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Profitable Commercial Property in Portugal: An Investor's Guide

Portugal, with its attractive climate, rich culture and growing tourist traffic, has become a magnet for property investors. Of particular interest is commercial property for lease, which can generate a stable income and provide long-term prospects.
However, before diving into this market, you need to thoroughly research all aspects including advantages, disadvantages, risks, opportunities, and specific data on different types of property.
General overview of the income-producing commercial property market in Portugal:

The commercial property market in Portugal is represented by different types of properties: hotels, guesthouses, tourist rental apartments, restaurants, shops, office space, as well as glamping and camping sites that are gaining popularity. The following factors contribute to the attractiveness of this market:
  • Growing tourist traffic: Portugal is a popular tourist destination, with visitor numbers growing annually. According to Portugal's National Institute of Statistics (INE), the number of international tourists increased by 15% in 2023 and tourism revenue increased by 20% year-on-year.
  • Attractive climate: A mild climate and over 300 days of sunshine a year make Portugal a year-round destination for leisure and business.
  • Affordable prices: Compared to other Western European countries, property prices in Portugal, although rising, remain relatively attractive, especially in regions not so much affected by mass tourism.
  • Well-developed infrastructure: Portugal has a good transport infrastructure, including international airports, roads and railways, providing easy access and movement.
  • Stable economy: Since the 2008 financial crisis, the Portuguese economy has stabilised and is showing steady growth.
Geographical features:

  • Algarve: Main tourist region known for its beaches and golf courses. High demand for rentals, but also high competition.
  • Lisbon: Capital and largest city, attracting tourists and business travellers. Diverse market, with great growth potential.
  • Porto: Second largest city, known for its history and wine industry. A growing tourist sector, with more affordable prices than Lisbon.
  • Madeira and Azores: Popular tourist destinations with unique climate and nature. Promising markets, but with fewer facilities than on the mainland.
  • Other regions: Inland regions with developing rural tourism and agritourism, promising for niche investors.
Advantages of investing in income-producing commercial property in Portugal:

  • Stable rental income: High demand for tourist property rentals provides a steady stream of income, especially in popular tourist areas.
  • Potential for value growth: Portugal's property market is showing steady growth, which provides the potential to increase the value of the asset in the long term. According to Eurostat, residential property prices in Portugal increased by 7% in 2023 and this trend is likely to continue. Commercial property is also on an upward trend.
  • Diversification of the investment portfolio: Investing in foreign property allows you to diversify your investment portfolio and reduce dependence on the fluctuations of domestic markets.
  • Possibility of obtaining a residence permit: Investing in property in Portugal can be the basis for obtaining a residence permit, the so-called ‘Golden Visa’. Although the conditions of the programme are constantly changing, this is still an attractive factor for many investors.
  • Tax incentives: The Portuguese government offers a number of tax incentives for non-residents investing in property, which can reduce the tax burden.
  • Variety of property types: It is possible to invest in different types of commercial property, from hotels and restaurants to flats and glamping sites, allowing investors to choose the most suitable options according to their investment objectives.
Disadvantages and risks of investing in income-producing commercial property in Portugal:

  • Fluctuations in tourist flow: The tourism sector is subject to fluctuations caused by economic crises, political events and pandemics. A decrease in tourist traffic may lead to a decrease in rental demand and consequently a decrease in income.
  • Property management: Commercial property management requires time, effort and expertise. Tenants must be found, the facility must be maintained, taxes must be paid, and other administrative issues must be handled. Using a property management company may solve this problem, but will incur additional costs.
  • Taxes: Taxation in Portugal has its own peculiarities. In addition to property tax (IMI), there are taxes on rental income, capital gains and property transfer tax (IMT) on purchases.
  • Tenant insolvency risk: There is a risk that tenants may not pay rent or may damage the property.
  • Dependence on external factors: The property market can be affected by global economic trends, changes in interest rates and political decisions.
  • Competition: An increase in the number of properties available for rent may increase competition and affect pricing.
Guarantees of preservation of invested funds:

