Retail in Lisbon is a growing market and international investors and occupiers are trying to move in. Because of the restrictive nature of Lisbon’s shop leases, Jones Lang LaSalle reports that the retail market is dominated by shopping centres.
Central Lisbon in particular houses a large number of privately-owned niche retailers as opposed to the international chains normally seen in European capitals.
New foreign retailers targeting Portugal recently have included the French cosmetics retailer Sephora, mobile phone chain Fonehouse, Spanish retailer Roberto Verino and UK hairdressers Toni & Guy. Marks & Spencer, having terminated its local franchise agreement, has reopened its store in the successful Colombo shopping centre in Lisbon under direct management. It has also reopened its store in Guerra Junqueiro, an important shopping street in Lisbon. M&S’s attitude is also being adopted by some other retailers experiencing unsuccessful franchising agreements, opting to reopen strategic outlets under direct management.
There has been a proliferation of shopping centre developments. According to Knight Frank, far from being a bad thing, this has helped to increase market penetration by those international retailers requiring large units. Part of the reason is the extreme expense of traditional retail locations.
“In the CBD, it is very expensive,” says Natercia Peixoto, commercial director at Knight Frank. “It is similar to the Champs Elysées. Most international traders are there, such as Emporio Armani – though Calvin Klein was there but has closed now.” In the prime Avenida Liberdada, Peixoto puts rents at between Esc10,000 and Esc15,000 per m2 a month.
The strength of demand from both consumers and retailers has led to rapid growth in shopping centre development in recent years. Despite this, the overall saturation level of shopping centres in Portugal remains considerably below most other European countries with many regional centres under-supplied. Lisbon’s retail offer has also improved considerably in recent years and the Vasco da Gama shopping centre at Parque das Nações located on the former Expo site won the MIPIM International Award 2000.
Last summer, Portuguese developer Sonae Imobiliãria exercised its option to buy the remaining 50% stake in Vasco da Gama belonging to its partner ING Real Estate for €12.5m (Esc2.5bn). The option on the 47,000m2 centre was written into the terms of their joint venture to build it. The centre was independently valued in 1999 at around €154.6m (Esc31bn). Sonae owns another two shopping centres in Portugal in joint ventures with ING Real Estate, including Columbo to the north of Lisbon. Sonae also plans to develop the 63,000m2 Cascais shopping centre in Lisbon.
Demand for space at Vasco de Gama and Columbo is high and expected to remain strong despite the new centres opening in and around Lisbon over the next 12 months. According to JLL, early 2001 will also see Portugal’s first factory outlet open in Carregad to the north of Lisbon as well as Portugal’s first retail park at Sintra, a further sign of the pace of change in the Portuguese.
Dutch Developer MDC is currently constructing two shopping centres. Forum Almada, just south of Lisbon, will open in 2001. The 73,000m2 centre will have a Jumbo (Auchan) hypermarket and 190 retail units including 10 anchor stores. In addition there will be 20 restaurants and 14 cinema screens with 3,800 seats. The total development cost is €216m (Esc43bn). CGI has entered into a forward funding agreement. MDC’s other shopping centre under construction is Forum Algarve at Faro. Knight Frank reports that, for the first time, the government is having to consider tightening planning rules. The scale of development has spurred the government into introducing strict controls on development in the urban areas.
Portugal’s first retail park, Sintra Retail Park, opened in 2000 alongside the Lisbon-Sintra Highway, around 25km west of Lisbon. The 15,000m2 joint development by Sonae and UK-based Miller Developments is already completely prelet. Tenants will include Mr Bricolage, Atlantis, Rádio Popular, Loja do Gato Preto and McDonalds. Sonae recently announced that its second retail park with Miller will be built at Setúbal. Turiprojecto, a partnership comprising TrizecHahn from Canada and Riofisa from Spain, among others, aims to develop 10 retail parks nationwide.
Portugal’s first factory outlet centre, Campera, is underway at Carregado, around 50km north of Lisbon alongside the A1 Lisbon – Oporto motorway. The 20,000m2 scheme is owned by the national property fund ESAF and the developer is Mercasa. Phase 1, which will total 11,500m2, is fully let. Sports retailer Nike has taken one of the anchor stores. The second phase is now under construction.
Prime retail yields have been pushed in substantially over the last year from 8%-8.5% to 7%. Activity has principally focused on the shopping centre market, although the increasing new retail formats are expected to attract notable investor interest.
