Those who follow the behaviour of the office market in Portugal have probably asked themselves: How have rents managed to remain stable, and even rise, in such a slow period of transactions, as has been the case in 2023?
As with most questions relating to market dynamics, there is no single definitive answer. It’s actually a complex interplay of circumstances, some more obvious than others. One of the circumstances that seems to have played a crucial role is the relationship between the supply of new office buildings and current demand. The new assets that have emerged have been absorbed gradually and steadily by the market, avoiding the saturation of available unoccupied space. Such saturation would certainly put pressure on rents, especially in Lisbon’s outlying areas and in older buildings. You only have to go back a decade to realise the impact this had on rents and negotiations at the time…
Another relevant factor has been the effort by investors and landlords to offer alternative incentives to meet tenants’ needs, prioritising discussions about grace periods or financial contributions for adapting spaces, rather than direct rent reductions. These strategies affect the net income of the asset, but usually involve other concessions from tenants such as longer contract terms.
Last but not least, the focus on obtaining sustainability certifications and stricter criteria for the renovation of existing assets has also justified the increase in rents in older properties, contributing to the resilience of rents that we have observed.”
Opinion article by Bernardo Zammit e Vasconcelos, Head of Agency at Worx, published in Magazine Imobiliário on 31st October 2023.