particularly in large metropolitan areas.
- Logistics and Industrial
The logistics segment remained one of the most robust in the real estate sector in 2024. The absorption volume reached 778,500 m² (a record high) reflecting the pressure of demand from logistics operators, retailers and e-commerce companies. Lisbon and Porto led the activity, together accounting for more than 57% of national occupancy.
The growing shortage of new supply continues to be one of the main limitations of the market. The majority of contracts were awarded to expand existing operations, with many occupiers opting for new or customised spaces, given the inadequacy of existing stock.
Prime rents continued to rise, supported by consistent demand and limited supply. Prime yields have stabilized, but are still attractive to institutional investors. There is also a growing appreciation of assets with environmental certifications and optimized technical characteristics, given the demand for energy efficiency, ESG and automation in logistics centers.
- Hospitality
The hotel sector consolidated the recovery that began in 2023, driven by resilient tourism and a favorable macroeconomic context. In 2024, overnight stays grew by 4%, with significant increases in Lisbon, Algarve and some inland regions.
From an operational point of view, the average daily rate (ADR) exceeded €120, while RevPAR exceeded €70, reflecting both the increase in demand and the repositioning of many assets towards higher-value segments.
The interest of international investors has grown again, with emphasis on large-scale operations, such as the sale of the Conrad Algarve and several 4 and 5-star urban units. The outlook for 2025 is for performance to be maintained, with a growing focus on sustainable units, renovation and integration of technology and personalized experiences, as well as the consolidation of the luxury offer, focus on sustainability (Green Hotels), digitalization of the customer experience and growing interest in the health and wellness segment.
- Offices
The office market, especially in Lisbon, has shown exceptional performance, with more than 220,000 m² of take-up in 2024 (the third best record ever). Parque das Nações and emerging areas led the take-up, benefiting from the completion of new buildings and large corporate operations (CGD, for example).
Companies continue to adapt their work models, with a consolidation of hybrid work policies and a redirection of real estate strategies towards more efficient, well-located and technologically prepared spaces. The demand for buildings with environmental certifications (LEED, BREEAM, WELL) has increased significantly, reflecting the demands of international occupiers and investors.
Prime rents have stabilised, with slight compression in yields in some areas. Despite the limited availability of new stock, the pipeline for 2025-2026 anticipates the entry of projects with higher pre-leasing. The demand trend has been for flexible and “plug & play” spaces, with ESG certification as a prerequisite.
- Residential
The residential sector shows signs of vitality despite several years of price growth. Demand for rentals has remained high, especially in mid-rise typologies and in peripheral areas.
Access to housing continues to be a structural challenge, with supply growing very slowly compared to demand. Build to Rent projects, promoted by institutional investors that focus on stable long-term rentals, may be a good investment option.
Sustainability and energy efficiency have become critical elements in the purchase/investment decision, especially among national and foreign buyers with a more informed profile. There has also been an increase in demand for new urban centres and neighbourhoods integrated with services, green spaces and good mobility.
Nuno Santos, Asset Manager
MONTH'S
SCHEDULE
June 2025
