PORTUGAL - Real Estate & Construction
Pedro Lancastre joined JLL as head of capital markets in March 2007. In 2011 he assumed the leadership of JLL Portugal. He has a degree in management from Instituto Superior de Gestão and a post-graduation degree in real estate valuation management from ESAI. He has more than 20 years of experience in the real estate sector, having started his career in banking.
Pedro Lancastre, CEO of JLL, talks to TBY about the Portuguese real estate sector.
What characteristics differentiate JLL as a partner for real estate developers?
JLL is a top real estate advisor in Portugal. One of our main differentiating factors is our broad expertise across real estate types. Many of the projects we are involved in are mixed-use. The current trend for developers is to design projects that incorporate aspects of commercial, residential, and offices. Working in all sectors allows us to understand each project holistically. We can provide value from the initial ideas to the final commercialization. JLL’s 360-degree expertise is, therefore, a precious asset for our clients.
At a market level, what areas are attracting investor interest?
Residential real estate, in Portugal, represents 10 times more volume than other segments. There is EUR30 billion in transactions in that segment, versus EUR3 billion in commercial real estate. Hotels and hospitality account for 33% of the total investment, followed by offices on 27% and logistics on 18%. Approximately 80% of investment spending is international. Commercial real estate is driven by offices and should remain the case. Within residential real estate, a trend that everybody is talking about is the lack of supply. Demand outpaces supply, and domestic demand accounts for 94% of transactions. There is a huge scarcity of new products in the residential market which explains why prices are rising, as it’s not because of international demand. Of course, this reality has created a niche market of premium high-quality developments. There’s still a lot to be done to create new products from scratch, and to realize land development,
Given these market conditions, how does JLL provide value?
We help clients create the best products to meet the needs of the population, not only to live in but as social spaces. Our position is that of an advisor to identify the right opportunities. Many players are not local, whereby we are the locals that can show them the best opportunity. We have the data and the technology, and are able to present them the best of it. JLL has offices in over 80 countries. Specifically, in Portugal the company has a long trajectory of local know-how. This combination of international and local know-how is powerful. One of the best aspects of real estate in Portugal is the quality of the industry in which we are involved. Construction companies and developers are highly qualified and specialized. JLL collects a lot of information from the markets, and uses it to give confidence to investors entering the Portuguese market. Actionable information is quite transparent and consistent, which is essential for the investor. And meanwhile, being an international firm means we are aware of the major advances in trends because we are involved in them abroad. Our colleagues occasionally work to create products at a much larger scale or ones that still don’t exist here. Thus, when we talk about such topics, it is from an informed position. Being international, then, is a vital driver of innovation.
What is JLL’s approach to innovation, data handling, and optimizing strategy through information?
Our main focus is on organized data because this gives us a competitive advantage in decision-making. Three items are tightly interconnected; technology, information, and transparency. We invest in emerging product companies via our tech venture JLL Spark. And since 2018, we have invested over EUR300 million in 40 pro-tech companies that offer innovative solutions to transform the way that commercial real estate operates. Global tech startups have the capacity to support investors with innovative solutions in construction and sustainability.
What is the company doing in terms of sustainability?
We ensure that real estate projects comply with the energy requirements of tomorrow. We want a better world and know that with the growth of the population cities will see greater building needs. We are ready to continue to build extensively to meet the need for new houses, schools, and hospitals. Yet, what people want, of course, is a better world, whereby we need to construct differently. We have products that are much more adapted to the quality of life that people are looking for. And of course, technology is a staple of environmentally sensitive building, just as it is for household appliances and automobiles. Real estate accounts for over 40% of carbon emissions in the atmosphere. And we are addressing this.
How is the real estate market fueling the Portuguese economy?
Real estate plays an important role for the Portuguese economy. It represents 20% of GDP, which is 3% below the EU average. The difference is that in Europe, the weight of investment in residential construction is much larger than in Portugal; there was little construction over the past 10 years. Activity is stimulated not only by developers, but also the construction companies, the architects, and many industries that orbit real estate. Ours is also a much more professional industry than it once was, and is attracting more talent. We try to be market leaders in what we do, and to appeal to investors in Portugal. They have to come to our office and to talk with us. That’s why our 360-degree approach is a permanent one. There are still areas that we intend to grow in. We want a presence across Portugal, but there are certain critical places where we will continue to expand. This year we are opening an office in Funchal for instance after Algarve last year.
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