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oney talks, or so they say. So the US$315 million and 18 investments Portugal attracted in a one-month time frame (July 2001) certainly speak volumes about the country’s appeal as a business location. The fact that these investments came from major U.S., European and Asian companies only reinforces the idea that Portugal is a hot place for investment.
Tyco, Johnson Controls, Philips and others increased their investments in Portugal in July, retaining some 5,000 jobs and generating 1,914 new positions. The investments came from a wide array of industries, including automotive, electronics, chemical, glass packaging, metallic doors, agro-industrial and optical sectors.
“These new investments indeed confirm Portugal as one of Europe’s most attractive investment destinations,” says Luis Neto, president of ICEP-Portugal, the Portuguese investment promotion agency. “The country’s competitive advantages such as a highly skilled work force, lowest real estate and labor costs, and excellent quality of life, make it the ideal place to do business in the European Union. Moreover, Portugal offers one of Europe’s most generous and flexible incentive packages.”
Knight Frank Praises New Investment Climate
And according to Knight Frank’s first annual Portugal Office Report (September 2001), the business climate is only getting better. The London-based real estate services firm notes that the Portuguese government allocated US$1.3 billion to the “Plano Operacional da Economia.” The program consists of special benefits for companies operating in Portugal and allowances for companies considering foreign direct investment into the country.
The government also plans to abolish the property transfer tax, Sisa, in the medium term, while VAT, a deductible tax, will be applied to the transfer of property. At present property transfers are exempt from VAT. Significant reform of the law governing the licensing of land division, development works and private construction also occurred, simplifying and accelerating the process. “Currently property investment still involves a certain amount of time-consuming bureaucracy,” the report says (the revised land division law became effective October 2001).
Portugal continues to see high levels of investment, with $39 billion expected between 2000 and 2006 from European Union funds, reports Knight Frank. These funds will be channeled into a number of projects including new highways, high-speed TGV rail links from Lisbon to Oporto and improvements to the ports of Lisbon, Douro, Aveiro, Setubal and Sines. A new airport is also online in Lisbon.
Improving Property Investments
For property investors, a new emphasis on quality has the potential to greatly improve returns. “Portugal will offer an excellent opportunity for property investment over the next decade,” reports Knight Frank. “The improving quality of new office and retail development in Portugal is providing investments of international and institutional quality. As part of the Euro-zone, Portugal is likely to become even more attractive to investors after 2002 when the Euro is launched.”
In addition, analysts note that the Euro is currently undervalued in relation to other key currencies around the world and that this will be corrected in coming years. Knight Frank explains, “Property investors in Portugal could therefore be represented with a ‘double profit’ — firstly, from direct earnings from property and secondly, from the revaluation of the Euro.”
Lisbon Office Market at a Glance
Lisbon (CBD) Still one of the lowest occupation costs of all key European capitals at US$19.66 per square meter per month. Vacancy rate stands at 2 percent. Approximately 1.1 million sq. ft. (102,000 sq. m.) of office space in the pipeline. Parque das Nacoes (Lisbon submarket) One of the most favored areas in Lisbon for occupiers to locate headquarters, including Telecel-Vodafone and Sony. Rents are around $17.91 per square meter per month. Approximately 920,300 sq. ft. (85,500 sq. m.) of office space in the pipeline. Miraflores-Oeiras (Lisbon submarket) Highest rents in Lisbon market at $17.91 per square meter per month. Approximately 1.84 million sq. ft. (171,000 sq. m.) of office space in the pipeline. Source: Knight Frank
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