Portugal Real Estate Market Report 1st Semester 2019 Real Estate Market Report

Economy

In 2019, the increase in private The gradual decline in the unemployment Throughout the year 2019, consumption will be linked to the favorable rate, which by 2020 is estimated to reach 5.7%, Portugal will maintain its evolution of disposable income of households, together with a low population growth, will expansion trajectory, albeit justified by the favorable evolution of have a decisive influence on the productivity employment and nominal wages. levels achieved, which are fundamental to to a lower rhyme compared In May 2019, the unemployment rate maintaining the competitiveness of the to the last years stood at 6.6%. Portuguese economy. It should be noted that the Portuguese At the beginning of 2019, the Portuguese economy, despite successfully passing through economy experienced a slight acceleration in a period of recession and now enjoying a more its expansion trajectory, registering a growth of favorable international context, continues 0.5% in the first quarter of 2019. to present some structural challenges that The projections advanced by the Bank of influence its growth potential. Portugal foresee a real GDP growth of 1.7% in 2019, with the evolution of Portuguese economic activity based on the growth of Macroeconomic 2019 2020 2021 2018 private consumption, the dynamism of Gross projections (f) (f) (f) Fixed Capital Formation and the increase in GDP 2.1% 1.7% 1.6% 1.6% exports, despite the downward revision of external demand. Inflation 1.2% 0.9% 1.2% 1.3% Also, financing conditions should remain 2.5% 2.6% 2.0% 1.7% favorable for all sectors of the economy Private Consumption and external demand should grow on average Public Consumption 0.8% 0.5% 0.5% 0.5% below 3%. Exports 3.6% 4.5% 3.1% 3.4%

Imports 4.9% 8.0% 4.3% 4.4%

Employment 2.3% 1.3% 0.8% 0.4%

Unemployment rate 7.0% 6.3% 5.7% 5.3%

(f) forecast Source Bank of Portugal

Unemployment Rate 20 18 17 16 17 17.3 16

14 16.2 15.4 15.4 14.8

12 14.4 13.5 13.6 13.4 12.1 12.3 12.4 12.3 % 10 11.3 10.9 10.5

8 9.8 9.2 8.8 8.1 7 7.1 6 7.6 6.7 6.6 4 6.5 2 0 May 2017 May May 2012 May May 2015 May May 2013 May May 2018 May May 2019 May May 2016 May May 2014 May August 2017 August August 2012 August August 2015 August August 2013 August August 2018 August August 2016 August August 2014 August February 2017 February February 2015 February February 2013 February February 2018 February February 2019 February February 2016 February February 2014 February November 2017 November November 2012 November November 2015 November November 2013 November November 2018 November November 2016 November November 2014 November

* (Seasonally adjusted -%) of the active population aged 15-74 years by age group; Monthly Source INE

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Vacancy rate by market zone 25.00% Prime Zone CBD Zone Emerging Office Zone Secondary Zone Parque das Nações Western Corridor 20.00%

Offices 15.00% 12.08% 10.00% At the end of the first half of 2019, the Vacancy Rate A12 office market totaled 110,100 sq.m of take-up, Lisbon Office Market VASCO corresponding to 97 operations. This result, PARQUE CRIL DA GAMA 5.00% DAS BRIDGE which represents an increase of 27% compared 3.27% NAÇÕES to the first half of 2018, allows us to foresee a 3.83% IC16 IP7 more exciting year-end compared to forecasts 1.41% AIRPORT 0.00% 0.35% GARE DO drawn at the beginning of the year, which ORIENTE should exceed 170,000 sq.m, but should not 1º half 2015 1º half 2016 1º half 2017 1º half 2018 1º half 2019 surpass the 200,000 sq.m. mark. Source Savills Research 2ª CIRCULAR 24% of the operations registered in the first 5.23% six months of the year concerned areas above CHELAS 1,000 sq.m, mostly centered on the Parque

