Foreign Investment in Portuguese Commercial Real Estate Shows Strong Growth

• 14 January, 26

According to the latest research released by an international real estate consultancy, total commercial real estate investment in Portugal reached approximately €2.67 billion in 2025, representing a 10% increase compared to the previous year. Foreign capital accounted for around 60% of total investment, maintaining its dominant role in the market and demonstrating sustained confidence from international investors in Portugal’s commercial property sector.

Retail, Office, and Hospitality Remain Core Investment Segments

In terms of asset allocation, retail properties continued to attract the largest share of investment, accounting for 29% of the total volume. Office assets ranked second with a 26% share, while hotels represented 20%. These traditional commercial real estate segments remain central to capital deployment strategies, highlighting the market’s long-term confidence in core assets.

Rising Share of Alternative Assets and Logistics Properties

Beyond traditional sectors, alternative assets gained notable traction in 2025. Purpose-built residential assets, including student housing and senior living facilities, represented 13% of total investment. Industrial and logistics real estate accounted for approximately 11%. Although take-up levels declined, the sector continues to offer strong structural growth potential over the medium to long term.

Office and Logistics Take-Up Declines Sharply

Office market absorption weakened significantly throughout 2025. Lisbon recorded a year-on-year decline of 23% in office take-up, while Porto experienced a steeper drop of 51%. The logistics sector also faced pressure, with annual take-up decreasing by roughly 30%, reflecting a more cautious approach by companies when making expansion decisions.

Diverging Trends in Retail and Hospitality Markets

Retail real estate saw a 20% year-on-year reduction in new store openings. However, food and beverage operators remained highly active, emerging as a key driver supporting the retail market. The hospitality sector demonstrated strong resilience, with more than 80 new hotels opening during the year and an additional 4,800 beds entering the market, underscoring the continued strength of tourism demand for hotel assets.

Moderating Foreign Investment Creates Opportunities for Domestic Capital

While foreign investors still represent more than half of total investment volume, their share remains below historical peak levels. This shift has created additional space for domestic investors, contributing to a more balanced and diversified investment landscape.

Rising Prime Rents Reflect Limited Supply of Quality Assets

Despite declining overall occupancy levels, prime commercial rents in core locations continued to rise. Market analysis suggests this trend is driven not by weak demand, but by a shortage of high-quality properties, which is further pushing up the value of prime assets.

Ongoing Yield Compression Signals Asset Value Growth

Most commercial real estate sectors experienced yield compression in 2025, indicating continued upward pressure on asset prices. Prime office yields stand at approximately 5% in Lisbon and 6.5% in Porto. Logistics yields are around 5.5%, while high-street retail yields average 4%, and shopping centers approximately 6.15%. Declining yields point to sustained capital appreciation across the market.

Affordable Housing Set to Become a Key Investment Theme in 2026

Looking ahead, affordable housing targeting middle-income households in metropolitan areas is expected to emerge as both a major challenge and opportunity in 2026. Supported by government initiatives to increase housing supply, and contingent on further legal and tax incentives for Build-to-Rent models, this segment has the potential to become a new growth engine for Portugal’s commercial real estate market.

Cre: The Portugal News