Market Report Primavera 2017 2 AGUIRRE NEWMAN Economic Overview 5

Home , Alverca do Ribatejo, Bucelas, Camarate, Frielas, NOS Alive, Web Summit

Offices 19

Industrial 51

Retail 61 Agenda

Tourism 79

Investment 97

PRIMAVERA MARKET REPORT 2017 3

Economic Overview Europe Economic Overview

6 AGUIRRE NEWMAN Europe

In 2016, the European Union’s Gross Domestic central European countries like the Netherlands, Product (GDP) fell by 100 basis points comparing France and Germany, and also the recent rela- to 2015. This decrease was, in part, due to the tionship between Europe and the United States instability felt in Europe which increased levels since the election of Donald Trump. of economic uncertainty: “Brexit”, elections in

Table 1 GDP in Portugal / Spain / EU 1998 → 2016

4.50%

3.50%

2.50%

1.50%

0.50%

-0.50%

-1.50%

-2.50%

-3.50%

-4.50%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E

SOURCE: EUROSTAT EU 28 SPAIN PORTUGAL

PRIMAVERA MARKET REPORT 2017 7 In the last quarter of 2016, the EU and the euro area’s GDP increased, by 1.8% and 1.7% year-on-year, respectively, indicating a slight economic growth for most countries.

Table 2 Brent Price / GDP in EU28 2005 → 2016

140 4.00%

3.00% 120

2.00% 100 1.00%

80 0.00%

60 -1.00%

-2.00% 40

-3.00%

20 -4.00%

0 -5.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E

SOURCE: BLOOMBERG BRENT PRICE GDP EU 28

8 AGUIRRE NEWMAN The Brent price has maintained its upward trend Last year, the inflation rate in Europe increased since 2015, after having been at its lowest rate by 0.3%, mainly due to the decrease in monetary in the last 10 years in 2015, at US$37.28 per bar- stimulus (programme of debt purchasing) and rel. The European barrel price has been driven the interest rate increase. up because of anticipation that surplus in supply would decrease after the cut in production by members of the Organisation of the Petroleum Exporting Countries.

Table 3 Inflation Rate 2005 → 2016

5.00%

4.50%

4.00%

3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%

-0.50%

-1.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E

SOURCE: EUROSTAT PORTUGAL EURO ZONE SPAIN EU 28

PRIMAVERA MARKET REPORT 2017 9 The European and Global economy continue continued to be particularly positive in the to grow; a reality which is reflected in Spanish job market, with the unemployment unemployment rates. The unemployment rate rate decreasing from 22.2% in 2015 to 18.63% in the European Union has decreased by 120 at the end of 2016. These figures confirm the basis points since 2015, to 8.2% at the end moment of growth acceleration for the Iberian of 2016. The effects of economic recovery Peninsula’s biggest economy.

Table 4 Unemployment rate 2005 → 2016

27.00%

24.00%

21.00%

18.00%

15.00%

12.00%

9.00%

6.00%

3.00%

0.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E

SOURCE: EUROSTAT PORTUGAL EURO ZONE SPAIN EU 28

10 AGUIRRE NEWMAN The unemployment rate in the European Union decreased to 8.2% in 2016.

PRIMAVERA MARKET REPORT 2017 11 Portugal Economic Overview

12 AGUIRRE NEWMAN Portugal

According to the INE (National Statistical Insti- The unemployment rate in the 4th quarter of tute), GDP increased by 1.9% in the 4th quarter 2016 was at 10.5%, maintaining the rate of the of 2016, driving up performance for the rest of preceding quarter. For the whole year of 2016, the year. For the whole year of 2016, an increase the average annual rate was 11%, which was of 1.4% in GDP was registered (compared to 1.6% lower than the previous year (12.4% in 2015). in 2015). These figures reflect the positive effects of measures taken to boost the Portuguese economy.

Table 5 Unemployment and inflation rate Portugal 2010 → 2016

18.00%

13.00%

8.00%

3.00%

-2.00%

1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 1ºT 2ºT 3ºT 4ºT 2010 2011 2012 2013 2014 2015 2016

SOURCE: INE UNEMPLOYMENT RATE INFLATION RATE

PRIMAVERA MARKET REPORT 2017 13 For 2017, the projections of the Portuguese economy indicate sustained growth in economic activity, as a result of strong external demand.

Table 6 GDP growth forecast Portugal 2017 → 2019

2017 f (%) 2018 f (%) 2019 f (%)

Portuguese Government 1.5 1.9 2.0

Bank of Portugal 1.4 1.5 1.5

European Commission 1.6 1.5 –

OECD 1.3 1.3 –

SOURCE: MINISTRY OF ECONOMY, BANK OF PORTUGAL, EUROPEAN COMISSION AND OECD

For 2017, the projections of the Portuguese economy indicate sustained growth in economic activity, as a result of strong external demand.

14 AGUIRRE NEWMAN Table 7 Economic Climate Indicator in Portugal 2005 → 2016

2.0%

1.0%

0.0%

-1.0%

-2.0%

-3.0%

-4.0%

-5.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: INE EURIBOR 3M

Growth in the confidence indicator was due to increased expectations for the growth of internal and external demand.

PRIMAVERA MARKET REPORT 2017 15 Table 8 Euribor Rate 2005 → 2016

6.0%

5.5%

5.0%

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

-0.5%

-1.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: BLOOMBERG, EURIBOR RATES SÉRIE 1

According to the CMVM (Portuguese Securities Market Commission), in December 2016, the market capitalisation reached €237,814.9 million; an increase of 2.9% from the previous year. The PSI- 20 share index fell by 11.9% from December 2015, reaching 4679.2 points in December 2016.

16 AGUIRRE NEWMAN Positive expectations for internal and external demand increase the confidence indicator.

PRIMAVERA MARKET REPORT 2017 17

Offices mapa_aguirre.pdf 1 20/05/15 12:48

N COMPANIES’ MIGRATION

W E LISBON 2015

mapa_aguirre.pdf 1 20/05/15 12:48

N COMPANIES’ MIGRATION

S W E LISBON 2015

PARQUE VASCO da GAMA das NAÇÕES BRIDGE

Av. B

AIRPORT erlim

VASCO da GAMA q

i r

s PARQUE n

o e R n

a H

A .

UL e

c A D R C v. O

I M e

C t a I s

ª r e n 2 c o o

h a

d a f ã

l G n o

a o I J

. d

e . s v e d D

a A . C m o v s a l ta A

A asil The present study is based on the information provided by LPI index v. Br das NAÇÕES A (Lisbon Prime Index), a Real Estate Index used to evaluate the Lisbon office market performance, regarding the volume of sq. m traded, the number of recorded transactions and the Destination Office BRIDGE Zones (in which the companies have leased new office spaces) in the BENFICA years 2013 and 2014.

For the identification of each transaction’s origin, eleven categories of sources were considered: érica Entrecampos a Am os d nid das s U • Office Zones 1 - 7 Arma do orças Esta das F os Av. Av. d • Out of Lisbon – companies who moved from outside the Lisbon Radial de Be region to one of the Office Zones 1 - 7 n ca

. A d

v • Activity Start-Up – Start-up companies whose ﬁrst ofﬁce is in the a .

5 R

e d Destination Ofﬁce Zone address for the transactions identiﬁed p e ú

O IC Praça de b u C l 1 i ão XXI 9 t c Av. Jo u S a IN b • Structural Growth - increase of leased area through growth of the T R Espanha r A o M company structure, corresponding to new premises in the Destina - tion Ofﬁce Zones 1-7 Y

N CM • No Information - cases where it was not possible to identify the - 1 transaction’s origin, due to insufﬁcient information regarding the MY 1 e 7 u corporate name of the company and / or the correct address of the q i r CY n Destination Ofﬁce Zone - residual weight of less than 1% e

H A v . . D A CMY . R. Mo e A rais So t . ares n Ofﬁce Zone 7, accordingly to LPI index, represents all ofﬁces located A a MONSANTO g f n u Saldanha I

K ia . outside the main zones, which corresponds geographically to all the r v A areas of Lisbon which are not within zones 1 - 6. In this sense, ofﬁce transactions analysed in this report as having occurred in Ofﬁce Zone CAMPOLIDE 7, correspond only to those registered by LPI index, and, we believe, L Marquês are not representative of all transactions performed on the market U de Pombal outside zones 1-6. S ulé - Lo e de E Av. Duqu guiar T R. Joaquim A. A R s A i v WESTERN CORRIDOR e

O R . e B N t

e a

r r S i l I O A m -

im C l X A

A S . I v A v .

C d A 5 E a A L ib AIRPORT e rd a d TEJO RIVER AMOREIRAS e Largo do Rato

to an ESTRELA S te n fa 4% In v. A PRIME CBD

BAIXA CBD a

t CHIADO

u e

EMERGING OFFICE ZONE I

R .

v C A 24 Julho SECONDARY OFFICE ZONE - Av. 7 1 “PARQUE DAS NAÇÕES” IC CAIS do SODRÉ WESTERN CORRIDOR ZONE 7 ALCÂNTARA

20RESTELO AGUIRRE NEWMAN Av. Índia 25 de ABRIL

BRIDGE

i r AGUIRRENEWMAN.PT

s n

o e R n

a H

A .

