Western Mainland Europe Construction Market Report 4Q 2023
Portugal
Local economic indicators
Statistics Portugal (INE) published the 3Q gross domestic product (GDP) press release on 20 November 2023, reporting year-on-year (YoY) real GDP growth of 1.9% and retracted 0.2% over 2Q. in 2Q 2023. The same release also shows construction volume slowing YoY. The Organisation for Economic Co-operation and Development (OECD) updated its yearly GDP forecast to 2.2% in 2023 and 1.2% in 2024.
The most recent data on the INE website shows local inflation at 2.12% in October, the lowest in the past two years (November 2021; 2.58%). The Eurostat Harmonised Index of Consumer Prices (HICP) has produced similar results at 2.3% in November, the lowest since January 2022 (3.4%). The OECD forecasts 2023 inflation at 5.5% for the year’s average and 3.3% in 2024.
The local industrial producer price index, as reported by Eurostat, reveals that only structural metal and electrical distribution have shown some price recovery YoY, while other materials continue to experience inflation. See the following table for month-over-month (MoM), YoY and indexed pricing inflation:
Construction materials
Market outlook
Despite positive work expectations (1.8), construction confidence was reported at –3.3 in November due to negative current order books (-8.3). Reports indicate labour shortages and financial constraints as the largest factors limiting building activity, 30.8 and 17.9, respectively.
The Portuguese commercial real estate market experienced a notable decline in investment during 1Q-3Q 2023. International capital initially dominated the Portuguese market but diminished in the third quarter as national investors became more active.
Hotels constituted a significant portion of the activity, followed closely by the retail sector.
The residential market displays strength, driven by persistent undersupply. Investors are finding opportunities in refurbishing existing properties and new construction, with potential growth in the underdeveloped multifamily segment.
Meanwhile, the office market activity, especially in Lisbon, continued to decrease in 3Q 2023.
Industrial and logistics were in an upward trend, but 3Q witnessed a decline, with most activity occurring in the first half of the year. Despite active demand, an undersupply of quality space persists.
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.
