Operational real estate: the future of the sector in Portugal

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Operational real estate is shaping up to be the future of the sector in Portugal, as in other European countries, opening doors into new investment and development opportunities.

Broadly speaking, operational real estate means targeting activity on end user services and experiences. This means focusing on sub-sectors that include Hotels, Student Accommodation, Senior Living and Healthcare, Leisure (parks, cinema, gyms, etc.), Pubs and Restaurants, and emerging segments including storage facilities, data centers, co-living and co-working.

At first glance, it can be easy to see operational real estate as simply meaning hospitality and leisure, and hotels in particular. However, it extends way beyond hotels and now reaches right across Europe. Despite lagging behind countries such as the UK and Germany, Portugal is now moving forward in this key area.

Portuguese real estate: no longer a static market Real estate standard asset classes in Portugal are changing, with co-living, co-working and hotels with co-working and co-living, along with other mixed uses, being added to the mix. Portuguese hotels are more actively exploring other activities and venues, such as meetings, conferences and events. Meanwhile, millennials are helping us to understand a new view of the sector, moving from a model of real estate ownership to one of real estate use, as and when it’s needed.

Statistics Portugal revealed a 6.1% increase in the hotel sector, comparing July 2018 to July 20171. With data not yet available for 2019, the media has reported 166 new tourist-focused projects in the pipeline in the first half of 2019: an increase of 23% compared to the same period in 2018. This is one result of Portugal being named the world’s leading destination in 2019 for the third consecutive year (World Travel Awards)2.

“Despite lagging behind countries such as the UK and Germany, Portugal is now moving forward in this key area of real estate.”

Opening doors

The success of Portugal’s hospitality and leisure sector is opening the door to new and improved structures. Hotel chains are providing rooms with guest services similar to serviced apartments, while short-term rental providers are expanding their offerings to move closer to hotel-style services. These new offers provide additional income sources, particularly in light of Europe’s low interest rates, including Portugal.

At the same time, the arrival of experienced real estate investment funds and investment companies from across the world is a catalyst for further evolution and setting new targets for the country’s real estate market. For example, although the student accommodation sector is not as highly developed as other countries, the Nova School of Business & Economics campus, west of Lisbon, is a success story that delivered more than 1,000 student beds3 . However, according to financial services company JLL, there is still a shortfall of 14,000 to 20,000 beds in the country, which represents a tremendous opportunity for investors in this sub-sector.

In Senior Living and Healthcare, we can point to the construction of new private hospitals and clinics, such as by the CUF Group of hospitals. Increasing life expectancy and growing numbers of elder people who want or need to live with certain amenities and healthcare services mean senior living is expanding as a business.

When you take into account that people retire in 2020 aged 66 years and 5 months and the fact that life expectancy may go up by 22.1 years (counting from aged 65)4 then existing developments are merely the start of what may be an extremely interesting market.

In Leisure, new investments are being targeted at gyms across Portugal. Recent data suggests that more than 90% of the population does not attend gyms5 . The main players in this sub-sector, including Fitness-Hut (low cost provider), Holmes Place, Go-Fit and Solinca recognise this opportunity and are expanding their investments in the main Portuguese cities with notable success6.

For Pubs and Restaurants, the all-year tourist interest in Portugal over the last few years has led to a considerable number of restaurant openings every year, with the country acknowledged for its fabulous cuisine7 .

With emerging segments, car parking is currently an attractive investment, especially in the main cities due to the scarcity of parking spaces. The clearest example is Empark, the leading car park concessionaire in the Iberian Peninsula. The company’s experience in this area and its high revenues led to its recent acquisition by Macquarie European Infrastructure Fund 5.

Co-living is also “the next big thing” in Portugal. The most pressing issue in cities today is to locate affordable housing to rent or purchase in the residential market. Given that Portuguese average salaries are quite low, co-living is an increasingly popular solution, particularly in or close to city centers. Lisbon now ranks 27th in European cities for co-living beds8 . There is huge potential for growth.

Co-working is also emerging as a real estate opportunity in Portugal. With numerous existing co-working spaces in Lisbon, new projects in the pipeline include Smart Studios and WeWork facilities under construction. These developments will help transform Lisbon into a new European exemplar of affordable co-working spaces. Such affordability can be central to some business’ sustainability: start-ups, for example, which are increasing every year in Portugal.

All this activity suggests we are witnessing a shift in Portuguese real estate towards meeting operational end user requirements, bringing both innovation and new investment opportunities. Increasing diversification will, we believe, mean growth and future success for Portuguese and foreign investors.

“ We are witnessing a shift in Portuguese real estate towards meeting operational end user requirements, bringing both innovation and new investment opportunities.”


1www.ine.pt/xportal/xmain?xpid=INE&xpgid=ine_publicacoes&PUBLICACOESpub_boui=358629548&PUBLICACOESmodo=2
2 www.worldtravelawards.com/award-worlds-leading-destination-2019
3 issuu.com/cobertura/docs/student_housing_jll_portugal_april_
4 www.savills.pt/research_articles/254855/290527-0
5 expresso.pt/economia/2018-02-11-Negocio--dos-ginasios-esta-a-encher
6 Ibid.
7 www.timeout.pt/lisboa/pt/restaurantes/os-melhores-novos-restaurantes-em-lisboa
8 nit.pt/out-of-town/back-in-town/coliving-moda-partilha-casa-nao-vai-parar-crescer-portugal