UL e

c A D R C v. O

I M e

C t a I s

ª r e n 2 c o o

h a

d a f ã

l G n o

a o I J

. d

e . s v e d D

a A . C m o v s a l ta A

A asil The present study is based on the information provided by LPI index v. Br A (Lisbon Prime Index), a Real Estate Index used to evaluate the Lisbon office market performance, regarding the volume of sq. m traded, the number of recorded transactions and the Destination Office Zones (in which the companies have leased new office spaces) in the BENFICA years 2013 and 2014.

A v

. A d v • Activity Start-Up – Start-up companies whose ﬁrst ofﬁce is in the a .

5 R

e d Destination Ofﬁce Zone address for the transactions identiﬁed p e ú

H A v . . D A CMY . R. Mo e A rais So t . ares n Ofﬁce Zone 7, accordingly to LPI index, represents all ofﬁces located A a MONSANTO g f n u Saldanha I

WESTERN CORRIDOR e

O R

N t

S i I O A m -

C l X A

A S . I v A v .

C d A 5 E a A L ib e rd a d TEJO RIVER AMOREIRAS e Largo do Rato to an ESTRELA S te n fa 4% In v. A PRIME CBD

BAIXA CBD a

t CHIADO

u e

EMERGING OFFICE ZONE I

R . v C A 24 Julho SECONDARY OFFICE ZONE - Av. 7 1 “PARQUE DAS NAÇÕES” IC CAIS do SODRÉ WESTERN CORRIDOR ZONE 7 ALCÂNTARA

RESTELO

Av. Índia 25 de ABRIL BRIDGE

AGUIRRENEWMAN.PT mapa_aguirre.pdf 1 20/05/15 12:48

N COMPANIES’ MIGRATION

W E LISBON

mapa_aguirre.pdf 1 20/05/15 12:48

N COMPANIES’ 2015MIGRATION

W E LISBON 2015 mapa_aguirre.pdf 1 20/05/15 12:48

N PARQUCOMPANIES’E VASCO da GAMA MIGRATION das NAÇÕES BRIDGE S W E LISBON 2015 Av. B AIRPORT erlim S

PARQUE VASCO da GAMA e

q Lisbon

i r

s n

das NAÇÕES o e R BRIDGE n

a H

A .

UL e

c A D R C v. O

I M e

C t a I s

ª r e n 2 c o o

h a

d a f ã

l G n o

a o I J

. d

e . s v e d D

a A . C m o v s a l ta A

A asil The present study is based on the information provided by LPI index v. Br A Av. B AIRPORT erlim (Lisbon Prime Index), a Real Estate Index used to evaluateOffice the Lisbon office market performance, regarding the volume of sq. m traded, the number of recorded transactions and the Destination Office Zones (in which the companies have leased new office spaces) in the BENFICA years 2013 and 2014.

For the identiﬁcation of each transaction’s origin, eleven categories e

u of sources were considered:

VASCO da GAMA q

i r

s PARQUE n

o érica e m R Entrecampos n da A a

H s

A o

. Market UL e nid

A s D U • Ofﬁce Zones 1 - 7 R C v. ada os rm O d

I A M e a s I t

C ça t r a I s o s E ª s F r s a e n o 2 d c o d . o .

Av h a v

d A a f ã

l G n o

a o I J

. d • Out of Lisbon – companies who moved from outside the Lisbon

e . s v e d D

a A . C m i o v Rad al de Be s a region to one of the Ofﬁce Zones 1 - 7 n l ca ta A

A asil A The present study is based on the information provided by LPI index . Br v v . A A d v • Activity Start-Up – Start-up companies whose ﬁrst ofﬁce is in the a (Lisbon Prime Index), a Real Estate Index used to evaluate the Lisbon .

5 R

e das NAÇÕES d Destination Office Zone address for the transactions identified p office market performance, regarding the volume of sq. m traded, e ú

O IC Praça de b u C l 1 i ão XXI the number of recorded transactions and the Destination Office 9 t c Av. Jo u a Map S IN b • Structural Growth - increase of leased area through growth of the T R Espanha r Zones (in which the companies have leased new office spaces) in the BRIDGE o A M BENFICA years 2013 and 2014. company structure, corresponding to new premises in the Destina - tion Office Zones 1-7 Y

N For the identiﬁcation of each transaction’s origin, eleven categories CM • No Information - cases where it was not possible to identify the - of sources were considered:

1 rica transaction’s origin, due to insufficient information regarding the Amé MY 1 Entrecampos s da ido e 7 u as Un • Office Zones 1 - 7 corporate name of the company and / or the correct address of the ad s q rm do i A r orças Esta CY as F os n Destination Office Zone - residual weight of less than 1% d e Av. Av. d H A v . . D • Out of Lisbon – companies who moved from outside the Lisbon A CMY . R. Mo e A rais So t ar n Radial de . es region to one of the Office Zones 1 - 7 Office Zone 7, accordingly to LPI index, represents all offices located Ben A a ca MONSANTO g f n u Saldanha I

K i . outside the main zones, which corresponds geographically to all the A a r v v A . A d areas of Lisbon which are not within zones 1 - 6. In this sense, office v • Activity Start-Up – Start-up companies whose first office is in the a .

5 R

e transactions analysed in this report as having occurred in Office Zone d Destination Office Zone address for the transactions identified p e ú

O IC Praça de b 7, correspond only to those registered by LPI index, and, we believe, u C l 1 i ão XXI CAMPOLIDE 9 t c Av. Jo u S a

I b N L Marquês • Structural Growth - increase of leased area through growth of the are not representative of all transactions performed on the market T R Espanha r A o M U de Pombal company structure, corresponding to new premises in the Destina outside zones- 1-6. S ulé - Lo e de tion Ofﬁce Zones 1-7 Y E Av. Duqu guiar T R. Joaquim A. A N R s i

CM WESTERN CORRIDOR e

O R • No Information - cases where it was not possible to identify the - e N t 1 n transaction’s origin, due to insufﬁcient information regarding the a

MY r 1 S i

e I O 7 A m u - corporate name of the company and / or the correct address of the l

C q X A i

A r S . I v A v n CY . Destination Ofﬁce Zone - residual weight of less than 1% e

C d A 5 E a H A A v L . . i D A b CMY R. M e e . or t A ais So rd ar n . es a Ofﬁce Zone 7, accordingly to LPI index, represents all ofﬁces located A d a f TEJO RIVER MONSANTO g AMOREIRAS e n u Saldanha I

K ia . outside the main zones, which corresponds geographically to all the r v Largo A areas of Lisbon which are not within zones 1 - 6. In this sense, ofﬁce do Rato transactions analysed in this report as having occurred in Ofﬁce Zone CAMPOLIDE 7, correspond only to those registered by LPI index, and, we believe, Marquês to are not representative of all transactions performed on the market L an ESTRELA S U te de Pombal n outside zones 1-6. S lé fa - 4% ou In e L v. e d A PRIME CBD E Av. Duqu guiar T R. Joaquim A. A R s A i v WESTERN CORRIDOR e

O R BAIXA . CBD e B N t

a t e a

r CHIADO u

r S i e I O l L m - A C i l EMERGING OFFICE ZONE

m C I X e A

A S . I d v A v R . .

C d v A E a 5 C A A L i 4 Julho - b v. 2 SECONDARY OFFICE ZONE AIRPORT e A rd 7 a 1 AMOREIRAS d TEJO RIVER e “PARQUE DAS NAÇÕES” IC Largo CAIS do SODRÉ do Rato WESTERN CORRIDOR to ZONE 7 an ESTRELA S te n ALCÂNTARA fa 4% In v. A PRIME CBD RESTELO BAIXA CBD

Av. Índia a

t CHIADO

u e

EMERGING OFFICE ZONE I

R . v C A 25 de ABRIL 24 Julho SECONDARY OFFICE ZONE - Av. 7 BRIDGE 1 “PARQUE DAS NAÇÕES” IC CAIS do SODRÉ WESTERN CORRIDOR ZONE 7 ALCÂNTARA

RESTELO PRIMAVERA MARKET REPORT 2017 21 Av. Índia AGUIRRENEWMAN.PT25 de ABRIL

BRIDGE

i r AGUIRRENEWMAN.PT

s n

o e R n

a H

A .

UL e

c A D R C v. O

I M e

C t a I s

ª r e n 2 c o o

h a

d a f ã

l G n o

a o I J

. d

e . s v e d D

a A . C m o v s a l ta A

A v

. A d v • Activity Start-Up – Start-up companies whose ﬁrst ofﬁce is in the a .

5 R

e d Destination Ofﬁce Zone address for the transactions identiﬁed p e ú

H A v . . D A CMY . R. Mo e A rais So t . ares n Ofﬁce Zone 7, accordingly to LPI index, represents all ofﬁces located A a MONSANTO g f n u Saldanha I

WESTERN CORRIDOR e

O R

N t

S i I O A m -

C l X A

A S . I v A v .

