Portugal Real Estate Summit Reveals Investment Focus on 'Build-to-Sell' and Emerging 'Living' Sectors
A comprehensive analysis of Portugal's real estate investment landscape, presented at the 9th Portugal Real Estate Summit in Estoril, has identified a clear divergence in capital allocation, with traditional bank financing remaining heavily focused on 'Build-to-Sell' residential projects while international investment funds are increasingly targeting the 'living' sectors, including Build-to-Rent (BTR) and Purpose-Built Student Accommodation (PBSA).
The investment research, based on discussions with over 60 leading speakers from banking, development, and international capital, forms an investment thesis centered on a persistent supply-demand imbalance across the Portuguese market. The market rationale is that while the demand for all types of housing is strong, the most significant growth potential lies in asset classes that are currently underserved by both developers and traditional lenders. Francisco Ravara Cary, Executive Director at Caixa Geral de Depósitos, stated that from the banking perspective, “housing dominates financing, in particular the Build-to-Sell,” confirming that the bulk of the bank's €1.5 billion annual real estate lending portfolio is directed towards for-sale residential developments.
The target property types for forward-looking investors are shifting. Vanessa Gelado, Senior Managing Director for Hines in Iberia, emphasized that her firm's strategy is “firmly in the living sectors,” highlighting the structural need for student housing and rental properties. Similarly, Juan M. Acosta of Rockfield Real Estate pointed to “flexible housing formats” and co-living as a key opportunity, arguing that “investors will follow these structural needs” driven by demographic shifts and affordability challenges in cities like Lisbon and Porto.
Projected returns for these emerging sectors are reportedly higher than for traditional assets, though they come with distinct challenges. Frédéric Jariel, Co-Head of Real Estate at Tikehau Capital, noted that while BTR is a “good asset class,” its growth is hampered by the continued dominance of the Build-to-Sell model, which offers quicker returns for developers. The investment timeline for BTR is longer, requiring a commitment to managing assets for rental income over several years, a model that is less familiar to some local players.
Key risk factors identified during the summit include significant regulatory and licensing delays, which can add years to a project's timeline and substantially increase costs. Duarte Soares Franco of Habitat Invest highlighted that “regulations are complex and slow,” a sentiment echoed by multiple panelists. This bureaucratic friction is a primary mitigation target for investors, who must factor these delays into their financial models and due diligence processes.
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The market conditions supporting this investment opportunity are clear. Augusto Lobo, Head of Capital Markets at JLL Portugal, noted that office rents in Lisbon have risen 45% since 2018 due to a scarcity of Grade A supply. In logistics, 87% of the pipeline is already pre-let. This intense demand and lack of product are pushing investors to find new niches. The consensus is that Portugal has evolved from a tactical play to a strategic, long-term market for institutional portfolios, with Gelado stating, “There has been no better time in the last 15 years to raise capital for Iberia.”
As a comparable investment, the Spanish market was frequently referenced, with panelists agreeing that the entire Iberian Peninsula is a top destination for capital in Europe. However, performance benchmarks are still being established for the nascent BTR and PBSA sectors in Portugal, requiring investors to rely on sophisticated modeling rather than historical data.
Professional investment advisory is deemed critical to navigate this complex environment. Due diligence must now extend beyond asset quality to include a thorough analysis of the licensing pipeline and municipal politics. Financing options are also evolving. While major banks like CGD are conservative, they are beginning to offer more competitive rates for projects with strong ESG (Environmental, Social, and Governance) credentials, signaling a potential opening for well-structured BTR and PBSA developments.
Exit strategies for these new asset classes are also a key consideration. While the Build-to-Sell model has a clear exit, BTR investors must plan for either a long-term hold or a portfolio sale to another institutional player. The liquidity of these assets is expected to increase as the market matures and more institutional capital enters the space.
The regulatory and tax implications remain a central part of the conversation. Investors are closely watching for any government initiatives that might streamline licensing or provide tax incentives for developing rental housing, which could significantly de-risk projects and improve returns. The future of the sector, it was concluded, will depend on how quickly financing and regulation can adapt to meet the clear and growing investor appetite. Explore investment strategies and opportunities at realestate-lisbon.com.