Compiled by the Urban Land Institute and Price Waterhouse Coopers, researchers placed Lisbon in ninth on the rankings, up 17 places from the position it held only 12 monhs ago.
This substantial rise in ranking is said to reflect increased interest in Southern Europe, as investors widen their remit beyond Spain.
The report states that Portugal has exited cleanly from its €78 billion EU-IMF bailout and its economy is improving, with the Bank of Portugal forecasting GDP growth of 1.5 percent in 2015.
In Lisbon’s downtown, office rents have stabilised and prime yields hardened.
Increasing competition for the limited number of prime assets has turned the investment market on its head.
“The food chain in the market has changed, with buyers at the bottom and sellers at the top”, the report reads.
International investors are driving the market, but those looking for big-ticket deals will struggle to find them, says one interviewee.
Prime Portuguese retail appears to be a bright spot.
“Retail sales are up, which could push rents up,” says one interviewee.
“Shopping centres in the city centre of Lisbon and further out offer good investment prospects if they have a broad mix of tenants and are in a good catchment area.”
In addition, the Portuguese government’s decision to introduce “golden visas” – or a resident’s permit – in 2012 to buyers who acquire a property valued at €500,000 or above, is attracting foreign capital.
“Chinese investors and developers are looking to be active in Portugal and will even buy land to develop,” said another interviewee.
By and large, though, respondents in the recovering economies – the UK, Ireland, Spain, Portugal, Greece, and the Netherlands – are said to be the most upbeat about business and improving their profitability next year.
Reports out of Spain are varying and could pose some good news for Portugal as investors broaden their horizons.
Views range from “the train has already left the station” to “Spain is still very much an opportunistic player. There is very little core activity because debt is quite difficult and the domestic banks are still not lending.”
Portugal and Greece, despite its recent well-documented woes, appear to have a strong fan-base when compared with the rest of Southern Europe: “Portugal is on the up, Spain is bottoming out, Italy is still a conundrum and sooner rather than later, Greece will be in focus again.”
Overall, the report reveals that Europe’s real estate industry expects to be busier and more profitable in 2015, despite concerns over weak fundamentals and economic conditions.
The five leading cities for investment prospects in 2015 are a mix of German stalwarts and recovery plays: Berlin is top, followed by Dublin, Madrid, Hamburg and, in a remarkable revival, Athens. Dublin’s ranking and Athens’ rise reflect the opportunistic streak that runs through Europe.
Madrid’s ranking, too, reflects a capital surge into Spain that started in 2013 and shows no sign of easing up. If anything, there are signs of this activity spreading across southern Europe.
Emerging Trends in Real Estate Europe, a trends and forecast publication is now in its 12th edition.
Undertaken jointly by PwC and the Urban Land Institute, the report provides an outlook on real estate investment and development trends, real estate finance and capital markets, cities, property sectors, and other real estate issues throughout Europe.