C d A 5 E a A L ib e rd a d TEJO RIVER AMOREIRAS e Largo do Rato to an ESTRELA S te n fa 4% In v. A PRIME CBD

BAIXA CBD a

t CHIADO

u e

EMERGING OFFICE ZONE I

R . v C A 24 Julho SECONDARY OFFICE ZONE - Av. 7 1 “PARQUE DAS NAÇÕES” IC CAIS do SODRÉ WESTERN CORRIDOR ZONE 7 ALCÂNTARA

RESTELO

Av. Índia 25 de ABRIL BRIDGE

AGUIRRENEWMAN.PT Supply Offices

22 AGUIRRE NEWMAN Supply

Lisbon’s office market has been quite dynamic in Compared with the main office zones in the recent years. However, the stock of offices in the Iberian Peninsula, Madrid and Barcelona, the main zones has only grown moderately, exist- Portuguese market only represents 36% and 78% ing currently about 4,637,921 sq.m. available. of their sizes, respectively. The biggest growth in 2016 was in the Emerging zone with a 2.26% increase in supply in terms of area, compared with the reduced general increase of 0.57%.

Table 9

Zone 2015 [sq.m.] 2016 [sq.m.] % 2016 ∆ 2015/ 2016

1. Prime CBD 597.767 597.767 12.9% 0.00%

2. CBD 1.096.077 1.096.077 23.6% 0.00%

3. Emerging Zone 491.247 502.350 10.8% 2.26%

4. Secondary Zone 390.225 387.804 8.4% -0.62%

5. Parque das Nações 359.149 359.149 7.7% 0.00%

6. Corredor Oeste 909.036 916.250 19.8% 0.79%

7. Zona 7 768.003 778.524 16.8% 1.37%

TOTAL 4.611.504 4.637.921 100.0% 0.57%

PRIMAVERA MARKET REPORT 2017 23 In Portugal, the limited expansion in supply was The conclusion of the new developments expan- reflected through the conclusion of only 5 office ded the market by about 35,760 sq.m.. It should buildings between 2015 and 2016. be noted that apart from Lagoas Park - Edifício 9, the new supply is not speculative construction since the future tenants had already been defi- Table 10 ned when building work began. Conclusion Development / Building Zone Area [sq.m.] Date

EDP Head office 4 13.900 2015 - Q2 Table 12 Castilho 24 1 7.161 2015 - Q4 Distribution of Lisbon office stock in 2016 TOTAL 21.061

12,9% 16,8% Table 11 Conclusion Development / Building Zone Area [sq.m.] Date

Lagoas Park - Edifício 9 6 4.900 2016 - Q1

D. Luis I 4 10.000 2016 - Q4 23,6% Edifício Santander 3 9.600 2016 - Q4 19,8% TOTAL 24.700

7,7% 10,8% 8,4%

PRIME CBD CBD EMERGING ZONE SECONDARY ZONE PARQUE DAS NAÇÕES WESTERN CORRIDOR ZONE 7

24 AGUIRRE NEWMAN Few developers are looking to develop office Marquês de Pombal 14 and República 5-7 buildings projects as a primary option, as they prefer still have no final use, or defined conclusion dates, sectors that provide more short-term profits, because of the different uses the buildings can namely the residential one. As such, there is have, such as residential or hotels. a reduced pipeline for the next two years of around 46,500 sq.m., from 4 developments. Table 14 Future office supply by zones Table 13 Conclusion Development / Building Zone Area [sq.m.] Date

Edifício VDA 4 12.000 2017

24 de Julho 62 4 10.500 2017 23 000 4 6.000 2017 Edifício Abreu Advogados 40%

Fontes Pereira de Melo 41 1 18.000 2018 28 500 49% Marquês de Pombal 14 1 5.000 -

República 5-7 2 6.100 -

TOTAL 75.600

6 100 11%

PRIME CBD CBD SECONDARY ZONE

The Prime CBD and CBD zones involve a significant proportion of the entire stock on offer as the first has two office developments and the second has another one. The increased dynamics in the Secondary Zone are justified by the move of the EDP head offices to the riverside zone, resulting in a growing interest area for the office market.

PRIMAVERA MARKET REPORT 2017 25 Demand Offices

26 AGUIRRE NEWMAN Demand

The demand for offices in 2016 was similar to There were 58 fewer leasing agreements (-23%) the year before. The contracted area in 2016 than in 2015, event with the size of the deals (143,799 sq.m.) was some 5% less than in 2015. being greater.

Table 15 Lisbon Office Take-up (sq.m.) 1998 → 2016

250 000

232 620

201 430 200 000

165 000 161 680 158 000 148 660 150 000 144 513 143 799 139 000 139 600 135 000 129 000 125 000 126 529 115 628 105 674 101 974 100 000 87 649 77 802

50 000

1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PRIMAVERA MARKET REPORT 2017 27 Comparing the correlation between the growth between 2011 and 2013. After 2014, with in GDP in Portugal and the annual absorption the signs of economic recovery and greater of office space, in the periods of the greatest domestic and international interest, the economic contraction, the absorption of office absorption of office space returned to its pre- space was also relatively poor, particularly crisis figures.

Table 16 GDP Vs. Office Take-up 1998 → 2016

250 000 6.00%

200 000 4.00%

150 000 2.00%

100 000 0.00%

50 000 -2.00%

0 -4.00%

1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

ABSORÇÃO LISBOA PIB PORTUGAL

28 AGUIRRE NEWMAN Looking at the main operations in 2016, the area. The main transactions, with about 29,000 Emerging Zone (zone 3) stands out as being the sq.m., involved, among others, Santander Totta, one with the greatest demand in terms of leased Manpower and BNP Paribas.

Table 17

Quarter Zone Building Area [sq.m.] Tenant

Q4 3 Santander Totta Building 9.800 SantanderTotta

Q2 3 Torres de Lisboa 7.887 Manpower

Q4 3 Torre Ocidente 6.122 BNP Paribas

Q4 6 Alfrapark- Edifício Elevo 5.889 Nokia Solutions

Q1 3 Torres de Lisboa 5.137 Global Media Group

Q1 1 Liberdade, 252 4.572 Havas

Q1 7 Entreposto 4.491 CML

Q3 2 Álvaro Pais 3.532 Grupo CGD

Q3 4 D. Luis I 3.429 Sitel

Q3 1 Alexandre Herculano, 50 3.423 BNP Paribas

In terms of leased area, the two halves of the year were quite similar, although the second half was responsible for 55% of the total. The Manpower operation at Torres de Lisboa stood out in the first half, while the Santander Totta was the biggest in the second half.

PRIMAVERA MARKET REPORT 2017 29 Table 18

2015 2016 ∆ Area Zona Area [sq.m.] Transactions Area [sq.m.] Transactions 2015 / 2016

1. Prime CBD 21.492 42 21.411 31 -0,4%

2. CBD 19.842 43 29.580 47 49%

3. Emerging Zone 19.276 29 43.664 26 127%

4. Secondary Zone 16.668 7 4.246 4 -75%

5. Parque das Nações 25.220 41 7.922 15 -69%

6. Western Corridor 28.020 74 25.644 56 -8%

7. Zone 7 13.994 21 11.331 20 -19%

TOTAL 144.513 257 143.799 199 -0,5%

The leased area in the Emerging zone (Zone 3) The Secondary Zone, Parque das Nações increased 127% between 2015 and 2016 because and Corredor Oeste fell by 75%, 69% and 8%, of the four major transactions mentioned above. respectively. This reduction, particularly in the These transactions accounted for about 66% of Secondary Zone and Parque das Nações, was the total leased area in that zone. because of a drop in available supply in terms of demand, size and quality. CBD recorded an increase of about 49% in the leased area and four more operations in 2016 than in 2015. The Prime CBD was in line with the previous year with just a 0.4% drop.

30 AGUIRRE NEWMAN Table 19 Absorption by Zones (sq.m.) 2014 / 2015 / 2016

45 500

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

1. Prime CBD 2. CBD 3. Emerging zone 4. Secondary Zone 5. Parque das 6. Western Corridor 7. Zone 7 Nações

2014 2015 2016

The Emerging Zone was in first place in new office leases in 2016 in terms of the area leased, closely followed by CBD and the Corredor Oeste.

PRIMAVERA MARKET REPORT 2017 31 Table 20 Number of Transactions by Zone – 2016

10% 16%

28%

24%

7% 2% 13%

PRIME CBD CBD EMERGING ZONE SECUNDARY ZONE PARQUE DAS NAÇÕES WESTERN CORRIDOR ZONE 7

The “Service Companies”, “Telecom, Media and Technology (TMT) and Utilities” and “Financial Services” sectors were the driving force behind the demand in 2016 with about 30%, 23% and 20% of the absorbed area respectively (approximately 42,539sq.m., 33,310 sq.m. and 20.079 sq.m.).