ENTRECAMPOS das Nações, Prime Zone and Emerging Office STATION IC19 Zone areas. SETE RIOS STATION It should be noted that the Parque das Best performing Activity Sectors Nações zone and the Prime Zone were the best Although the vacancy rate is currently below MONSANTO L U N117 S - performing market zones with 26,840 sq.m and 6%, the market shows that it will be able to E T R A5 O 24,937 sq.m respectively. It is important to note stay above the average take-up of the last five WESTERN N CORRIDOR O that for the performance balance of the Parque years (158,000 sq.m). IX E AMOREIRAS das Nações area, the purchase of a 17,400 sq.m The Secondary Zone, which comprises SANTA turnkey office project by the AGEAS Portugal the riverside and historical area of Lisbon, APOLÓNIA Prime CBD BAIXA STATION Group accounted for 65% of the total. GLA delimited by the Av. Infante Santo and Av. 24 CRIL CBD occupied in this market area. de Julho axes, as well as the Parque das Nações Business Consultants Financial A2 CAIS DO SODRÉ RESTELO CAIS DO STATION Emerging Office Zone In the Prime Zone, the market had the area, are the areas with a practically zero Services: and Lawyers: Services: ALCÂNTARA SODRÉ Secondary Office Zone leasing operations of the newly built Torre vacancy rate, resulting from the lack of entry of "Parque das Nações" da Cidade located at Fontes Pereira de Melo new speculative projects. 28,259 24,664 24,606 BELÉM TOWER Avenue 41, by the multinational consultant During the first half of 2019, 48 operations sq.m sq.m sq.m Western Corridor KPMG (9,950 sq.m) and the Law Firm PLMJ were due to relocations, accounting for a total of Zone 7 (8,306 sq.m) that occupied all the office space 72,659 sq.m, and another 31 operations related in this emblematic project. to area expansion decisions, totaling 27,157 sq.m. By the end of the year 2019, approximately 22,000 sq.m should be completed spread over 5 office building projects located in the Prime, Market Zone Take-Up 5 Years Evolution CBD and Western Corridor Zones. Pipeline 2019 – 2021 40 Between 2020-2021 will reach approximately 120,000 153,000 sq.m heavily concentrated in the 1st Semester 2015 1st Semester 2016 1st Semester 2017 106,170 Parque das Nações area, marked by innovation 1st Semester 2018 1st Semester 2019 MARKET TOTAL 100,000 1ST SEMESTER 2018 and modernity that will contribute to underline the technological nature of this market area, 26,840 such as the EXEO and K-Tower projects. 24,937 86,819 80,000 23,229 Regarding office lease prices and forecasts 22,185 sq.m. 21,338 for the next 6 months, prime rent closed the 18,785 20 18,753 17,616 semester at € 22 / sq.m / month, with relative 60,000 sq.m. 15,926 16,032 15,610 15,398 14,840 14,855 MARKET TOTAL price stability observing. 14,285 13,808

13,682 ST 12,577 12,834 1 SEMESTER 2019 Until the end of 2019, rents are expected to sq.m. (thousands) 40,000 9,867

8,765 8,766 remain stable, but there is room for general 31,300

7,163 market increases of around 5%, justified by 5,692 110,069 21,920 4,462 4,498 4,148 4,246 4,275 sq.m. the vacancy rates at minimum values and high 20,000 2,436 2,446 2,309 1,734 demand. This upward pressure will be justified 0 0 0 not only by the lack of available space, but also 0 Prime CBD Emerging Secondary Parque Western Other by the entry of new planned projects that will Zone Zone Office Zone Zone das Nações Corridor zones raise the price range. 2019 2020 2021

Source Savills Research Source Savills Research

4 5 Portugal Real Estate Market Report Portugal Real Estate Market Report

Oporto Offices Market

Prime rents by market zone In the first half of 2019, Oporto office A28 market accounted for a total of 22,552 sq.m of A41 €25.00 FRANCISCO SÁ CARNEIRO INTERNATIONAL AIRPORT take-up, which represents a sharp decrease of N107 2017 2018 Q1 2019 Q2 2019 N107 45% over the same period of 2018. The ZEP zone concentrated the largest N13 €20.00 contracted GLA in a total of 8,550 sq.m and PERAFITA

€22.00 €22.00 MAIA

€21.00 was elected by a renowned financial services A3 €20.50 company to implement its new premises in the €15.00 €18.00 €18.00 €18.00 €18.00 €18.00 Greater Porto market, totaling 4,000 sq.m. MAR €17.00 €17.00 €17.00 €17.00 SHOPPING In total, Oporto office market registered A4 €16.00 €16.00 €16.00 €16.00 €16.00 €15.47

€14.50 €14.50 a total of 28 operations, of which 53% was A4 €14.00 €13.50 €10.00 €13.50 EXPONOR

