Retail Sector Fuels Record €1.23 Billion Investment in Portuguese Commercial Real Estate
The Portuguese commercial real estate market has shattered previous records, attracting an unprecedented €1.23 billion in investment during the first half of 2025. This represents a remarkable 69% surge compared to the same period last year, according to a comprehensive market analysis published by the consultancy firm Savills. The report identifies the retail sector as the primary catalyst for this growth, which has significantly outperformed other segments and drawn substantial international capital, particularly from the United Kingdom.
The investment thesis for Portuguese commercial property appears robust, with the retail sector alone accounting for €616 million of the total volume. This figure marks an extraordinary 360% increase year-over-year, signaling a dramatic turnaround and renewed confidence in the segment. Alexandra Gomes, the author of the Savills report, noted that the resurgence is underpinned by strong market fundamentals. “We are witnessing a powerful recovery in footfall and sales across Portugal’s shopping centers, which, combined with sustained consumer spending from a record-breaking tourism season, has created a highly attractive environment for investors,” she explained. This dynamic has led real estate investment funds and asset management firms to become the most active players in the market.
The target property types for this wave of investment have been diverse, though with a clear focus. The report highlights a growing appetite for retail assets that offer potential for renovation and rebranding, as investors seek to expand their market share in a segment that has proven its resilience. Geographically, while the interest is nationwide, the major urban centers remain a key focus. The hospitality sector, which attracted €330 million, continues to see a strong pipeline of projects in Lisbon and Porto. Here, the strategy is centered on value-add opportunities through the repositioning and modernization of existing hotels to cater to a more demanding clientele.
Expected returns and investment timeline projections remain favorable, with prime yields holding steady across most asset classes in the second quarter. Prime offices in Lisbon's central business district offer yields of 4.75%, while prime shopping centers are at 6.5% and retail parks at 7.0%. The logistics and purpose-built student accommodation sectors both stand at 5.5%. “The stability of yields, with a potential for slight compression in high-demand sectors like logistics, reflects a healthy equilibrium,” commented a senior analyst from a Lisbon-based investment fund. “Solid demand continues to outpace the limited supply of prime assets, which supports current valuations.”
However, the market is not without its risk factors and mitigation strategies are key. The Savills report points to a “clear imbalance between the expectations of buyers and sellers,” which has moderated the pace of transactions and fostered greater selectivity among investors. The office market, for instance, saw a more contained investment volume of €134 million. While this is an 11% increase, growth was constrained by the limited availability of core assets and the evolving demands of hybrid work models, which require greater flexibility. “The established presence of international corporate tenants underscores the market's resilience, but the mismatch in price expectations is a challenge we must navigate,” the report clarifies.
Market conditions supporting this investment opportunity are multifaceted. Portugal's strong economic recovery post-pandemic, its status as a top tourism destination, and its political stability are crucial pillars. Performance benchmarks from comparable investments in Southern Europe further validate the interest in Portugal. Professional investment advisory firms are emphasizing the importance of thorough due diligence, particularly in identifying assets with genuine value-add potential. Financing options remain accessible, though lenders are also exercising caution, aligning with the selective approach of investors.
Looking toward the second half of the year, Savills projects that the total investment volume for 2025 will exceed the previous year's figures. The market sentiment is decidedly positive, though contingent on bridging the price expectation gap between buyers and sellers. The regulatory and tax implications for foreign investors remain stable, contributing to the country's appeal. As one UK-based fund manager, who recently closed a deal on a retail portfolio, stated: “Portugal offers a compelling combination of growth, yield, and long-term potential. The key is a granular approach and a clear strategy for asset management and value creation.”
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