32 AGUIRRE NEWMAN Table 21

2015 2016

Area Average Area Average Sector [sq.m.] % Transactions % area [sq.m] [sq.m.] % Transactions % area [sq.m]

TMT's & Utilities 26% 51 20% 744 33 310 23% 40 20% 833

Pharmaceutical & Health 7 869 5% 24 9% 328 5 442 4% 12 6% 454

Company Services 36 564 25% 57 22% 641 42 539 30% 49 25% 868

Other Services 11 809 8% 32 12% 369 16 537 12% 39 20% 424

Consumer Products 10 224 7% 19 7% 538 3 427 2% 11 6% 312

Financial Services 21 126 15% 36 14% 587 29 079 20% 17 9% 1 711

Consultant & Law 5 200 4% 21 8% 248 2 579 2% 13 7% 198

State, Europe and Associations 11 750 8% 8 3% 1 469 6 135 4% 6 3% 1 023

Construction and Real Estate 2 002 1% 9 4% 222 4 750 3% 12 6% 396

TOTAL 144 513 100% 257 100% 562 143 799 100% 199 100% 723

All sectors recorded fewer transactions in The “State, Europe and Associations” sector also 2016 that the year before, except for “Other stands out because although there were few services” and “Construction and Real-estate”. transactions, just 6, the average leased surface The “Financial Services” sector stood out with area was the second highest of all with 1,023 17 transactions, 19 fewer than the year before, sq.m. per deal. This figure is largely due to the but with an average surface area of 1,124 sq.m., fact that CML (Lisbon city chambers) occupied compared with 587 sq.m. in 2015. This increase 4,491 m of the Entreposto Building. in area was mainly driven by transactions by players such as Santander Totta (9,800 sq.m.) and BNP Paribas (6,122 sq.m.).

PRIMAVERA MARKET REPORT 2017 33 Table 22 Average Absorption Area 2014 / 2015 / 2016

60%

50%

40%

30%

20%

10%

> 5.000 sq.m. 3.001 to 5.000 sq.m. 1.501 to 3.000 sq.m. 801 to 1.500 sq.m. 301 to 800 sq.m. <300 sq.m.

2014 2015 2016

Table 23

2014 2015 2016

Take-up Transactions % Transactions % Transactions %

> 5.000 sq.m. 3 1% 3 1% 5 3%

3.001 to 5.000 sq.m. 5 2% 2 1% 5 3%

1.501 to 3.000 sq.m. 6 3% 12 5% 13 7%

801 to 1.500 sq.m. 12 5% 22 9% 18 9%

301 to 800 sq.m. 71 30% 85 33% 60 30%

< 300 sq.m. 142 59% 133 52% 98 49%

TOTAL 239 100% 257 100% 199 100%

34 AGUIRRE NEWMAN In spite of the number of transactions in 2016 a higher demand for larger areas, over and having fallen by 58 compared with 2015, above 800 sq.m., rather than spaces that were there was no reduction in business activity. smaller than this, showing that companies are Compared with previous years, there was getting bigger.

Table 24 Average Absorption Area [sq.m.] 2014 / 2015 / 2016

2.500

2.000

1.500

1.000

500

1. Prime CBD 2. CBD 3. Emerging zone 4. Secundary 5. Parque das 6. Western Corridor 7. Zone 7 Zone Nações

2014 2015 2016

PRIMAVERA MARKET REPORT 2017 35 Over the last three years, Lisbon has had an average leased area per transaction of around 23% more than in Barcelona. The situation is different when compared with Madrid. Over the period in question, the average leased areas in Madrid were always bigger than in Lisbon, with the biggest difference seen in 2015 (Madrid 950 sq.m. and Lisbon 562 sq.m.).

Table 25

2014 2015 2016

Average Area Average Area Average Area Zone [sq.m.] [sq.m.] [sq.m.]

Lisbon 529 562 723

Madrid 851 950 884

Barcelona 458 539 589

The Portuguese and Spanish office space markets both show signs of growth as a result of the economic recovery and business growth in both countries.

36 AGUIRRE NEWMAN Over the last three years, Lisbon has had an average leased area per transaction of around 23% more than in Barcelona.

PRIMAVERA MARKET REPORT 2017 37 Vacancy Offices

38 AGUIRRE NEWMAN Vacancy

The availability rate between 2014 and 2016 fell looking for larger spaces along with a stagna- by about 14.3% and is currently at 10.2%, which is tion in the development of new office projects, equivalent to about 473,460 m² of free space (in- reducing the supply of office space, particularly cluding zone 7). This is mainly due to companies in Parque das Nações and Prime CBD.

Table 26 Availability by Zones [sq.m.] 2014 / 2015 / 2016

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

1. Prime CBD 2. CBD 3. Emerging zone 4. Secundary 5. Parque das 6. Western Corridor 7. Zone 7 Zone Nações

2014 2015 2016

PRIMAVERA MARKET REPORT 2017 39 Table 27

2014 2015 2016

Zone Availability [sq.m.] % Availability [sq.m.] % Availability [sq.m.] %

1. Prime CBD 54 270 9,25% 52 424 8,77% 41 590 6,96%

2. CBD 103 596 9,78% 103 737 9,46% 93 317 8,51%

3. Emerging Zone 69 374 14,33% 64 488 13,13% 46 758 9,31%

4. Secondary Zone 23 066 5,99% 22 737 5,83% 30 053 7,75%

5. Parque das Nações 29 339 8,17% 17 414 4,85% 12 773 3,56%

6. Western Corridor 223 615 24,61% 210 165 23,12% 205 964 22,48%

7. Zone 7 49 270 6,43% 38 956 5,07% 43 007 1,11%

TOTAL 552 530 12,14% 509 922 11,06% 473 462 10,21%

Most zones were down compared with 2015, namely the Prime CBD and the Emerging Zone as a result of greater demand.

40 AGUIRRE NEWMAN The availability rate between 2014 and 2016 fell by 14.3% and is currently at 10.2%, which is equivalent to about 473,460 sq.m. of available area.

PRIMAVERA MARKET REPORT 2017 41 Rents Offices

42 AGUIRRE NEWMAN Rents

Average rents saw a general increase between As regards the two main business zones, Prime 2015 and 2016. The only exception was the Prime CBD and CBD, these rose to €19.00 /sq.m. and CBD, because of a lack of quality supply and €15.80/sq.m., for prime rent in 2016. the fact that there were transactions involving large spaces with lower sq.m. rents. The prime rents were all in all very similar to most zones and went up compared with 2015.

Table 28

2014 2015 2016

Prime Rent Average Rent Prime Rent Average Rent Prime Rent Average Rent Zone (€/ sq.m.) (€/ sq.m.) (€/ sq.m.) (€/ sq.m.) (€/ sq.m.) (€/ sq.m.)

1. Prime CBD 19,00 14,74 18,50 15,89 19,00 14,83

2. CBD 15,00 11,78 14,00 11,49 15,80 12,53

3. Emerging Zone 14,00 12,06 12,00 10,85 16,00 12,57

4. Secondary Zone NA 8,66 NA 11,55 NA 14,41

5. Parque das Nações 14,00 12,14 16,50 13,32 15,00 13,72

6. Western Corridor 12,00 9,44 11,50 9,40 12,50 10,49

PRIMAVERA MARKET REPORT 2017 43 Comparing rents in Lisbon with Madrid and Barcelona, prime rents in Lisbon remained fairly stable, unlike the other two cities where there was some instability.

Table 29 Prime rents in Lisbon, Madrid and Barcelona (€/ sq.m.) 1998 → 2016

50.00

40.00

30.00

20.00

10.00

0.00

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

LISBON MADRID BARCELONA

44 AGUIRRE NEWMAN Rents outside the city centres and on the city outskirts generally went up in 2016. Rents went up more modestly in the central business districts than outside the city centres and outside the city.

Table 30 Average Rents in Lisbon, Madrid and Barcelona 2015 → 2016

15.00%

12.00%

9.00%

6.00%

3.00%

0.00%

CBD Decentralized Out of town

LISBON MADRID BARCELONA

PRIMAVERA MARKET REPORT 2017 45 Oporto Offices

46 AGUIRRE NEWMAN Oporto

Oporto saw a significant growth in the office space market in 2016, driven by a wide range of industries such as Contact Centres, TMTs, Shared Services, the food industry and healthcare. The demand was as diversified as the supply.

→ Areas of over 1,000 sq.m.: International companies already operating in Lisbon, to expand their representation to the north of the country

→ Areas between 100 – 500 sq.m.: Medium-sized Spanish companies

→ Areas of under 100 sq.m.: Start-ups / SMEs, generally associated with new technologies

On the demand side, they usually require being close to the Metro, modern buildings and location, preferably in Boavista or the Historical Zone.

There are basically two, quite separate but well established, main office supply markets in Oporto.

PRIMAVERA MARKET REPORT 2017 47 Oporto

AVENIDA DA BOAVISTA

ROTUNDA DA BOAVISTA

PRIME ZONE: 13 – 16€ / SQ.M EMERGING ZONE : 9 – 12 €/ SQ.M

48 AGUIRRE NEWMAN Gaia

AFURADA DE BAIXO Centro Comercial AFURADA Arrábida Shopping DE CIMA

CANDAL

Oliveira do Douro

Mafamude V ILA NOVA Canidelo de GAIA

COIMBRÕES

Gaia Shopping FREIXIEIRO

SANTO OVÍDIO

RENT: 9 – 12€ /SQ.M.

Maia

PADRÃO

CARVALHAL

Zona Industrial REAL M

Vermoim

GODIM Moreira

BRANDINHÃES

O UTEIRO OUTEIRO

ALTOS

M Fórum Maia

Zoo da Maia BARREIROS Câmara Municipal SENDAL da Maia

Parque da Maia M

RENT: 9 – 12€ /SQ.M.