€/sq.m/month directed to operations below 300 sq.m. VIA Oporto continues to assert itself as a city A28 NORTE N105 of business destination, integrating the list of €5.00 VIA preferred locations of multinationals wishing RÁPIDA PORTO DE LEIXÕES CIRCUNVALAÇÃO to expand their activity in Portugal. NORTE CIRCUNVALAÇÃO CRUISE TERMINAL SHOPPING ROADROAD ASPRELA Given the demand that the market has MATOSINHOS ZEP €0.00 N12 registered, the promotion of new office VCI A20 Prime Zone CBD Zone Emerging Office Zone Secondary Zone Parque das Nações Western Corridor building projects is today a reality that CITY'S PARK PINHEIRO promises not to slow down and is urgently MANSO Source Savills Research AVIZ CONSTITUIÇÃO needed to maintain the attractiveness and Boavista – Prime CBD INTERFACE CASA DA MÚSICA ANTAS competitiveness of Oporto compared to other BOAVISTA CAMPANHÃ Downtown Area DOWNTOWN Trends: European capitals. A1 RIBEIRA CAMPO 24 DE CAMPANHÃ Eastern Zone M AGOSTO BUS INTERMODAL TERMINAL For the next years it is foreseen the ARGIN AL ARRÁBIDA PAVILHÃO TERMINAL BRIDGE Main projects under development ■■ The second half of the year will continue to development of more than 150,000 sq.m. At the ZEP ROSA MOTA S. BENTO STATION N209 be marked by the renegotiation of rents as end of the first half of 2019, the Urbo Business Matosinhos LUÍS I BRIDGE FREIXO BRIDGE well as the commitment by some owners Center buildings (16,100 sq.m), the Boavista Maia HUB Criativo do EXEO – Stage 1 to remodeling more outdated and obsolete Office Center (8,000 sq.m) and the Sonae GAIA Vila Nova de Gaia Others Zones Parque das Nações spaces, taking advantage of the high demand; Headquarters building integrated into the 7,000 DEVESAS A44 N108 › › STATION › Estimated date of completion: 2020 › Estimated date of completion: 2021 sq.m Maia Business Center were completed. ■■ › GLA: 11,000 sq.m › GLA: 30,000 sq.m This year will be distinguished by the By the end of the year, the 31,000 sq.m rethinking of occupancy strategies and the Porto Office Park (POP) project and the analysis of the new offer that will start to 16,800 sq.m Palácio dos Correios project for MONUMENTAL 3rd COLOMBO’S TOWER enter the market in the next two years; offices are expected to be completed. Take-up distribution by market zone › CBD Zone › Emerging Zone ■■ › Estimated date of completion: 2020 › Estimated date of completion: 2021 Increased demand for coworking spaces as a result of the growing number of startups, but 7% › GLA: 18,000 sq.m › GLA: 30,000 sq.m Downtown 3% also an increase in new forms of organization Eastern Zone 1% and workplace experience that foster a Maia 28% growing sense of sharing and community; Boavista - Prime CBD

■■ Companies' growing commitment to 23% improving their office space as an essential Matosinhos and integral tool for their talent attraction and retention strategies.

38% ZEP

Source Savills Research

6 7 Portugal Real Estate Market Report Portugal Real Estate Market Report

Retail

Rents in the Oporto office market continue Market Zones Rent/sq.m/month The Portuguese retail market continued we also have the restaurants Meat Me, Up to The Food & Beverages sector their upward trend justified by the high Boavista - Prime CBD 18.00€ to show strong dynamics demonstrating Sushi, Stanislav Café, 100 Ways, Sa Morais demand, the improvement in the quality of the maintenance of good performance has been the main driver of Sushi and Therapist. 17.00€ new projects promoted but also by the lack Downtown’s Zone in the sector. the high street retail in Lisbon Every corner of the city of Lisbon receives of current supply available in the face of high Eastern Zone 13.00€ In terms of the evolution of economic increasingly diverse concepts that bring life demand dynamism. indicators, the CPI registered in June 2019, The Food & Beverages sector accounted for to a totally cosmopolitan, modern and open ZEP 14.00€ a year-on-year change of 0.4% and identical 79% of new openings, followed by the Fashion to the world, trying to keep its historical and Matosinhos 14.00€ to the previous month. The underlying sector with 8%. cultural character intact. Maia 13.00€ inflation indicator (total index excluding In the Food & Beverages sector, we highlight In the face of rising demand, the available unprocessed food and energy) increased the opening of JNcQuoi Asia restaurant at supply remains scarce and continues to put Vila Nova de Gaia 13.00€ by 0.6% year-on-year, representing a 0.1% nº 144, in an area of 900 pressure on the income values practiced. Since increase over May. sq.m and with a concept focused on Asian cuisine. the beginning of the year 2019, the prime rent Source Savills Research The national retail market remains quite Also noteworthy is the opening of the applied to the Chiado area has risen by 14% to dynamic due to the high street retail, with a project King of China and Chef Avillez’s House stand at the end of the second quarter of 2019 very significant expression in the central axes of Delights in Chiado. Among other openings, at 160 € / sq.m / month. of the city of Lisbon. In the first six months of the year, Savills accounted for a sample of 150 new stores in the heart of Lisbon, with Consumer price and underlying inflation indices the highest concentration in the parishes of 1.6 Misericórdia, , Santo António CPI (Year on Year Rate) CPI (Rate Variation of the last 12 months) and . 1.4 Underlying inflation indicator

1.2 Throughout 2019, Portuguese consumers have 1

been more confident about % 0.8 their economic situation, paving the way for changes 0.6 in their consumption 0.4 patterns and also allowing 0.2 them to be more willing to spend on products and 0 activities that bring benefits, Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez Jan Fev Mar Abr Mai Jun that promote happiness. 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 Source INE

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Out with the old… In with the new!