There are no absolute guarantees of preservation of invested funds in the property market. However, the following measures can be taken to minimise risks:
  • Thorough market research: Thoroughly analyse the market, study price dynamics, supply and demand in the region you are interested in.
  • Selecting a reliable property: Choose properties with good location, quality construction and potential for growth.
  • Use professionals: Use experienced lawyers, realtors and financial advisors to guide you through the investment process.
  • Insurance: Take out insurance to cover property damage or other unforeseen events.
  • Diversification: Don't invest all of your funds in one property or one region. Consider diversifying your investment portfolio.
  • Risk Management: Develop a risk management plan and be prepared for possible market fluctuations.
Taxation of commercial tourist property:

  • Immovable property tax (IMI): An annual property tax, the amount of which depends on the cadastral value of the property and municipal rates. IMI rates vary from 0.3% to 0.8% depending on the municipality and type of property.
  • Rental Income Tax: Rental income is subject to income tax (IRS), the rate of which depends on your tax status and income level. For non-residents, a flat rate of 28% applies.
  • Capital gains tax: Capital Gains Tax (Capital Gains Tax) may arise on the sale of a property. The tax rate for non-residents is 28%.
  • Immovable Property Transfer Tax (IMT): The tax is payable on the purchase of a property. The rate depends on the value of the property and varies from 0% to 7%.
  • VAT (IVA): For commercial activities such as renting out apartments with ancillary services, VAT at 6% or 23% may apply.
  • Tax deductibility: There are tax deductions available for property management costs, which can reduce the tax burden.
Rental statistics (2024 and forecast for 2025-2026):

Hotels (including boutique hotels and guesthouses):
Average room rate per night (ADR):
  • Lisbon and Porto: €120 - €200
  • Algarve: €100 - €180 (seasonal)
  • Madeira: €90 - €150
  • Other regions: €70 - €120
Average occupancy:
  • Lisbon and Porto: 65-75%
  • Algarve: 60-80%
  • Madeira: 60-70%
  • Other regions: 40-60%
Forecast 2025-2026: ADR growth of 5-8% annually, stable occupancy, increased competition and development of niche segments.

Houses (villas, townhouses, etc.):
Average rental price per night:
  • Algarve (villas): €200 - €600
  • Lisbon (townhouses): €150 - €350
  • Other regions (rural houses): €100 - €250
Average occupancy:
  • Algarve: 60-70%
  • Lisbon: 50-60%
  • Other regions: 40-55%
Forecast 2025-2026: Increased demand, ADR growth of 5-10% per annum, increased competition and popularity of houses with privacy.

Flats (flats):
Average rental price per night:
  • Lisbon and Porto (centre): €80 - €180
  • Algarve (coast): €70 - €150
  • Other cities: €50 - €120
Average occupancy:
  • Lisbon and Porto: 60-70%
  • Algarve: 50-70%
  • Other cities: 45-60%
Forecast 2025-2026: Stable demand, price growth of 3-7% per year, increased competition and development of online platforms.
Ecotourism, Glamping and Camping in Portugal: Growing Trends

  • Ecotourism: Is growing rapidly, offering nature reserves, hiking and cycling trails, eco-farms, water sports and educational programmes.
  • Glamping: Combines the comfort of a hotel and proximity to nature. Accommodation types: Yurts, dome houses, chalets, safari tents, mobile homes.
  • Campsites: Offer affordable holidays in nature. Types: car camping, tent camping, bungalows, rural camping.
  • Market growth: The ecotourism, glamping and camping market is showing steady growth (10-15% per year) with an increase in the number of sites (10-20% annually).
  • Trends: Sustainability, innovation, niche markets, social networks, collaborations, quality service and integration with local culture.

