Western Mainland Europe Construction Market Report 3Q 2023
Portugal
Local economic indicators
Statistics Portugal (INE) published a press release on 31 July 2023, reporting that the country achieved year-on-year growth of 2.3% in 2Q 2023, also stating that there was no volume growth from the previous quarter. INE also reports a decrease in export demand offsetting an increase in internal private consumption. The Organisation for Economic Co-operation and Development’s (OECD) recent Economic Outlook, published in June 2023, forecasts a growth rate of 2.5% for the year and 1.5% in 2024.
The most recent data on the INE website shows local inflation at 3.7% in August — a minor peak after nine consecutive months of decline. The Eurostat Harmonised Index of Consumer Prices (HICP) has produced similar results, with a peak in October 2022 (10.6%), followed by steady decline up until an uptick in August of 5.3%. The OECD forecasts inflation to continue lowering in the second half of the year, reaching 3.7% in 4Q 2023 and trending towards 5.7% for the year’s average.
Construction materials
Since December 2022, industrial producer prices for glass and concrete have risen the most, while structural steel has seen some savings and electrical distribution has not seen any change.
Market outlook
Construction confidence was reported at 1.4 in July, where employment expectations remained positive (8.5) and fewer respondents reported increased price expectations (33.5 in January versus 14.2 in July). Labour shortages remain high at 57.5.
In 2Q 2023, Portugal's industrial and logistics, hospitality and retail sectors continued their upward trend. However, despite ongoing investor interest and many transactions, commercial real estate investment experienced a slight decline, as did activity in the office sector due to the reassessment of work policies.
Meanwhile, Portugal's data centre market is still growing due to increased digitalisation and a shortage in major European markets like Frankfurt, London, Amsterdam and Paris. The widely publicised 495MW Start Campus project in Sines, Portugal, will help meet demand.
The student accommodation sector in Portugal is prospering, driven by an increasing number of international students. Growth in this sector will likely continue as options for accommodation are in short supply.
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact project programmes and costs. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