Also in the city of Oporto, the high street High Street, and as we have been witnessing There are also growing retail maintains its expansion trajectory and in Lisbon, has been growing significantly and in openings of convenience- affirmation of successful format. In the first parallel with an increase in the flow of tourists framed formats that are six years of 2019, there were several brands visiting the city of Porto. that opened stores, of which we can highlight totally targeted at city the Spanish brand Hawkers that opened a consumers who know the store in Santa Catarina Street and Elements products they like very well Contemporary Jewelery in Rua das Flores. and who don’t like to waste Greater Oporto will also be the address chosen for the opening of the first Primark a lot of time. Fast product XXL store that will be located in Norte Stock shopping experience and access is Shopping, resulting from the expansion of centers: the key to success for these this shopping centre. The new store will considerably increase the space already types of formats. occupied by Primark to about 6,300 sq.m. 3.7 million sq.m

Greater Lisbon Offer: 1.1 million sq.m

After decades of successful openings, phase, resulting not only from changes in Great Porto the shopping center market in Portugal is consumer profile, for sustainability and Offer: Market Values now undergoing a period of renewal of its energy efficiency reasons, but above all. shopping center stock. driven by the digital world. 584 In the first six months of 2019 we had The rapid access to all the information thousand sq.m Prime Rents Evolution the Alameda Shop & Spot requalification launched by different brands in different 180 and the start of the expansion of Glicínias purchase channels, with special relevance to High Street – Lisbon High Street – Oporto Plaza located in Aveiro and scheduled for the digital channel, now poses a real challenge 160 Shopping Centers completion in the year 2021. for physical commercial spaces. 160 Also noteworthy was the opening of 140 Montijo Retail Park, which added 18,000 sq.m 120 140 to the existing commercial offer on the south Making the shopping experience 120 110 100 bank of the Tagus. unique, complete and differentiating 100 Currently, and with no plans to open now motivates investors and 100 100 100 95 new shopping centers in Portugal, the focus developers to expand and renovate 80 85 remains on the requalification, expansion and modernization of a set of shopping centers, their shopping centers. €/sq.m./month 60 70 70 such as Norte Shopping, Colombo Shopping 40 50 50 Center, Oeiras Park and Vila do Conde Porto 40 Fashion Outlet. 20 A very successful format for Portuguese consumers and winners of several 0 international awards, shopping centers in 2015 2016 2017 2018 Q2 2019 Portugal are experiencing a reinvention

Source Savills Research

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Prime Rents Q1 2019

Bucharest €4.00 Milan - Bologna - Rome €4.33 Paris (Ile-de-France) €4.33 Logistics Prague €4.70 Lisbon €5.00 and Industrial Warsow €5.35 Madrid €5.50 Vienna €6.50 The industrial and logistics sector saw the The current challenges imposed by the Munich €7.10 take-up of the first half 32% lower than the requisition and immediate delivery of the The Neetherlands €7.71 st AZAMBUJA 1 semester of 2018. This decrease is again A1 most varied products, driven by e-commerce, ALENQUER Dublin €8.75 related to the common denominator of the have had a particular impact in the search London €16.50 other real estate segments: lack of supply that A8 CARREGADO of spaces that combine the proximity to the meets the criteria currently demanded by centers of the cities with the infrastructures logistics operators. that make possible and guarantee the 0 2 4 6 8 10 12 14 16 18 A10 In the case of logistics and industrial VILA FRANCA effectiveness of the cycle logistic operations. €/sq.m/month DE XIRA platforms, the supply of spaces with more MAFRA Therefore, it becomes increasingly A21 Source Savills Research than 10,000 sq.m is particularly scarce. This N10 imperative that future logistics spaces led, especially during the second quarter, to be versatile and respond to important

price rises in the area of the Western Corridor CREL guidelines such as sustainability, energy Prime Rents Industrial and Logistical Axes ALVERCA (3.5 € / sq.m for 4 € / sq.m) and Matinha - efficiency, decarbonization, interconnection €6.00 Prior Velho (4.5 € / sq.m for 5 € / sq.m). with other platforms and means of transport, Q4 2018 Q1 2019 Q2 2019 Other secondary zones such as the N118 the ability to install state-of-the-art €5.00 Montijo - Alcochete and Palmela - Setúbal IC16 technology, among others. axis also registered increases in rents N119 In this sense, it is worth noting the

