Portuguese Real Estate Investment Survey 3rd …...For more information, contact Deloitte...
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Portuguese Real Estate Investment Survey – 3rd Edition 2018Let’s get ready to retail
Portuguese Real Estate Investment Survey – 3rd Edition 2018© 2018. For more information, contact Deloitte Consultores, S.A. 2
The Portuguese Real Estate Investment Survey has been generating a positive impact in the perception and evolution of the real estate sector.
It is with great pleasure that we launch the third edition of this survey, with the confidence that the opinion and knowledge of the players that act daily in this business, make all the difference.
We would like to thank the Selected Panel for their continued support and involvement over the past editions. The success of this initiative depends only on their dedication.
We are at your entire disposal to discuss any relevant question.
Carefully,
Jorge Marrão
Jorge Sousa Marrão
Partner
Real Estate Leader
Preface
2Portuguese Real Estate Investment Survey – 3rd Edition 2018
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Hot topicRetail
In the third quarter of 2018, there is a trend towards investment in the retail sector.
After a period of recession, leading to a decline in total private consumption, the retail sector in Portugal seems to be experiencing a recovery stage, driven by the raising of this indicator that reached 126 billion euros in 2017(1).
From shopping centres to high street shops, the choices seem to be growing and to be more diversified, with an increasing appetite from domestic and foreign investors.
After a strong bet on the office and hotel sectors, is it the time to shift to retail? Or is this growth related to the good performance of the other sectors?
(1)Source: PORDATA
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Real Estate Strategy
Globally, the investment
strategy (69%) continues
to be the primary choice of
players in real estate
sector, similar to the 2nd
quarter.
Main conclusions
Investment Strategy
Core investments (46%)
are perceived as the
preferred investment
strategy. Major players
(46%) foresee to increase
their portfolio by more
than 10%.
Business Feeders
Banks (77%) continue to be
the main business feeders
of real estate acquisitions.
Capital sources arise mainly
from Europe (77%).
Divestment Strategy
Value added assets
(46%) will be the main
target of further
divestment. 54% of
respondents aim to
reduce their portfolio by
more than 10%.
Investors
Funds of Funds (62%) are
identified as the main real
estate purchasers.
Capital sources arise
mainly from Europe
(85%).
Real Estate Market
Noteworthy is the increase
in volume and transaction
prices in the four sectors
under analysis as well as a
greater stability in
profitability rates.
In the last 12 months,
38% of the respondents
made acquisitions up to
€25M, mainly in the
Portuguese market.
Also 38% made disposals
of less than 25M€.
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Introduction
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IntroductionReal Estate strategy for 2018
Type of organization that participants represent
Divestment
Portfolio management
Investment
6
None of the above
31% 31%
15%
8% 8% 7%
Real Estate AssetManagement
Company
CorporateCompany
Venture Capital/Private Equity
Bank InsuranceCompany
Other
23%
69%
8%
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Frequency of real estate portfolio strategy review
For most players of the sector, real estate portfolio should be continuously reviewed.54%
Continuous
review process
Introduction
7
23%Annually
15%When
opportunities/changes in
market dynamics
8%Twice a year
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Investment strategy over the last 12 months per market
Value of purchases made in the last 12 months
More than 50M€
From 25M€ to 50M€
Up to 25M€
No acquisitions were made in the last 12 months
Portuguese market
European market
Introduction
8
8%
Not applicable
Regional market
23%
31%
46%
46%
8%
38%
Portuguese Real Estate Investment Survey – 3rd Edition 2018
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Divestment strategy over the last 12 months per market
Value of disposals made in the last 12 months
More than 50M€
From 25M€ to 50M€
Up to 25M€
No disposals were made in the last 12 months
Portuguese market
European market
Introduction
9
Not applicable
Regional market
38%
8%
38%
16%
38%
38%
16%
8%
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Investment strategy
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(1)Multiple choice question
Investment forecast for the next 12 months
Investment strategy
Increase portfolio by more than 10%
Increase portfolio by more than 5%
Not applicable
Investment strategy for the next 12 months
11
Not applicable 8%
23%
23%
46%
Value added
Core
Opportunistic
deals
46%
31%
23%
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Preferred investment sectors for the next 12 months
(1) Multiple choice question
Investment strategy
12
CMVM – Investment by type of use
Comparative analysis
Not applicableOthers
Note: Investment for Real Estate Investment Funds, Real Estate Special
Investment Funds and Real Estate Management Funds – 30.06.2018
(Values at end of month) vs 31.03.2018 (Values at end of month)
Source: CMVM – Long time series
54%
46%
38%
31%
15% 15%
8%
ResidentialIndustrial/ Logistics
OfficesHotelsRetail
40%
22%
14%
4%
3%
3%
14%
39%
23%
13%
3%
3%
3%
16%
Services
Retail
Residential
Industrial
Hotels
Logistics
Others
Portuguese Real Estate Investment Survey – 3rd Edition 2018
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Source of funding for next year
Main funders for next year 77%EUROPE
31%NORTH AMERICA
8%MIDDLE EAST
38%ASIA
0%SOUTH AMERICA
Legend: Each icon represents 10%
Investment strategy
(1) Multiple choice question
13
Banks (%)
Pension Funds (%)
Insurance Companies
(%)
Funds of funds (%)
Sovereign Funds (%)
77%
31%
31%
23%
23%
Others (%) 38%
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Length of the real estate asset’s acquisition process
Easiness of fund raising for the next 12 months
Very
Difficult
Neutral
Easy
77%From 3 to 6
months
23%From 6 to 12
months
Investment strategy
14
61%
31%
8%
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Divestment strategy
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Divestment forecast for the next 12 months
Divestment strategy
Reduce portfolio by more than 10%
Reduce portfolio by more than 5%
Not applicable
Divestment strategy for the next 12 months
(1) Multiple choice question
16
Not applicable 23%
17%
31%
46%Value added
Opportunistic
deals
Core
54%
8%
38%
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Residential is the preferred divestment sector for players that operate in the real estate market in Portugal
Preferred divestment sectors for the next 12 months
Divestment strategy
(1) Multiple choice question
17
Not applicableOthersOffices HotelsIndustrial/ Logistics
Residential Retail
31%
23% 23% 23% 23%
15%
23%
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Source of financing for next year
Main real estate investors for next year 85%EUROPE
46%NORTH AMERICA
8%SOUTH AMERICA
46%ASIA
0%MIDDLE EAST
Divestment strategy
(1) Multiple choice question
18
Legend: Each icon represents 10%
Funds of Funds (%)
Pension Funds (%)
Insurance Companies
(%)
Sovereign Funds (%)
Banks (%)
62%
46%
23%
15%
0%
Others (%) 54%
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Length of the real estate asset’s disposal process
Easiness of investors gathering for the next 12 months 15%
Up to 3 months
54%From 3 to 6
months
31%From 6 to 12
months
Difficult
Neutral
Easy
Divestment strategy
19
62%
15%
23%
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Real estate market in Portugal
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Real estate market in Portugal
For the next 3 months, it is expected an increase in the volume and sales price for the sectors under analysis, with special emphasis in the residential sector (75%).