PRIMAVERA MARKET REPORT 2017 49

Industrial 52 AGUIRRE NEWMAN The Portuguese industrial market is centralised in the Metropolitan Area of Lisbon, where most of the existing supply is concentrated. In the Metropolitan Area of Lisbon, the main axes of supply are concentrated in warehouses in 6 distinct zones.

ZONE 1 NORTH MARGIN OF TEJO RIVER

SACAVÉM – ALVERCA: Sacavém, Bobadela, São João da Talha, Santa Iria da Azóia, Póvoa de Santa Iria e Forte da Casa

ALVERCA – AZAMBUJA: Alverca do Ribatejo, Sobralinho, Alhandra, Vila Franca de Xira, Castanheira do Ribatejo, Carregado, Vila Nova da Rainha, Azambuja

LOURES – VIALONGA: Prior Velho, Camarate, Portela, Moscavide, Unhos, Apelação, Frielas, Santo António dos Cavaleiros, Loures, Santo Antão do Tojal, Fanhões, Lousa, Bucelas, Arruda dos Vinhos, Odivelas, Famões, Póvoa de Santo Adrião

ZONE 2 SOUTH MARGIN OF TEJO RIVER

MONTIJO – ALCOCHETE: Montijo, Porto Alto, Samora Correia, Benavente

PALMELA – SETÚBAL: Almada, Seixal, Sesimbra, Barreiro, Moita, Palmela, Setúbal

ZONE 3 WESTERN CORRIDOR

ALFRAGIDE – CARNAXIDE: Alfragide, Carnaxide, Amadora

SINTRA – CASCAIS E OEIRAS

PRIMAVERA MARKET REPORT 2017 53 Demand Industrial

54 AGUIRRE NEWMAN Demand

The year 2016 was marked by low activity in the Small to medium businesses have, however, logistics sector, a trend of recent years. During been seeking out larger areas, as they begin to the period hardest hit by the economic crisis, see significant growth in their activity, after a many companies concentrated their Iberian long stagnant period. Because of this, despite Platforms in the Spanish market, significantly the low number of transactions registered com- reducing their Portuguese areas, and in many pared with the pre-crisis period, we already see cases closing them. Because of this, demand has some demand for spaces for above 3000 sq.m.. been evolving slowly, with speculation of a slow growth in revenue.

Main Leases Table 31

Logiters Nave Logística 11.500 sq.m. Contrary to the leasing market, demand for Webasto investment products in the logistics sector has DHL Quinta das Minas 7.300 sq.m. been more active. In 2016, investment pertaining Conforama Quinta da Marquesa 4.000 sq.m. to logistics assets surpassed €140m, mainly in Leroy Merlin Abrunheira Business 3.000 sq.m. Sale & Leaseback transactions. Center

PRIMAVERA MARKET REPORT 2017 55 Supply Industrial

56 AGUIRRE NEWMAN Supply

In terms of supply, speculative projects have not Portugal currently has 3 large-scale logistical been developed. In terms of future supply, no areas: in Porto Leixões, Lisbon North Logistics future construction has been planned. Platform and another located adjacent to the Port of Sines.

PORTO LEIXÕES

Logistical Platform: → Polo 1 31 hectares 5 plots 98.000 sq.m. logistical warehouses → Polo 2 35 hectares 14 plots Main tenant:

PORTO SINES

ZILS Global Parques – Industrial and LISBON NORTH Logistical area of Sines: → Over 2.000 hectares → 100 hectares → 52 plots ZALSINES made up of two areas: Main tenant: → The intra-port area, with 30 hectares, of which 12.3 hectares have complete infrastructure

PRIMAVERA MARKET REPORT 2017 57 Rents Industrial

58 AGUIRRE NEWMAN Rents

The stabilisation of logistical activity resulted in a similar stabilisation of average lease prices. Avera- ge lease prices in 2016 varied between 3 €/sq.m./month and 3.50€/sq.m./month, depending on region, product features and level of demand – supply of each one.

Table 32

Lisboa 2014 2015 2016 Due to the market do not show signs of growth,

1. Sacavém - Alverca 3,25 € 3,50 € 3,50 € either in the present or in the future, developers will have less interest in embarking on new 2. Alverca - Azambuja 4,00 € 3,50 € 3,50 € industrial projects. The viability of these projects 3. Loures - Vialonga 4,00 € 3,50 € 3,50 € is risky because of reduced activity of the sector 4. Montijo - Alcochete 3,50 € 4,00 € 3,00 € and low demand, becoming them unappealing. 5. Palmela - Setúbal 4,75 € 4,50 € 3,00 €

6. Alfragide/ Carnaxide 3,00 € 3,00 € 3,50 €

7. Sintra - Cascais - Oeiras 3,00 € 3,00 € 3,50 €

Forecasts for the L&I sector in 2017

The market is not expected to see a much grea- Demand will come, as in 2017, mainly from Small ter growth in 2017 than in 2016. Demand throu- to Medium businesses that, thanks to the re- gh tenders has not been seen in recent years, covery in purchasing power, will be expanding and there is uncertainty over whether this type their current areass. In this segment, assets ty- of activity will return to the Portuguese logisti- pically do not surpass 3000 sq.m., both in rental cal market in 2017. and sale.

PRIMAVERA MARKET REPORT 2017 59

Retail 62 AGUIRRE NEWMAN Retail

The retail market in Portugal remained qui- versy, namely because of the New Rent Law. te dynamic in 2016 largely due to High Stre- Under the terms of the law, landlords now find et. Apart from the constant improvement in it easier to evict tenants without having to go economic conditions, with greater purchasing to court. This situation has resulted in a decre- power and lower unemployment rates, there ase in the older, more traditional trade in the was also an increase in tourism in the country, commercial zones and a more modern com- particularly in Lisbon and Oporto. These fac- mercial supply. tors led to greater confidence by domestic and international store keepers. Recently there has been a development of zones that has so far been less dynamic in terms The continued increase in tourist flows and the of commerce, such as secondary streets in high flows of consumers from countries such down town Lisbon, Alfama and Cais do Sodré. as Brazil, Angola, France, Russia and China, The impact of this dynamism in the surroun- along with beneficial tax policies for foreign ding zones has created new centralities and investment, such as the “Golden Visa” pro- attracted new consumers, inhabitants and gramme, helped keep Portugal in the sights of tourists to these areas. international operators.

The rehabilitation of abandoned buildings has come up as an alternative option to install operators who are looking for High Street spaces and find there is little supply compared with the high demand. The question of rehabi- litating old buildings has led to some contro-

PRIMAVERA MARKET REPORT 2017 63 Supply Retail

64 AGUIRRE NEWMAN Supply

The High Street is distributed along the commercial axis with specific characteristics in terms of the kind of activity and the target audience they attract. The most attractive zones, and those in most demand by visitors to Lisbon, continue to be the zones around the historic centre: Rossio, Rua do Carmo, Rua Garrett, Avenida da Liberdade, Rua Augusta, and the area around Saldanha.

PRIMAVERA MARKET REPORT 2017 65 Lisbon

Museu Calouste Gulbenkian

Avenida Fontes Pereira de Melo

Avenida da Liberdade

Castelo de S. Jorge

Portas do Sol Assembleia da República Alfama Baixa Pombalina

Sé de Lisboa

Praça do Comércio

PRIME ZONE EMERGING ZONE

66 AGUIRRE NEWMAN Oporto

Mercado do Bolhão

Teatrio Municipal Rivoli

Fonte dos Leões

Torre dos Clérigos

Sé do Porto

PRIME ZONE EMERGING ZONE

PRIMAVERA MARKET REPORT 2017 67 Demand Retail

68 AGUIRRE NEWMAN Demand

Most High Street in Lisbon saw an expansion in 2016 with catering expanding the most, followed by high demand by the fashion and accessories sector.

The Prime Zones continue to see the highest demand in Lisbon, focused moving from Avenida da Liberdade to Rua Garrett and Rua Augusta. Operators’ demand for these zones is justified be the preference for zones with more people.

PRIMAVERA MARKET REPORT 2017 69 Retail in Lisbon

PRIME ZONE EMERGING ZONE

Prime rent: 120 € / sq.m. Prime rent: 70 € / sq.m.

DEMAND INTENSITY

BOILING BOILING Rua Garret/ Chiado Rua Augusta

WARM WARM Av. Liberdade Rua do Ouro/ Rua da Prata Ribeirinha

HOT Eixo MP/ Saldanha

70 AGUIRRE NEWMAN Retail in Oporto

PRIME ZONE EMERGING ZONE

Prime rent: 60 € / sq.m. Prime rent: 40 € / sq.m.

DEMAND INTENSITY

BOILING Rua Santa Catarina

WARM Rua das Flores Avenida dos Aliados Clérigos Praça da Liberdade Mouzinho da Silveira

PRIMAVERA MARKET REPORT 2017 71 Shopping Centres Retail

72 AGUIRRE NEWMAN Shopping Centres

The Portuguese shopping centre market is one of the most competitive in Europe. Most of the shopping centres in the country were built between 1995 and 2009, and in 2010 it attained a Mar Shopping Algarve level of maturity, so few have appeared since then. Currently, most large and medium cities and towns have at least one shopping centre that covers the retail needs of the surrounding population.