€4.00 €5.00 practiced, proof of the affirmation of these IC19 expected arrival in the market in 2019 of the AEROPORTO LISBOA ALCOCHETE zones as viable alterations and consolidated IC30 newly infrastructed logistics platform of the €4.00 €4.00 to the prime axis. latest generation in Castanheira do Ribatejo, €3.00 €4.00 CRIL LISBOA €3.75

The warehouse Azambuja 2 with 38,482 A5 property of Merlin Properties with an area €3.50 sq.m., the Abóboda Business Center (7,146 OEIRAS between 250,000 sq.m and 300,000 sq.m, as a €3.00 MONTIJO €/sq.m/month €2.00 sq.m) and the Aleluia Factory in Aveiro ALMADA result of an investment of 150 M€ . BARREIRO (5,000 sq.m) are the top 3 of the largest IC20 €1.00 transactions in the industrial and logistics MOITA A12 segment in the first half of this year, SEIXAL representing a concentration of 90% of the IC32 €0.00 Sacavém – Alverca total takeup in only 3 transactions. A2 Carregado Póvoa de Loures – Corredor Lisboa Montijo – Palmela – Carregado – Azambuja PALMELA – Azambuja Santa Iria – Vialonga Oeste (Matinha – Alcochete Setúbal Loures – Vialonga Alverca Prior Velho) Montijo – Alcochete SETÚBAL Market Source Savills Research Palmela – Setúbal Alfragide – Carnaxide Values Logistic and Industrial Take Up Sintra – Cascais – Oeiras SESIMBRA 61,777 The highest rents of the logistics and 55,783 industrial segment in Portugal, achieved 49,739 in the Lisbon region, at €5, is a reflection of the aforementioned inability to supply 46,191 Top 5 Transactions quality logistics and industrial spaces to meet the existing demand. In turn the axis Area Quarter Building Location Occupier between Sacavém and Alverca continues to be (sq.m.) 28,588 considered prime and the most desirable for sq.m. 2 Azambuja 2 Azambuja Auchan 38,482 the installation of platforms. Centro Empresarial 1 Abóboda Vision Box 7,146 da Abóboda 2 Aleluia Factory Aveiro Uber 5,000 1 Logispark Montijo Montijo LFP 3,700 7,152 Nunes & Guisantes 1 Warehouse Cacém Investimentos 3,668 Imobiliários LD Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Source Savills Research Source Savills Research

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Top Transactions

Minor Hotel Portfolio ■■ Hotels Investment ■■ Seller: Minor International ■■ Buyer: Invesco During the first half of 2019, the Portuguese The retail segment accounted for the second In the office market, accounting for 23%, ■■ 312 Million € real estate investment market showed a less largest share of investment (30%). In total 8 9 transactions were recorded, led by the dynamic activity. Compared to the same period operations were closed, including the purchase sale of Credit Suisse's Art's Business Center of 2018, there was a decrease of 27%. of Leiria Shopping for 128 million euros by and Fernão Magalhães Buildings to Merlin DWS from Sierra Portugal Fund. Properties for 112 million euros. Art's Business Center In total 30 operations were Fernão Magalhães Tower ■■ Offices recorded, with a total investment Commercial Real Estate Investment Volume ■■ Seller: Credit Suisse of approximately 1,100 million euros. 900 1st Semester 2017 ■■ Buyer: Merlin Properties The hotel sector was the most active during 800 1st Semester 2018 ■■ 112 Million € st

the semester, having recorded the largest 810 1 Semester 2019 700 investment operation in the sale of Portfolio Minor International to US investment manager 600 Invesco for 312 million euros. Leiria 500 The attractiveness of the hotel sector Shopping was also confirmed by the closing of 4 517 400 ■■ Retail more operations, including the sale of the Millions € ■■ DoubleTree by Hilton Lisbon Hotel - Fontana 300 393 393 Seller: Sierra Portugal Fund

Park Lisbon to Commerz Real AG in the 316 ■■ Buyer: DWS 295 200 293 amount of 37.5 million euros. ■■ 128 Million € 244 18

100 56 55 47 32 28 16 10 0 Offices Retail Industrial Mixed Hotels Others Klépierre & Logistics Use Use Galleries Source Savills Research ■■ Retail ■■ Seller: Klepierre ■■ Buyer: Square Asset Management ■■ 102 Million €

