Promiris specializes in sustainable property development and is currently active on the Belgian, Luxembourg and Portuguese market and now entering the Spanish market . The company's work in Portugal focuses primarily on the residential sector, including student housing.
Promiris is turning five this year, congratulations! Can you start by telling us how and why you entered the Portuguese market?
In a nutshell, the Portuguese real estate market has been idle for about seven yearsas a result of the financial crisis of 2008 so there was a gap in developments that needed to be filled. Besides, Portugal rests on foreign investments which motivated the government to come up with various programs to attract international players. I'd say we entered this market two years too late, but even so we are finding that there is plenty of opportunity here and the climate is safer than before, with less opportunistic deals and more reliable ventures.
As a company, we started with a residential and office projects in Belgium but nowadays we are focused on the residential sector with an accent on student housing, especially in Portugal - that represents half of our portfolio at the moment. By the end of 2022, we aim to reach 100,000 square meters of development in this country.
How have you seen the market transforming since first setting foot here?
There's a lot more stability, proof that the market is maturing. Another interesting evolution is that domestic demand has increased significantly, and the focus is no longer just on Lisbon. New opportunities are coming up in Porto and other cities up North - where the economy is most effervescent, and also in Algarve - the absolute pole of tourism.
Referring to the residential sector specifically, I'm noticing a newfound interest towards sustainable features - often times this is driven by the clients themselves.
Affordability is perceived as a challenge in Portugal - what segment of the population are you addressing through your projects?
Generally speaking, the lower end of the market is represented by clients who need to be "helped" in the purchasing process and although public authorities try to back this segment up, there are few tools available (mainly affordable plots of land to build units from the Authorities, etc.) to carry out these support measures. It is not something we are focused on for the moment .
We are addressing the middle or upper class which has a pretty distorted image - contrary to what's being stated in official reports, its purchasing power is high. Portuguese people have side ventures or alternative revenue sources that allow them to buy apartments as expensive as EUR 500,000.
They are either entrepreneurs who reinvest their money in real estate or simple citizens, eager to sell their old houses and move into high-end apartments. In this case, they only need to finance the difference between the two properties, so it's not too hard to obtain a bank loan.
You mentioned student housing as an area of focus for Promiris - what makes this segment a good business opportunity in Portugal?
Student housing is a British concept that is well spread across the Northern Europe and is now making its way to the South also. So far, there is little to no infrastructure of this sort in Portugal, because the country has relied on a model where students would rent a room in houses with shared facilities, even though this is progressively changing
The opportunity springs from the fact that more and more students are looking for a better life style, in other words professionally managed buildings, with concierge and a high level of security or leisure areas. Demand is there, no doubt, what proves challenging is to find suitable plots of land for this type of developments. Especially since the competition is increasing now that many foreign investors have grasped the opportunity.
Many of you peers have pointed to long licensing timelines when speaking about the challenging aspects of Portugal. Are there other notable issues that come to mind?
The permitting process is, indeed, a nightmare. In Lisbon especially the timeline is chaotic and the dialogue with authorities virtually inexistent. On the flipside, things tend to go smoother in secondary cities because municipalities are open and willing to partner up with the private sector. Porto is a good example of that, the relationship with the municipality has proven transparent and well-intended.
Another issue that I want to note is that new developers need to be careful when deciding who will help them along the way - anybody can act as a broker in Portugal because this activity is not well regulated at the moment. Due diligence is absolutely essential in this matter, to find a reliable party that actually holds the expertize a foreign investors needs in order to navigate the local processes and local culture .
Switching our attention towards the future, what are your plans for Portugal in the coming 2-3 years?
We are definitely going to continue our work in the student housing sector while also expanding towards senior housing both in Portugal and Spain We are carefully looking for the right operators to team up with, since all the residences that we develop are built-to-rent.
We'd like to dip our toes into the office sector as well, but it's highly speculative and the prices are extremely high at this point in time. International companies opening new branches here have sparked a lot of interest from developers, but also gave birth to many speculative launch of office developments. We are waiting for the right project to come up.