In the current market context, the supply of shopping centres in Portugal has seen one or two openings a year at most. In 2016 only one shopping centre was opened: the Nova Arca- da, in Braga (formerly Dolce Vita Braga), in a partnership between SONAE and IKEA. This project has a total area of around 68,500 sq.m, with an IKEA store (20,000 sq.m.), Hypermarket (11,000 sq.m.) and about 110 shops.

Mar Shopping Algarve is expected to open in 2017, with about 83,000 sq.m. Developed by the IKEA Group, it is going to have 220 shops, 8 cinemas, 1 IKEA store and 3,500 parking places. Because of its location, size and diversity, Évora Shopping the project will boost the zone of the Algar- ve to a level that the other shopping centres have not been able to reach so far. In Alentejo, Évora Shopping will have 74 shops, 19 restaurants and 1,200 parking places covering about 16,400 sq.m.

PRIMAVERA MARKET REPORT 2017 73 Table 33 Shopping Centres (sq.m.) 2000 → 2016

350 000

300 000

250 000

200 000 ) 2 Area (m Area 150 000

100 000

50 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 P

74 AGUIRRE NEWMAN AÇORES

17% 22 Shopping Centers 1% 20% 1 Shopping 26 Shopping Center Centers

MADEIRA

18% 21 Shopping 2% 26% Centers 3 Shopping 34 Shopping Centers Centers

9% 10 Shopping Centers

1% 1 Shopping 6% Center 9 Shopping Centers

PRIMAVERA MARKET REPORT 2017 75 Because of the fact that shopping centre su- Table 34 pply has, in a certain way, attained a level of Modernity of Shopping Centres in Portugal (%) stability, the developers have opted for new 2% strategies to attract more visitors. 17% Although many shopping centres are quite recent, with an average age of about 16 years, recently various centres have been refurbi- shed, namely C.C Amoreiras, in Lisbon and Mar Shopping, in Matosinhos. They invested in more 57% modern, trendy designs (e.g. gourmet food court and more pleasant look). 24%

Another approach has been to invest in the innovation of the spaces, making them more welcoming and comfortable and providing better experiences in the shopping centres. UP TO 5 YEARS BETWEEN 5 AND 10 YEARS As an example of these initiatives, there are BETWEEN 10 AND 15 YEARS OVER 15 YEARS some shopping centres with customer support lines via Whatsapp, making the contact more practical and immediate. There are also geore- ferencing systems associated with the shopping experience, such as apps that provide the users with real time information about special offers, sales, services and other information about where they are.

The Shopping Centres have used differentiation and customisation to offer quality to the spaces and conquer customers’ loyalty.

76 AGUIRRE NEWMAN Forecasts for 2017

Because of the tourism that is certainly going to There is some speculation about the effect of the flow into Lisbon and Oporto, the retail market, New Rent Law, because of a possible revision. particularly High Street, will continue to see high In 2017, any events this causes will determine levels of demand. The catering area will be one the continuation of High Street in the historical of the most dynamic among the different sec- parts of the city. Another possible scenario is tors of commerce. more modern retail shops moving in.

In the down town and Chiado zones of Lisbon, it As regards the shopping centres, it will continue will be recorded eccentric amounts in Key Money the adaptation and improvement of the units to transactions because of a lack of quality supply follow the new trends more allied with techno- in 2017. logy.

PRIMAVERA MARKET REPORT 2017 77

Tourism 80 AGUIRRE NEWMAN Tourism

2016 continued to see intense tourist activity All these events, along with the marketing that in Portugal to a great part driven by foreign has been developed, has led to an increase in demand. The tourism sector indicators went tourist demand for the country. up compared with 2015 and Portugal proved its capacity to reinvent itself in terms of tour- There was an increase in flights to Portugal in ism/hotels in areas such as organising events. 2016 in response to this demand. Azul Linhas Aéreas Brasileiras, announced connections In 2016, Lisbon hosted the Web Summit event from Brazilian cities to Lisbon and Oporto, first which had more than 55,000 participants, with three flights a week, and then 5 a week. which added to its growing fame as a city Delta Airlines, the second largest US airline, and the country as a whole. A mega event of presented its schedule that included New this size sees changes in terms of accommo- York - Lisbon in 2016. Another case was the dation, catering, transports etc. As the event Portuguese flag-carrier TAP that expanded its was held over a three-day period, the return operations out of Lisbon and Oporto to other in economic terms is difficult to quantify, but European cities, African countries, Brazil and the Portuguese hotel and a catering associa- the USA. tion reckoned that there was a direct impact of hundreds of millions of euros (greater than EXPO’98 and EURO2004).

In the sports area, Portugal organised the “Lisbon Rock’n’Roll Half Marathon” and this year, Peniche hosted one of the stages of the World Circuit. Looking at other leisure events, Portugal has been standing out with a range of summer festivals (NOS Alive, Super Bock Super Rock, etc).

PRIMAVERA MARKET REPORT 2017 81 82 AGUIRRE NEWMAN Portugal Table 35 Overnights in Portugal - 2015 According to figures released by the Portu- guese statistics agency (INE), hotels had total takings of about €2.9 billion and €2.1billion 14.482,8 from room sales. These interim results show 30% increases of around 18% and 14.4% respectively compared with 2015, as a result of an increase in the number of stays following a marketing campaign run by the domestic tourist agency, 48,850.7 instability at some competing destinations and organised events. 34.367,9 70% Lisbon was awarded the ‘Best City or Short Break Destination’ prize by the Travel Media Awards 2016, ahead of cities such as London, Paris, Rome or Barcelona. Lisbon stood out PORTUGAL FOREIGN because of the quality and diversity of its ho- Table 36 tels, restaurants, museums, entertainment and other tourist attractions. Overnights in Portugal - 2016

Looking at the hotel behaviour in mainland Portugal, Lisbon, the Algarve and Porto are the 15.238,8 areas with the greatest number of tourists. 28%

53,526.4

38.287,6 72%

PORTUGAL FOREIGN

PRIMAVERA MARKET REPORT 2017 83 Lisbon Demand

The Lisbon Metropolitan Area accommodated tional guests accounted for 66% of the total. about 5.6 million tourists in 2016, who contri- This figure was also reflected in the overnight buted towards the 13.1 million overnight stays stays, with foreign tourists representing 77% (+7.6% and +7.2% than in 2015). Foreign demand of the overall amount (10.1 million overnight was very important as the number of interna- stays).

Main Nationalities of Overnight Stays

13% 12% 9% 8% 7.5%

FRANCE SPAIN GERMANY BRAZIL UNITED KINGDOM

Table 37

2016

Room occupancy Total Income RevPar rate

€874.2 M €59.2 72,5 %

+13,2 % +10,5% + 1,9%

SOURCE: TURISMO DE PORTUGAL (2016)

84 AGUIRRE NEWMAN Supply

In and around Lisbon, most supply of accommodation comes from hotels rather than other options (Pousadas, resorts and so on) and this is almost 90% of all the supply.

Table 38 Hotels 2016 - A.M. Lisbon

5% 2% 3%

89%

APARTMENT HOTELS TOURIST APARTMENTS TOURIST VILLAGE HOSTELS HOTELS

As the Tourism sector gains importance in the Lisbon region, hotel supply grew interestingly between 2009 and 2016 and the number of units went up almost 71% (249 in 2016 compa- In Lisbon, Hotel supply red with 146 in 2009). increase around 70% betweenPRIMAVERA MARKET REPORT 2009 2017 and 2016. 85 Table 39 Hotels by Typology - A.M. Lisbon (number of units)

250

46 45 200 42

39 61 29 60 150 23 58

18 52 51 49 50 100 47 101 94 88 80

71 76 66 50 60

41 34 37 38 21 24 26 26 0 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: INE/ AGUIRRE NEWMAN 5 STARS 4 STARS 3 STARS 2 AND 1 STARS

Over the next two years, there is expected Table 40 to be an increase in hotel rooms in Lisbon, as there are already 25 new hotels in the pipeline, Occupancy Average Room 2016 RevPar rate Rate (ARR) which should increase the number of available 5 Stars 92.3 67.0% 144.56 rooms by more than 2,000. 4 Stars 56.4 74.5% 75.81

Increased consumer confidence has been 3 Stars 50 75.4% 63.65 driven by the results and indicators that have been seen in the sustained growth of the sector in Lisbon.

86 AGUIRRE NEWMAN Oporto Demand

The north of the country had about 3.8 million 52% of the total. However, the number of over- guests in 2016, who contributed with 6.9 night stays by foreigners in the north of the million overnight stays (+11.1% and +12.8% than country has been growing and it has increased in 2015). There is a greater balance between by about 18.2% (3.8 million overnight stays in domestic and foreign tourists in this part of 2016 compared with 3.2 million in 2015). the country, with Portuguese guests making up

Main Nationalities of Overnight Stays

9% 8% 7% 16% 23%

SPAIN FRANCE BRAZIL GERMANY UNITED KINGDOM

Table 41

2016

Total Income RevPar Occupancy rate

€361.9 M €35.1 60.8 %

+21.7 % (2015) +18.2% + 8.7% (2015)

SOURCE: TURISMO DE PORTUGAL (2016)

PRIMAVERA MARKET REPORT 2017 87 90% of Hotel Supply Establishments in

Just like in Lisbon, most of the accommoda- Oporto correspond to tion in the north of Portugal is in hotels, which Hotels. account for 91% of the total.