Investment by country of origin Imogest Portfolio ■■ Offices, Logistics, Retail Parks ■■ Seller: Imogest ■■ Buyer: M7 Real Estate ■■ 55 Million €

FIDELIDADE Building Alexandre Herculano 53 ■■ Seller: Apollo Global Management ■■ Buyer: M&G Real Estate 37% 23% 14% 13% ■■ 46 Million € US Germany Portugal

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Residential

The development sector is also very active Note also the recent approval of the SIGIs Average Values of Bank Valuation Portugal was in the first with the acquisition of projects mainly (Portuguese REITs), which proposes to 2 000€ directed to the residential and hotel segments. promote real estate investment, in particular quarter the third country in North Lisbon’s MA Algarve An example of this was the acquisition of the lease market and to boost the growth of the the European Union where the Block that integrates the historic Grand national real estate sector. Hotel Central in Cais do Sodré by Patrizia After a period of compression with house prices rose most, just 1 500€ Immobilien for 25 million euros. yield declines in all segments, prime yields behind the Czech Republic are expected to begin a path of further and Hungary. stabilization. 1 000€ Taking into account pipeline 2019 has continued to see widespread transactions, year-end forecasts increases in house prices in Portugal, €/sq.m. point to a slight decrease from 2018, Prime Yield Evolution estimated at around 16%. In the two main with an estimated total investment 12.00 cities of the country, Lisbon and Porto, prices 500€ continued to rise at a more moderate pace volume of between EUR 2,500 - 3,000 OfficesG ( ross) High street (Gross) Shopping Centers (Net) compared to the 4th quarter of 2019. 10.00 million euros. Industrial & Logistics (Gross) Lisbon registered in the first three months 0€ Retail Parks (Net) of the year a generalized increase of prices Continuing to benefit from a favorable around 11% and the city of Porto saw the closed 8.00 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May economic environment and the maintenance values in the sale of houses by almost 29%. 2018 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 of confidence from national and international Source INE

players, the Portuguese real estate investment % 6.00 market has been able to maintain its Absorption times in attractiveness to investors now with a more the periphery approach The city of Porto had as main highlight the that “(…) grants exemption from collective 4.00 core and value-add profile. Lisbon Cedofeita Union of Parishes, Sto. Ildefonso, and individual taxes to rents of contracts Sé, Miragaia, S. Nicolau and Vitoria, with an entered into within its scope (…) at least 20% 2.00 In the first three months of 2019, Lisbon average closing value of 2,682 € / sq.m. below a value of calculated based on various continued to be the county of the country with factors, such as the area of housing, the median the highest average value per sq.m, 3,561 € / price released by INE, the typology and other 0.00 sq.m, 70% above the pre-crisis period (around Savills alone in Lisbon has a specific characteristics of housing (…) ”- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2,095 € / sq.m). pipeline between 2019 and Housing Platform, for a minimum of 5 years or At the same time that prices per sq.m have 9 months in case of student housing. Source Savills Research 2022 of more than 6,500 been rising in all municipalities, the large All this has led promoters to consider dispersion of absorption times in the past in new homes that will enter betting on apartments aimed at the middle Prime Yields – European Cities Offices CBD the cheapest municipalities has considerably the market, most of them class, tending farther from the city center, but 8.00 approached the Lisbon absorption time (six focused in medium-high and still enjoying accessibility that make the area a months), from a range of ten months in high classes. real alternative. Take the case of Alta de Lisboa, 7.00 the first quarter of 2017, to only three / four for example, where around 500 housing units months in Odivelas and seven in Setúbal and Examples are large projects such as LX will be built in 10 different buildings, for an 6.00 7.00 Palmela, in the first quarter of 2019. Living in Amoreiras (151 homes), Infinity investment of around 200 M €. 5.00 The trend for the rest of the year for Lisbon Tower in Campolide (195 homes) or the 4.50

4.25 4.25 and Porto is for a continuous increase in values Matinha residential project that, together 4.00 4.00 4.00 3.75 % 4.00

3.60 per sq.m, at a slower pace but still above 10% with Prata Riverside Village, will bring that 3.50 3.50 3.50 3.25 3.00 3.00 in Lisbon and 25% in Porto. new life to life. zone where the creation of 3.00 2.90 2.90 The Invicta city will also tend to have high more than 2,700 new homes is projected in 2.00 growth rates of closed values; Porto currently what will be one of the largest residential practices the same values as Lisbon in 2007, projects in the country. 1.00 still only 60% of the average value of Lisbon, Incentives to lease will also mark the coming falling to 2,124 € / sq.m. times, notably the affordable rent program 0.00 O slo Paris Milan Berlin arsaw D ublin ondon L isbon Madrid Athens Prague L W Brussels Frankfurt Hamburg Stockholm Amsterdam

