Pedro Rutkowski
CEO
WORX

29 March 2022

WORX is a real estate consultancy company, born in Portugal and active in the market since 1996.

To start off, could you briefly introduce Worx and its current footprint in Portugal?

Our DNA is 100% Portuguese and we have been using our expertize to serve international investors and developers for more than 25 years now. We act as a one stop-shop and have a global presence through our collaboration with BNP Paribas Real Estate. Notably, we were the first company to have been regulated by RICS in Portugal.

A highly important part of our work is to build a multidisciplinary team, able to assist in a wide range of real estate sectors: research, urban regeneration, tourism, tenant representation, etc.

What are some notable changes you have observed in the market over the past couple of years? What about in your business specifically?

It's been an interesting evolution for sure. The downturn in the market was 30%, with almost EUR 2.0 billion in CRE investment.

 

In 2021 the level of foreign capital was much lower than in the previous years, having decreased from 90% to 80%. More domestic investments have been made, a natural reaction of the market to borders suddenly closing.

 

Referring to us specifically, the capital markets and agency services have generated most demand. Although we needed to adjust our expectations accordingly to the global crisis, we still managed to maintain healthy revenue levels across all sectors. 

The most surprising occurrence was the capital allocation to alternative segments, going up to 34% share of CRE investment compared to the usual value which was around 10%. This was due to the rise of PRS portfolios that were sold - ZIP was the biggest deal of the year, sold for EUR 333 million, followed by a hospital portfolio sold for EUR 213 million.

Could you give us a brief assessment for each of the real estate sectors during the pandemic?

Offices continued to be the main sector where investors put their money because it remained reliable even in times of remote working. In 2021, it grew by 17%, a better result than in 2020 but still 17% less than in 2019. Industrial has definitely been the star during this period thanks to the boom in e-commerce that resulted in tenants needing more warehouse space. There's still a need for industrial products developed from ground up so we will surely continue to see significant growth in this area.

Retail and tourism were the hardest hit by the pandemic, with 60% footfall decrease in high-street shops and 30% in shopping centers - on the flip side, the food & beverage and home decor segments have been thriving. Tourism registered a 50% decrease in revenue compared to 2019 but it has been recovering well throughout 2021. However, it will probably take a couple of years until it reaches the pre-pandemic levels.

What are some key challenges that a new investor should expect when entering the real estate market in Portugal?

One key challenge is the cost of construction which has gone up significantly. Furthermore, although the 6% VAT was introduced for affordable housing programs, they represent a small part of the market which means the overall taxation problem that market players have signaled persists. There is another challenge that has, unfortunately, become structural in Portugal and is related to licensing, many projects taking years to be approved.

 

Focusing on the residential market, the growth in sales price per square meter has been slowing down and we expect that in 2022 some families will have more difficulties in accessing credit due to imminent changes in borrowing conditions. 

This means a window opportunity for rental market to thrive in Portugal but it needs to be backed up by the government in order to have a successful transition, especially governmental stability. 

 

Is the financing climate favorable towards new investments?

Broadly speaking, financing is very friendly towards investors who are trying to access capital for new developments, but this openness depends on the type of product they're loaning funds for. Investors are now looking for high quality ventures and are more careful of environmental issues. Sustainability and renewable energy are the concepts that are now leading the market, so every new building must take them into account in order to remain relevant. 

What would you like to achieve with priority in the next two to three years?

We are making an agreement with a renewable energy company (Átomo Capital Partners) and in the near future we'd like to consolidate our footprint in this segment. Meanwhile, we are looking to include property management services in our portfolio, so the plan is to keep on growing our area of expertise.

Do you have a final message about the real estate market in Portugal?

Portugal has a small yet bountiful market that has greatly increased its potential during the past few years. The workforce is qualified and speaks a multitude of foreign languages so it's extremely easy to establish an international business here.

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