Volume and sales price for the next 3 months
21
Decrease Slightly decrease Similar Slightly increase Increase
HotelRetail / ServicesResidential Industrial
17%
58%
17%
8%
42%
42%
17%
33%
8%
50%
34%42%
8%8% 8%8%
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Profitability rates for the next 3 months For the next 3 months, it is expected a slightly increase for profitability rates in the residential sector (50%) and a greater stability in the retail/ services (58%) and industrial (50%) sectors.
Real estate market in Portugal
22
Decrease Slightly decrease Similar Slightly increase Increase
HotelRetail / ServicesResidential Industrial
17%
33%
50%
8%
58%
17%
50%
34%
25%
42%
25%33%
8%
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For the next 3 months, foreign investment, new players entrance and demand stand out as the variables that will have the greatest positive impact in the real estate sector.
Bureaucracy and fiscal policy will negatively impact the sector.
Impact of several variables in the real estate sector
New players
entranceBureaucracy Fiscal Policy Political
situation
Demand Supply Foreign
investment
PositiveNegative Neutral
Real estate market in Portugal
23
50%
75%
8%
92%42%
25% 8%
58%
34%17%
75%
33%
67%
100%
8% 8%
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The Deloitte CFO Survey: Spring 2018
24Portuguese Real Estate Investment Survey – 3rd Edition 2018
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Evolution of CFOs expectations about Portuguese economic outlook over the next 12 months
Economic outlook and financing
2325
Portuguese CFOs views on their businesses strategies priority
Attractive
Neither attractive nor unattractive
Unattractive
Corporate debt
Equity Internal
NegativePositive Neither positive nor negative
80% 22%
3%
52% 95% 90%
2%
60% 71% 15%
1% 1%
78%
-37%
-68%
37%
93% 89%
Q3_15 Q1_16 Q3_16 Q1_17 Q3_17 Q1_18
Net balance
Bank borrowing
61%
27%
12%
43%
38%
18%
23%
56%
22%
61%
29%
10%
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Likelihood of risk impact on businesses over the next 12 months
(% of likelihood)
Uncertainty and risk
23
67%
58%
57%
56%
47%
41%40%
35%
34%
33%
32%
31%
Domestic public policies
Rising labour costs
Rising input costs
Political or economic
instability in foreign markets
Cyber risk
Currency fluctuations
Rising cost of capital
Weaker foreign demand
Deterioration of cash flow
Weaker domestic demand
Rising barriers to
trade/protectionism
Stress in the financial system
26
CFOs expectation on external financial and economic uncertainty impact
59%High uncertainty
33%Normal
8%Low uncertainty
Portuguese Real Estate Investment Survey – 3rd Edition 2018
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The Portuguese Real Estate Investment Survey’s main goal is to assess:
• The perception of the real estate market evolution by the involved parties; and
• Understand which is the current and future strategy of the organizations.
The survey was sent to a Selected Panel of Participants on 18th September, the answers were obtain on 4th October, and were subject to analysis.
In case of doubt, some additional information or any clarification, please contact:
Jorge Sousa MarrãoPartnerTlm.: +(351) 963 902 674Tel.: +(351) 210 422 [email protected]
Inês Cintra CostaSenior ManagerTlm.: +(351) 962 103 923Tel.: +(351) 210 427 [email protected]
Technical Note
© 2018. For more information, contact Deloitte Consultores, S.A. 27Portuguese Real Estate Investment Survey – 3rd Edition 2018
28Portuguese Real Estate Investment Survey – 3rd Edition 2018© 2018. For more information, contact Deloitte Consultores, S.A.
Contacts
Jorge Sousa Marrão
Partner
Real Estate LeaderTlm. +(351) 963 902 674
Inês de Cintra Costa
Senior Manager
Real Estate – Financial AdvisoryTlm. +(351) 962 103 923
Miguel Paiva Couceiro
Manager
Real Estate – Financial AdvisoryTlm. +(351) 917 240 884
Ricardo Reis
Partner
Real Estate - TaxTlm. +(351) 964 736 261
Diogo Pires
Senior Manager
Real Estate – TaxTlm. +(351) 964 837 258
© 2018. For more information, contact Deloitte Consultores, S.A.
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