Investment Market Overview

Updated in February 2024

High interest rates together with concers of economics downturn led to a significant decline globally in real estate investments volumes. In this context yields expanded, and overall uncertainty made investors adopt a more conservative investment policy over the year. Portugal did not escaped from this trend, totalling in 2023 €1.6 billion, which represented a c. 50% decrease in comparison with the previous year.


Source: CBRE Research

The strong investment activity observed since 2015 has particularly targeted the office and shopping centre sectors, although the interest has diversified to other asset classes. Effectively, greater risk acceptance has attracted the interest from various investors to other operational assets, such as hotels, student housing and healthcare. The first PBSA projects started to be developed in Portugal in 2016 and therefore, first transactions were predominately forward purchase deals. Later, portfolio transactions including assets under operation and projects to be developed were completed. The transaction of large residential portfolios has also boosted the capital inflow to this asset class, where the multifamily/build-to-rent market is still embryonic.

A slowdown in investment activity was observed during 2020 and 2021 Covid-19 pandemic years, particularly in retail. Capital inflow to commercial property totaled €1,600 million in 2023, a 52% decrease year-on-year. The hotel sector was the “star” of the year, accounting for 40% of the total investment (€605 million) while the retail sector also stood out, representing a 35% share of the investment volume (€550 million). The slowdown of the investment activity in Portugal has not been driven by the operational performance of the assets, which is quite positive across the sectors, but is mostly motivated by an overly cautious investor approach.

The higher interest rates have been affecting property yields as a consequence of market adjustment. Nevertheless, we foresee some moderate yield compression over 2024, which is going to positively boost the confidence in the Portuguese real estate market.   

Prime yields in the main property asset classes

Source: CBRE Research