Investment opportunities in ecotourism, glamping and camping:
  • Purchase and development of existing facilities.
  • Construction of new facilities with sustainability in mind.
  • Investment in infrastructure and equipment.
  • Development of tours and packages.
General trends and forecasts:
  • Recovery of the tourism sector.
  • Increased demand for quality accommodation.
  • Development of niche markets and remote workplaces.
  • Introduction of innovative technologies.

Conclusion:
Investing in income-producing commercial property in Portugal can be lucrative and promising, but requires careful analysis, market understanding and competent management. Before making a decision, it is necessary to weigh up the pros and cons, assess the possible risks and consult with professionals. With the right approach and careful planning, you will be able to receive a stable income, protect your investments and ensure a secure future. Particular attention should be paid to new trends such as ecotourism, glamping and camping, which are showing steady growth and can be a profitable investment.
Faro Investment Group: Your Reliable Partner in the World of Real Estate Investments in Portugal
When it comes to investing in profitable commercial property in Portugal, choosing the right partner is crucial. Faro Investment Group is a team of experienced professionals with in-depth market knowledge, expertise in finance and legal support, and a proven track record. We offer comprehensive solutions to help you achieve your investment goals, minimising risks and maximising returns.

Why you should turn to Faro Investment Group:

In-depth Market Knowledge:
  • Expertise: We are property experts in Portugal, focusing on the commercial sector. We constantly monitor market trends, price dynamics, and regulatory changes.
  • Local network: Our extensive network of contacts with property developers, management companies, and other market players gives us access to exclusive offers and opportunities that are not always available to the general public.
  • Regional specialisation: We specialise in the most promising regions such as the Algarve, Lisbon, Porto, as well as emerging ecotourism and glamping destinations.
Personalised Approach:
  • Understanding your objectives: We endeavour to understand your individual investment objectives, financial capabilities and preferences in order to offer you the most appropriate solutions.
  • Personalised Strategies: We develop bespoke investment strategies, taking into account your level of risk, expected returns and planning horizon.
  • Ongoing support: We provide you with ongoing support at every stage of the investment process, from site selection to management.
Integrated Solutions:
  • Search and Analysis: We conduct a thorough search and analyse properties that match your requirements, taking into account their potential for growth, profitability and liquidity.
  • Legal Due Diligence: Our team of experienced lawyers provides full legal support, including document review, transaction processing and resolution of any legal issues.
  • Financial analysis: Our financial experts conduct detailed analyses of the investment attractiveness of properties, including yield, risk and tax implications.
  • Property management: We offer property management services including tenant search, property maintenance, rent collection and administration.
  • Fit-out and refurbishment services: We help you prepare your property for letting by carrying out all necessary refurbishment and design work.
Transparency and Reliability:
  • Openness: We work transparently and openly, providing you with full information about each property and every stage of the transaction.
  • Reliability: We build trusting relationships with our clients based on honesty, professionalism and reliability.
  • Performance: We strive to achieve maximum results for our clients, helping them to realise their investment goals and secure a stable income.
Innovative Approaches:
  • Ecotourism and Glamping: We follow the development of the ecotourism and glamping market, offering you promising investment opportunities in this growing sector.
  • State-of-the-art technology: We use state-of-the-art technology to search for properties, analyse data and manage properties, making our work more efficient.
  • Adaptability: We constantly adapt to market changes to offer you the most relevant and profitable investment solutions.
Long-term partnership:
Post-transaction support: We provide you with ongoing support after the transaction, providing property management, analysing the results and advising you on the next steps.
Long-term relationships: We are committed to long-term partnerships where you can rely on our expert support and professionalism.
With Faro Investment Group, you get:
  • Access to the best investment opportunities in Portugal.
  • Professional support at every stage of the investment process.
  • A personalised approach and solutions tailored to your objectives.
  • Maximum transparency and reliability.
  • Performance and long-term perspective.
If you are looking for a reliable partner to invest in profitable commercial property in Portugal, Faro Investment Group is your best choice. Contact us today to learn more about our services and start your journey to successful investment.