The supply of hotel rooms in the north of Portugal has been expanding in a sustained manner since 2009. Much of the growth has been in 4-star accommodation, which doubled between 2009 and 2016. Generally, 3-, 4- and 5-star hotels have increased by 123% (from 141 units in 2009 to 315 in 2016).

Table 42 Hotel Establishments 2016 – North of Portugal

4% 2% 2%

91%

HOTELS APARTMENTS HOTELS TOURIST APARTMENTS TOURIST VILLAGE HOSTELS

88 AGUIRRE NEWMAN Table 43 Hotels by Typology - North of Portugal (number of units)

300

116

109

225 99 93 90

69 84 150 84 45 85 80 35 76

55 50 75 99 89 77 71 71 64 56 49

13 14 14 15 16 0 7 7 10 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: INE/ AGUIRRE NEWMAN 5 STARS 4 STARS 3 STARS 2 AND 1 STARS

The north of the country can expect an increa- Table 44 se in the number of hotels as there are already Occupancy Average Room 10 new ones in the pipeline for the next two 2016 RevPar rate Rate (ARR) years. 5 Stars 75.8 67.7%

4 Stars 40.4 60.2% €83 The 2016 hotel indicators for the different 3 Stars 25.6 59.3% kinds of establishment have figures which, just like Lisbon, attract hotel investment.

PRIMAVERA MARKET REPORT 2017 89 Algarve Demand

The Algarve is Portugal’s greatest tourist acti- foreigners all year round and they are respon- vity zone and it had around 4.0 million guests sible for 73% compared to domestic guests. in 2016 that were responsible for 18.1 overnight In 2016, there were 14.2 overnight stays by stays (+10.1% and +9.0% than in 2015). Tou- foreign tourists, almost three times more that rist activity in the Algarve is mainly driven by domestic visitors.

Main Nationalities of Overnight Stays

43% 13% 10% 8% 6%

UNITED KINGDOM GERMANY HOLLAND IRELAND FRANCE

Table 45

2016

Total Income RevPar Occupancy Rate

€904.6 M €46.7 64.9 %

+19.4 % (2016) +13.6% + 5.0%

SOURCE: TURISMO DE PORTUGAL (2016)

90 AGUIRRE NEWMAN Supply

The supply by accommodation developments in the Algarve is very diversified, with Hotels representing 36%, Tourist Apartments 35% and Apartment Hotels 19%.

The growth in hotels has been sustained and more prudent than in Lisbon. Between 2009 and 2016, the number of hotels increased 48% (91 units in 2009 and 135 in 2016).

Table 46 Hotel Establishments - Algarve

35% 36%

9% 19%

HOTELS APARTMENTS HOTELS TOURIST APARTMENTS TOURIST VILLAGE HOSTELS

Between 2009 and 2016, the number of hotels increasedPRIMAVERA MARKET REPORT by 48%.2017 91 Table 47 Types of Hotel - Algarve (number of units)

125 22 21 21 20 15 20 100 12 37 35 33 10 32 34 35 75 33

50 52 49 50 46 47 43 45 41 25

23 23 24 19 16 19 11 15 0 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: INE/AGURRE NEWMAN 5 STARS 4 STARS 3 STARS 2 AND 1 STARS

Because of the high demand for accommodation, hotels are faced with stiff competition from Apartment Hotels, Tourist Apartments and Tourist Resorts. Although the supply of this kind of establishment has not shown significant growth in recent years, these units are established on the market and with representation in the Algarve market.

92 AGUIRRE NEWMAN Table 48 Hotel Establishments - Algarve (number of units)

250

21 20 20 200 21 22

12 15 10

33 35 34 35 150 37 29 33 32

100

45 47 49 50 41 43 46 52 50

0 2009 2010 2011 2012 2013 2014 2015 2016

FONTE: INE/AGURRE NEWMAN HOTELS-APARTMENTS TOURISTIC VILLAGE TOURISTIC APARTMENTS

The Algarve is in the cross-hairs of hotel in- Table 49 vestors and there are another 23 units in the Occupancy 2016 RevPar Rate pipeline for the coming years. About 10 are 5 Stars 89.6 59.4% expected to open in the Algarve in 2017/18. 4 Stars 55.0 65.6%

3 Stars 38.5 64.8%

Apartment hotels 45.4 71.6%

Resorts 36.6 37.4%

Tourist Apartments 30.1 40.4%

PRIMAVERA MARKET REPORT 2017 93 Outlook for 2017

In 2017 the outlook remains high and in line with the performance seen in 2016.

On the demand side, the attraction of new tourists through the marketing that has been run by sector entities is going to continue to fuel interest in Portugal. Because of the politi- cal and social instability in competing destinations (such the North African destinations, the Middle East and Turkey), Portugal may continue to benefit in terms of tourism, receiving the tourists unwilling to go to those destinations. It is expected that Portugal can manage to retain and maintain this public over the long run as it is a segment with greater dispo- sable incomes.

As regards the supply, with the foreseen increase in hotel units, there is greater and greater differentiation of the hotel establishments, according to market trends (technology, ecolo- gical awareness, theme concepts and so on).

The main challenge for Tourism in Portugal over the coming years will be the balance between the occupancy rate and the average room prices. There was a 3.37% fall in hotel prices in Portugal in 2016 when it stood at €92. Portugal, particularly Lisbon, is considered a cheap destination by foreign tourists and this is the label that the entities are going to have to face to make the hotel sector profitable.

94 AGUIRRE NEWMAN PRIMAVERA MARKET REPORT 2017 95

Investment 98 AGUIRRE NEWMAN Investment

The real-estate investment in Portugal in 2016 There was a greater demand by foreign inves- was highly dynamic, similar to what was seen tors from the rest of Europe for investment previously, in 2015. The sources of the in-co- products in Portugal in 2016. The European ming capital were quite varied and new inves- investors, namely those from Spain, were tor nationalities also appeared on the market, looking for a more interesting investment on namely French investors who represented a the Portuguese market because of the rapid large proportion of the amount invested in recovery of the Spanish economy. Various commercial property last year. European countries currently offered histori- cally low yields, making the Portuguese market Last year’s real-estate market in Portugal more tempting as its yields are higher. was quite attractive compared with the other countries in Europe, namely regarding the re- To corroborate the described dynamic, about turns that it “offered”, and was a good alterna- €1.6 billion was invested in the domestic real tive to savings options/applications the banks estate market, with 68% of this in the first half were offering (low term deposit rates). of the year, equivalent to €1.08 billion.

The characteristics of the commercial assets on the Portuguese market attracted distinct and varied investor profiles (different nationalities, different risk profiles and different investment amounts).

PRIMAVERA MARKET REPORT 2017 99 Table 50 Investment amount [M €] 2005 → 2016

2.500 2.400

2.000

1.603 1.600

1.500

1.128

1.000 826 734 749

609 597 547 500

274 224

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

The investment amount in 2016 was 40% lower the domestic real-estate market performance in than in 2015, mainly because of the 2nd half per- the second half of last year. formance, which saw a significant slow-down. This fact was impacted by the characteristics of As regards the demand by sectors, 2016 saw gre- the operations in progress (portfolio complexity, at diversification in the investment in Portugal. the size of them and transaction constraints), In the investment in commercial property, the meaning that some of the more complex opera- Office and Shopping Centre segments stand out, tions were postponed until early 2017. The global with weights of 40% and 17% respectively out of economic situation, namely questions such as the total amount of the investment. The real- Brexit and the election of Donald Trump in the -estate development/rehabilitation area should USA have created some investor jitters and the- also be stressed as it captured around 20% of se facts also contributed to the deceleration of the real-estate investment.

100 AGUIRRE NEWMAN As regards the demand by sectors, 2016 saw respectively out of the total amount of the great diversification in the investment in investment. The real-estate development/re- Portugal. In the investment in commercial habilitation area should also be stressed as it property, the Office and Shopping Centre seg- captured around 20% of the real-estate in- ments stand out, with weights of 40% and 17% vestment.

Table 51 Breakdown of Investment by Sector in 2016

Offices 40% 643,3 M

Shopping Centres 17% 273,0 M

Supermarkets 14% 203,1 M

Logistics 3% 42,5 M

Hospitality 2% 35,0 M

High Street Retail 1% 32,4 M

Retail Parks 1% 18,0 M

Others 1% 14,0 M

Development 20% 284,9 M

0,0 100,0 200,0 300,0 400,0 500,0 600,0 700,0

PRIMAVERA MARKET REPORT 2017 101 Foreign capital remained higher than domestic capital and was responsible for 87% of the real- -estate investment in Portugal in 2016.

