As it does every year, Worx Real Estate Consultants is anticipating the launch of WMarket 2023-2024, the annual publication that analyses the behaviour of the different commercial real estate sectors in Portugal over the past year, with a summary of the main conclusions and trends for the current year.
In a year in which the total volume of investment in commercial real estate in Europe fell by 51% (45% in Portugal), the Industrial & Logistics sector was one of the sectors with the least accentuated falls, only surpassed by the hotel and retail sectors.
According to the report on the European context published by BNP Paribas Real Estate, WORX‘s alliance member within the BNP PARIBAS Real Estate Alliance Network, in European terms there was also a significant decrease in the occupancy market, across all the main markets, with Frankfurt, Munich and Marseille being the only exceptions. Even so, Lisbon was one of the European cities in which the sector’s negative impact was least marked.
Despite the context of falling demand, the main European markets recorded increases in prime rents, with Lisbon showing the third highest growth, of around 18 per cent (5€/sq.m/month).
Even so, in Portugal the level of absorption in the sector in 2023 was 410,240 sq.m, down 20 per cent year on year.
In fact, compared to 2022, in 2023 there was a reduction in the average deal to 6,787 sq.m and a reduction in the number of pre-lets. At the same time, demand showed a greater appetite for new industrial and logistics space, with transactions characterising more than half of last year’s operations.
In this context, it is also important to emphasise the growth in the weight of own-occupation operations, which accounted for 47% of the total area absorbed. In fact, the biggest operations of the year were self-occupation projects currently under construction and scheduled to open in 2024, namely the new Lidl warehouse in Loures, the Almeirim Logistics Centre promoted by Mercadona and the Aldi Distribution Centre in Santo Tirso.
Greater Lisbon region accounted for more than 40 per cent of the total area absorbed, followed by Greater Porto, where demand for the Santo Tirso area stands out.
To summarise, the last year has highlighted the growth in demand for new spaces and the importance of the owner-occupied segment, reflecting, on the one hand, the shortage of stock and, on the other, the inadequacy of the conditions of the existing offer in the face of the requirements and demands of tenants, for whom the modernisation of spaces, already with the integration of automation systems, predictive analysis and AI technologies, is proving to be essential.
Faced with a lack of product to meet new demand, investment in new projects has grown, mainly in the Greater Lisbon, Greater Porto and Alentejo areas.
In this context, there are more than 28 projects planned or under construction, nine of which are scheduled to be completed in 2024 and which will represent an increase of 108 hectares in total construction area in the industrial and logistics stock.
Among the main projects expected for this year, and in addition to the projects for own occupation mentioned above, are the Grândola Euro-Atlantic Logistics Park, with 670,000 sq.m and promoted by Qantara Capital, and the Benavente Logistic Park, with more than 90,000 sq.m and promoted by Ivesco and Magna. Despite the volume of the pipeline and the significant increase in stock, there shouldn’t be a significant change in the vacancy rate, as a large part of this additional area is already pre-let.
The continued growth in the penetration of online commerce that is expected over the next few years should continue to drive the promotion of new logistics projects, especially in the area of last mile space.
The sector’s low vacancy rate, combined with the entry of these new products onto the market, should continue to drive rental growth this year.
To summarise, the Industrial & Logistics sector is expected to be one of the most dynamic markets in 2024, with rising occupancy levels driven by some tenants moving to new premises and accompanied by a slight increase in rents.
At the same time, the reduction in interest rates, which is expected to occur at the end of the first half of the year or the beginning of the second, by favouring financing conditions, should consequently help attract investment to promote new projects.
Published in Iberian Property on 15th February 2024.