L uxembourg Source Savills Research

16 17 Portugal Real Estate Market Report Portugal Real Estate Market Report

Sales Amounts and Absorption Time at Lisbon's MA Councils 4 000€ 18 Q1 2017 Q1 2018 Q1 2019 Absorption Time Q1 2017 16 3 500€ Absorption Time Q1 2018 Absorption Time Q1 2019 14 3 000€ 12 2 500€ 10 2 000€ 8 Months €/sq.m. Trends Tourism 1 500€ 6 1 000€ 4 ■■ Focus on the upper-middle and upper The behavior of the various indicators of national tourism showed a very positive performance 500€ 2 classes should be dispersed to the middle between January and May 2019: class, particularly with promotion projects in 0€ 0 areas further away from Lisbon’s city center. ira ■■ Rehabilitation projects at the center will oures Moita Mafra Sintra Seixal O eiras L isbon L de X Montijo Cascais Setúbal Almada Palmela Barreiro continue to attract investors, the future O divelas Sesimbra Amadora ila Franca ila Franca Alcochete

V trend resulting in a mix of rehabilitation and promotion; Source SIR

■■ Leasing will continue to be a strong option Nº of Dwellings Sold for a large proportion of people, and 4 500 the affordable tenancy program should Q1 2017 Q1 2018 Q1 2019 contribute, albeit slightly, to this trend. 4 000 ■■ Co-living and serviced apartments projects 3 500 should start to have more impact in the city of Lisbon, as a result of the mainly 3 000 foreign demand for these more complete 2 500 typologies in terms of services provided and the constant need for mobility that Units 2 000 makes these targeted housing models unfeasible. for students, freelancers, young 1 500 + 4.1% + 6.6% + 6.7% + 5.9% professionals, among others. Overnight Stays Guests Total Income Tourism Revenues 1 000

500

0

Lisbon’s MA Oporto’s MA North Center Alentejo Algarve

Source SIR

Dwellings Licensed in New Constructions for Family Housing Overall, even though there was a slight RevPar January to May 2018 2019 Δ19/18 600 decline in occupancy per room from the 70 15.00% Oporto's MA Lisbon’s MA Algarve beginning of the year until the end of May (around 0.5 pp YoY), the significant increase 60 500 in both RevPar (income per room) to € 37.70, 10.00% as the ADR (income per room occupied) to 50 400 € 64.89, shows that tourists are increasingly spending more in our country even if they 5.00% 40 stay here less time. 300 Units

€/sq.m. 30 0.00% 200 20 -5.00% 100 10

0 0 -10.00%

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May MA AR Total North Algarve AR Alentejo Center 2018 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 Lisbon Madeira Azores

Source SIR Source TravelBI

18 19 Portugal Real Estate Market Report Portugal Real Estate Market Report

Guests by Region January to May 10 000 000 12,00% 2018 2019 Δ19/18 9 000 000 10,00% 8 000 000 8,00% 7 000 000 6,00% 6 000 000

5 000 000 4,00% Units 4 000 000 Lisbon was the region that attracted the ADR January to May 2,00% most tourists in the period analyzed, with 3 000 000 growth of 4.1% over the same period of 2018, 0,00% 2 000 000 followed by the Northern region and later the -2,00% Algarve, which was the region that recorded the 1 000 000 largest increase of guests, in a total of 9.63%. 90.92€ 0 -4,00%

Total MA Lisbon North Algarve Center AR Madeira Alentejo

Source TravelBI 64.89€ 61.01€ 63.08€ 56.17€ 56.16€

51.82€ Overnights per Region 2019 January to May 45.71€ 8 000 000 14,00 Dormidas Δ19/18 (%) Average Stay per Night 7 000 000 12,00

10,00 6 000 000 8,00 MA Lisbon Total AR Madeira North Algarve AR Azores Center Alentejo 5 000 000 6,00 Source TravelBI 4 000 000

Units 4,00 Units / % 3 000 000 2,00 2 000 000 Top Guest Issuers 2019 January to May 0,00

Nationals (Nationals Foreigners (= 100%) 1 000 000 -2,00 + Foreigners = 100%) 1º 2º 3º 0 -4,00

North 999 500 (49.4%) Spain – 217 300 (21.24%) France – 117 700 (11.51%) Brazil – 110 500 (10.80%) MA Lisbon Algarve North AR Madeira Center Alentejo AR Azores

