PORTUGAL. Country Snapshots. Second quarter Please click on the appropriate sector to view. Offices Retail Industrial.

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1 Country s Second quarter 2017 Please click on the appropriate sector to view Offices Retail Industrial About & Contacts

2 Office Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Supply: Demand: Shortages of quality supply in Lisbon and Porto will bring pressure to bear on prime rents in With a new all-time low of 4.75% this quarter, up to the end of the year prime yields are likely to remain stable. Four projects are still likely to come on-stream in 2017, with the trend expected to continue across the next few years. Strong demand felt in previous periods is likely to continue across the year. Prime Office rents June 2017 LOCATION US$ GROWTH % MTH SQ.FT 1 5 Lisbon (Zone 1) Lisbon (Zone 2) Lisbon (Zone 5) Lisbon (Zone 6) Prime Office yields June 2017 LOCATION (FIGURES ARE GROSS, %) Lisbon (Zone 1) Lisbon (Zone 2) Lisbon (Zone 5) Lisbon (Zone 6) NOTES: Lisbon Zone 1: Avenida da Liberdade (Prime CBD) Lisbon Zone 2: Avenidas Novas (CBD) Lisbon Zone 5: Parque das Nacoes Lisbon Zone 6: Western Corridor (Decentralised) With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yield - Country Average Rental Growth - Prime Yields Yield - Prime Rental Growth - Country Average 10.00% 10.0% 9.00% 8.00% 5.0% 7.00% 6.00% 0.0% 5.00% -5.0% 4.00% 3.00% -10.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview The Portuguese economy is showing unmistakable signs of continuing along the positive trajectory in force since The Bank of Portugal recently revised its GDP growth forecast upwards to 2.5% by year end, the largest increase since the turn of the 21st century. Preliminary figures published by the National Statistics Institute indicated the lowest unemployment rate since December 2008 at 9.5% in April Occupier focus Greater Lisbon s market for office space has levelled off to a certain extent following a highly dynamic first quarter, which witnessed a take-up of 33,800 sq.m, down 27% over the same period in The highest level of demand was recorded in zone 6 (Western Corridor) with 23 deals and an occupancy area of 9,000 sq.m. This was offset by zone 7 (nonconsolidated zones) with no more than 2% of demand. 48% of the deals across the quarter in Lisbon were driven by the expansion of existing companies or new companies choosing the city to set up shop. The sectors with the largest occupied area were consultants and lawyers, financial services and TMTs & Utilities. With a vacancy rate of 8.8%, most supply available in Lisbon is poor quality and unfit for demand. This has fuelled an upturn in development activity although in most cases pre-lets are a sine qua non for project go-aheads. There are 90,000 sq.m across 8 projects in the pipeline up to the end of The half year witnessed the completion of the new head offices of Abreu Advogados in zone 4 Porto also enjoyed a promising start to the year, fuelled by growing demand from domestic and international operators. Companies such as Hostel World, Viagens Abreu and Michael Page took up space this year. Investment focus A highly dynamic occupational market, allied with expectations of new construction, helped to place the office sector fairly and squarely on investors radars. Although this quarter witnessed no more than 3 investment deals with a global value of 60 million, deals still in progress are expected to create a new alltime high in office space at the end of Outlook With a resumption of development activity and remodelling of current supply, over the next few years Lisbon and Porto are expected to be in a better position to meet the needs of new companies interested in setting up shop in Portugal. The major dynamics felt across previous periods are likely to continue.

3 Office Market LOCATION BUILT STOCK AVAILABILITY VACANCY RATE TAKE-UP TAKE-UP YTD UNDER CONSTRUCTION () () (%) () () () Lisbon (Prime CBD) 564,649 41, % 3,725 15,398 28,878 Lisbon (CBD) 1,104,037 91, % 5,923 9,334 0 Lisbon (New Office Areas) 529,953 69, % 5,799 12,266 6,886 Lisbon (Secondary Office Locations) 415,207 7, % 7,391 14,199 22,296 Lisbon (Parque das Nações) 354,642 11, % 1,107 2,309 0 Lisbon (Western Corridor) 907, , % 9,079 22,185 0 Lisbon (Non-Consolidated Areas) 740,780 41, % 760 1,734 0 Lisbon (Overall) 4,616, , % 33,784 77,425 58,060 Source: Cushman & Wakefield Key Occupier Transactions PROPERTY SUBMARKET TENANT SIZE () TRANSACTION TYPE Infante D. Henrique, 26 Lisbon (Secondary Office Locations) Abreu Advogados 5,144 Lease Alfrapark Lisbon (Western Corridor) Nokia 1,590 Lease Duo Miraflores Lisbon (Western Corridor) Compta 1,320 Lease Atrium Saldanha Lisbon (Prime CBD) Pipedrive 1,202 Lease Defensores de Chaves, 45 Lisbon (CBD) Bose 1,042 Lease Source: Cushman & Wakefield Key Investment Transactions PROPERTY SUBMARKET SELLER / BUYER YIELD PRICE MILLIONS Central Office Lisbon (Parque das Nações) Wafra / Merlin Properties 6.8% th floor Tower 3 Amoreiras Lisbon (CBD) Banif / Private Investor Buildings Sintra Business Park Brussels Lone Star Funds / Square Asset Management 6.3% 20.0 Source: Cushman & Wakefield, Real Capital Analytics This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Marta Esteves Costa Head of Research Avenida da Liberdade 131-5º, Lisboa, Portugal Tel:

4 Retail Market MARKET INDICATORS Market Outlook Prime Rents: Prime rents should continue to rise, particularly in the high street retail format, owing to the still, as yet, very large difference with other European cities. Prime Yields: Prime yields, at all-time lows, are unlikely to sink any further by year end. Supply: Demand: Supply is likely to be up by year end owing to the forecast opening of two retail spaces. Demand in the various retail formats is likely to continue to rise. Prime Retail Rents - June 2017 US$ GROWTH % SQ.FT 1 5 HIGH STREET SHOPS MTH Lisbon (Chiado) , Lisbon (Avenida Liberdade) , US$ GROWTH % OUT OF TOWN RETAIL (RETAIL PARKS) MTH SQ.FT 1 5 Country prime US$ GROWTH % SQ.FT 1 5 SHOPPING CENTRES MTH Country prime , Prime Retail Yields - June 2017 HIGH STREET SHOPS (FIGURES ARE GROSS, %) Lisbon (Chiado) Lisbon (Avenida Liberdade) OUT OF TOWN RETAIL (RETAIL PARKS) (FIGURES ARE NET, %) Country prime SHOPPING CENTRES (FIGURES ARE NET, %) Country prime With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Rental Growth - Prime 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% Yield - Prime Rental Growth - Country Average 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview The retail market in Portugal continues to improve. As in past years, retail sales index continues to point to recovery, with points in May. According to the Portuguese Association of Shopping Centres, the evolution of the the industry is following the same pattern, with a 2.6% increase in sales although footfall was down 3.6%. Occupier focus Based on a survey that Cushman & Wakefield has been conducting since 2014, increasing demand for retail spaces endures in Portugal. Although the shopping centres format was responsible for 50% of a total number of 160 retail operations, high street retail is increasingly coming to the fore with 44% of total demand this quarter, albeit mainly concentrated in Lisbon and Porto, and largely motivated by highly dynamic tourism sector. Major operators are currently gearing their expansion plans to high street retail, keeping pace with market trends and consumers preferences. The restaurants sector, particularly concentrating on high street retail formats, was responsible for the largest number of new ventures in second quarter The second most representative sector was fashion, mainly shopping centres. The exponential evolution of high street retail operations in Lisbon and Porto has fuelled demand for commercial spaces in these cities and has accounted for almost 80% of the total number of operations identified in the sample. Investment focus The retail sector has historically enjoyed the accolade of champion in terms of commercial investment and this quarter has been no exception, having brought in around 250 million. This interest is expected to continue up until the year end given the large number of deals in the pipeline. Outlook The evolution of retail space supply will mainly involve expansions and the remodelling of existing shopping centres, moulding them to new retail trends. Owing to the increasing difficulty of finding high street retail space in Lisbon and Porto, new high street retail areas are mushrooming, with growth of demand expected to entice new operators to Portugal. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Marta Esteves Costa Head of Research Avenida da Liberdade 131-5º, Lisboa, Portugal Tel:

5 Industrial Market MARKET INDICATORS Market Outlook Prime Rents: Prime Yields: Rent hikes in 2017 are unlikely. Yields are expected to remain unchanged after sinking to an all-time low in Supply: With high construction costs and low rents, occupancy rates across the year are unlikely to show much improvement. Demand: Some growth in demand is expected across 2017 Prime Industrial Rents June 2017 LOGISTICS LOCATIONS US$ GROWTH % MTH SQ.FT 1 5 Lisbon Porto Prime Industrial Yields June 2017 LOGISTICS LOCATION (FIGURES ARE GROSS, %) Lisbon Porto With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. Recent performance Yields Yield - Country Average Yield - Prime Rental Growth - Prime Rental Growth - Country Average 11.00% 15.0% 9.00% 10.0% 5.0% 7.00% 0.0% 5.00% -5.0% -10.0% 3.00% -15.0% Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Rental growth (y/y) Overview The manufacturing industry confidence indicator rose in June, after having stabilised in the preceding month, giving continuity to the expressive, positive trajectory beginning the previous year in which a 2.4 point growth rate was recorded. Although European-wide results were just as favourable, confidence in the domestic industrial sector except for June has outperformed the Eurozone average since the turn of the year. Occupier focus The industrial real estate market showed signs of improvement this quarter. Demand appears to have been gathering pace following a more active quarter in terms of take-up in which a total number of 9 operations accounted for around 56,000 sq.m. The quarter s largest occupier was Luis Simões with a total of 24,500 sq.m in 3 deals in Azambuja and Palmela. Notwithstanding a feeling of better days, tenants continue to show a certain unwillingness to accept market rent hikes and are more interested in negotiating longer grace periods. Occupiers have also been more demanding over the length of leases and it is, nowadays, not unusual to come across space agreements for periods of less than 2 years. All of these factors continue to dampen development activity owing to their adverse effect on project feasibility, whether on account of low rents or a trend towards shorter lease lenght periods. Jerónimo Martins development of the Alfena logistics platform in Valongo, for its own occupancy, was delivered in May. Investment focus The industrial sector witnessed a single investment deal in the second quarter, the sale of the EcoPark Azambuja II logistics platform by ECS. CIC s disposal of the Blackstone logistics portfolio is also expected to go through by year end. The portfolio includes several assets in Portugal, for an amount of more than 200 million. Outlook The industrial market is likely to remain relatively stable across the year with a slight upturn in demand, although rents will remain low. Supply shortages in Porto may have a dampening effect on the growth of present demand. The imbalance between rents and construction costs will continue to have an adverse effect on the sector s evolution insofar as supply shows no signs of improving. This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part Cushman & Wakefield LLP. All rights reserved. Marta Esteves Costa Head of Research Avenida da Liberdade 131-5º, Lisboa, Portugal Tel:

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