Table 52 Investment by origin of investor [%] 2005 → 2016

100%

13% 90% 18% 18% 18% 27%

80% 45% 43% 50%

70%

60% 85% 86% 86% 87%

50% 87% 82% 82% 82% 40% 73%

55% 57% 30% 50%

20%

10% 15% 14% 14% 13%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SOURCE: AGURRE NEWMAN PORTUGUESE FOREIGN

102 AGUIRRE NEWMAN The investment by nationality was varied, in 2016.

Table 53 Investment by nationality of investor 2016

309 M€ 300 M€ 270 M€ 260 M€ 212 M€ 19% of Total 19% of Total 17% of Total 16% of Total 13% of Total Investment Investment Investment Investment Investment

53% 92% 75% 57% 47% Offices Retail Retail Offices Offices

25% 8% 25% 43% 22% Development Logistics Offices Development Development

SOURCE: AGURRE NEWMAN

As regards Real-Estate Investment Funds, the associated with banks, because of sector res- Portuguese Securities Exchange Commission tructuring measures. said that the amount under management in December 2016 was €10.528 billion (-6.1% than Interfundos was the manager with the largest in December 2015) and there was a total of market share (13.2%), followed by Norfin (12.7%) 233 active funds (245 in December 2015). The- and Fundger (9.5%). In total, these companies se numbers prove some divestment by various managed 35.4% of the real-estate assets held by domestic funds, particularly in investment funds funds.

PRIMAVERA MARKET REPORT 2017 103 104 AGUIRRE NEWMAN Main Transactions Table 54

Description Area (sq.m.) € (M) The most attractive real-estate has well-loca- Campus de Justiça 65.000 223 ted been prime assets with good tenants and lease agreements of at least 10 years. Algarve Shopping + Estação Viana 63.800 185 Portfólio Douro (12 Assets) 158.000 164

The main transactions in Portugal last years Torre A (Torres Lisboa) + Monumental 33.800 100 were the following: NOS HQ 15.000 52,5

Portfolio Continente (4 Assets) 23.000 39

Alexandre Herculano 53 13.000 32,5

Campus de Justiça Monumental

On the other hand, the limited supply of pro- start of the geographic dispersion of the in- duct to trade, compared with the amount vestment, shifting the concentration from the of identified demand, with the consequent Lisbon area, namely to Oporto. pressure on the yields being offered, led to the

PRIMAVERA MARKET REPORT 2017 105 Offices

Investment in offices in 2016 totalized around €640 million, which was 56% more than in 2015 (about €410 million).

The average European yield dropped 0.25 per- centage points between 2015 and 2016, slipping from 4.10% to 3.85%. As in the rest of Europe, the yield in Portugal went down from 5.50% in 2015 to 5.00% in 2016 due to the high number of operations in this sector in a very aggressive, competitive market. As a result of these movements, the risk premium on the Portuguese office space market is 115 basis points above other European capitals.

The prime yields of offices in the various Euro- pean markets in 2016 were between 3.10% and 5.00% London, Munich, Paris, Berlin, Stockholm and Vienna were the capitals with the lowest values, below the European average. At the other end of the range came Dublin, Lisbon, Brussels and Milan with the highest levels, above the European average.

According to the current economic framework, the yields in Portugal are expected to continue In 2016, investment in to fall next year, both in prime and non-core assets. offices totalled around €640M, 56% more than in 2015.

106 AGUIRRE NEWMAN Retail – High Street

The retail investment market, namely High Street saw an investment of around €32.4 million in 2016 (only 1% of all the investment) and less than the investment that was made in 2015 of about €50 million.

International investors were responsible for the lion’s share in 2016 because of their higher purchasing power (or greater availability of capital) and because of the tax incentives for foreigners.

The average European yield fell from 3.60% in 2015 to 3.5% in 2016. To corroborate the Euro- pean trend, the yield in Portugal remained stable at 5.00% in 2016, because of the high demand for these assets for which there is a very limited supply.

The prime yields of High Street in the various European markets in 2016 were between 2.25% and 5.00% London, Paris, Rome, Munich and Vienna were the capitals with the lowest values, below the European average. At the other end of the range came Lisbon, Dublin, Frankfurt and Geneva with the highest levels, above the Euro- pean average.

The yields are expected to remain low and even go down in some cities next year because of the continued real-estate interest in Portugal and the liquidity on the domestic and international markets.

PRIMAVERA MARKET REPORT 2017 107 108 AGUIRRE NEWMAN Development and Building Rehabilitation

The Development and Building Rehabilita- Table 55 tion industry has become increasingly promi- Description Area (sq.m.) € (M) nent over the past year, in a market which has scarce supply in certain segments such Lisbon North Platform 100.000 100 as office space and logistics, whilst increased 7 Colinas Fund 70.000 90 opportunities have arisen in other sectors such CTT – S. José 10 & 20 9.600 25 as the residential sector. Hospital da Marinha 15.000 18

Casal Ribeiro 55 10.000 10,5

Braz & Braz Building 8.000 9,5

The characterisation of property investment in this segment can be described in accordance with investor profiles: types of assets/uses they look for, as well as the size of projects.

→ Small scale areas, due to the positive return they present. This kind of project mainly involves domestic Boosted by the growth in tourism, the profi- developers/investors, who, after the crisis, tability of these investments come through started to reinvest in the Portuguese market, the sale of apartments, and their manage- particularly in Lisbon. The main focus for this ment and rental in the tourism market. type of investor has been the rehabilitation of derelict buildings for residential property. → Large scale Large scale projects have often been sou- → Medium scale ght after by foreign entities. These projects Medium-sized projects have tended to raise mainly incorporate varied uses, often brin- the interest from international businesses, ging together office, retail and residential working in partnership with Portuguese de- space. In 2016, the “Fundo 7 Colinas”, made velopers, focusing on the residential market. up of assets located in different parts of the This type of investor has analysed “small sca- city of Lisbon, was one of the big commer- le” projects in the Historical and Riverfront cialised portfolios.

PRIMAVERA MARKET REPORT 2017 109 → Hotels → Golden Visa and Non-Habitual Resident The structural growth of tourism in Portugal Regime has prompted the expansion of national and The introduction of tax incentives like the international hotel chains. There has been a Golden Visa and the Non-Habitual Resident significant increase in demand from new ho- Regime have stimulated demand in the tel chains aiming to enter/ explore the Portu- property market in Portugal. In addition to guese market. These investors tend to search the sector’s growth, we also see an increase for spaces that are suitable for the construc- in sales prices of assets, and, recently, tion of a medium-sized building, for between with the new Golden Visa condition for 100 and 120 rooms. the renovation of buildings, city centre renovation. → Student Residences and Senior Residences The demand for buildings that are suitable Over 4400 visas have been granted since for student residences has been growing. For the introduction of the Golden Visa scheme these projects, investors look for a central in October 2012, with a return on investment location and good access to public trans- of around 2.7 billion euros in property in port (especially the Metro). Interest for this Portugal. The majority of visa holders are of segment comes predominantly from foreign Chinese origin, followed by Brazilian, Russian, investors who are keen to establish them- South African and Lebanese, primarily in the selves in the country’s main cities; Lisbon residential segment. and Oporto. The greatest challenge for this business relates to the cost associated to its Many foreigners have been drawn to Portugal start-up; being a business that requires a high for fiscal benefits. The regime, introduced in number of bedrooms for it to be viable. 2009, provides tax exemption for ten years, as long as 183 days are spent in the country In terms of senior residences, which have also and the person has not had fiscal residence in become more prominent in the Portuguese Portugal in the last five years. This status has market, we can see a desire to replicate con- received the most interest from residents of cepts that already exist outside of Portugal, French, English, Swedish, Dutch, Finnish and namely those originating in France. Italian origin.

110 AGUIRRE NEWMAN The interest in the residential segment is the greatest, due to its high return on investment.

PRIMAVERA MARKET REPORT 2017 111 112 AGUIRRE NEWMAN Supply

The current assets supply for property devel- With an already defined and concentrated opment or rehabilitation does not cover the urban fabric in the city centre, new areas of existing demand. The available supply is, in its expansion opportunities are becoming avail- majority, held by Banks, Private Investors and able for building rehabilitation; all of the River Management Companies. Front and Alta de Lisboa/ Telheiras. These are areas with potential for urban growth. In 2016, because of the greater investment interest in the residential market, many office The existing supply for hotel development has buildings were converted into housing to cir- presented certain limitations and adversities. cumvent the limited supply. By analysing exist- Not only are there few projects approved for ing cases, we see that a significant number of hotel use, this market has to compete with derelict or semi-derelict buildings end up not residential demand which, owing to its higher being an option, for legal/contractual reasons profitability, receives more funding at the time which impede their divestment. of purchase.

Forecasts for 2017

In 2017, we will certainly see more property In relation to the scarce supply of quality office development in the major cities, both in Lisbon spaces, it is hoped that residential property in- and Oporto. vestors begin to look at opportunities that are available for projects within this sector. The completion of student residences and similar projects is very promising, given the The residential rehabilitation and construction characteristics and growth of Portugal’s market will continue to be targeted by investors, university-level offering. who will need to diversify the areas they work in, because of decreasing supply in prime areas.

PRIMAVERA MARKET REPORT 2017 113 Madrid Barcelona Málaga Lisbon Oporto Berlin México City Bogotá Aguirre Newman Portugal

Praça Marquês de Pombal, 16 - 7º 1250-163 Lisboa T. +351 213 139 000

Praça Mouzinho de Albuquerque, 113 - 5º 4100-359 Porto www.aguirrenewman.pt