Center 869 500 (62.1%) Spain – 118 400 (22.27%) Brazil – 73 500 (13.82%) France – 50 400 (9.48%) Source TravelBI MA Lisbon 848 800 (28.5%) France – 223 900 (10.49%) Brazil – 220 700 (10.34%) Spain – 215 900 (10.12%) January to May Alentejo 345 500 (65.8%) Spain – 33 000 (18.42%) Brazil – 21 800 (12.17%) Germany – 18 700 (10.44%) Room Occupancy Rate 80,00% 5,00 p.p. Algarve 405 300 (25.8%) UK – 398 200 (34.10%) Spain – 128 600 (11.01%) Germany – 125 600 (10.76%) 2019 Δ19/18 4,00 p.p. AR Azores 140 000 (63%) Germany – 16 400 (19.95%) USA – 16 200 (19.71%) Spain – 6 800 (8.27%) 70,00% 3,00 p.p. AR Madeira 112 500 (19.3%) Germany – 123 500 (26.31%) UK – 105 400 (22.45%) France – 59 500 (12.68%) 60,00% 2,00 p.p. Portugal 3 721 100 (40%) UK – 738 600 (13.22%) Spain – 728 800 (13.04%) France – 570 300 (10.21%) 50,00% 1,00 p.p. Source TravelBI 40,00% 0,00 p.p.

-1,00 p.p. 30,00% -2,00 p.p. 20,00% -3,00 p.p. 10,00% -4,00 p.p.

0,00% -5,00 p.p.

MA Lisbon AR Madeira Total North Algarve AR Azores Alentejo Center

Source TravelBI

20 21 Portugal Real Estate Market Report

€ 393 Million Euros of Investment

Commercial investment in the hotel segment As regards openings, the geographical Rebranding activities have also had a recorded the highest value of the last semesters, dispersion of the new national units should significant impact, especially in the Central 393 M € (proof of the vitality, consistency be highlighted. The opening of units such as and Algarve regions, and should continue to be and attractiveness of the Portuguese market, Vila Galé Collection in Elvas or Verde Mar & a phenomenon throughout the country as has especially for foreign investors), achieved Spa in Ribeira Grande (São Miguel - Azores), been the case over the last few years. mainly through transactions in Lisbon and prove the sustainability of the sector and the Porto. sale of the portfolio, which included ability of areas outside the major urban centers 3 major hotels in Lisbon in North American of Lisbon and Porto to attract investment. of Invesco, with a combined value of 313 M €. internationally renowned operators.

Main Business Transactions

Hotel City Buyer Nationality Rooms Amount (M€) Portfolio - Avani Avenida Liberdade, Lisbon Invesco USA 704 313 Tivoli Av. Liberdade e Tivoli Oriente DoubleTree by Hilton - Hotel Lisboa Lisbon Commerz Real AG Germany 146 37,5 Fontana Park Eurostars Marquês de Pombal Lisbon Swiss Life REIM France 163 23 Hotel EXE Porto Centro Oporto Privado Estrangeiro N.A. 74 12,5 Palácio Condes de Azevedo Oporto BPI Asset Management Portugal NA 7

Source Savills Research

Main Openings 1st Semester 2019

Zone Hotel New / Rebranding Stars Rooms Maxime Hotel New 3 149

Casual Belle Époque Lisboa New 4 28 Lisbon The One Palácio da Anunciada New 5 83

VIP Folque New 4 131

Moon and Sun Porto New 4 48

Hotel Acta The Avenue New 4 NA

Hotel NH Porto Jardim New 4 NA

Hotel Vila Galé Porto Ribeira New 4 130 Oporto Oporto Airport & Business Hotel New 4 158

Porto Royal Bridges New 4 138

Vila Foz Hotel & Spa New 5 136

Porto Bay Teatro Rebranding 4 77

Grand House Hotel - V.R.S. António Rebranding 5 31

Algarve Monchique Resort & SPA Rebranding 5 185

Iberostar Selection Lagos Algarve Rebranding 5 220

Source Savills Research

22 Savills Research We’re a dedicated team with an unrivalled reputation for producing well-informed and accurate analysis, research and commentary across all sectors of Portugal's property market.

Paulo Silva Patrícia Melo e Liz Alexandra Portugal Gomes Eurico Alves Head of Country Portugal Chief Executive Officer Market Research Market Research [email protected] patrí[email protected] [email protected] [email protected]

Rodrigo Canas Cristina Cristóvão Joana Rodrigues Paula Sequeira Director Agency Director Agency Retail Director Architecture Director Consultancy [email protected] [email protected] [email protected] [email protected]