It’s a first. For the first time on record, the rents for street-facing stores in Baixa, Lisbon’s downtown, are higher than those on the Avenida da Liberdade, Lisbon’s main luxury artery. Furthermore, they are already nearing the prevailing prices in Chiado, the most expensive retail area in the Portuguese capital.

According to data from several consultants contacted by Expresso in 2018, street store rents in Baixa reached a high of between €105 and €130 m2/month, while on Avenida da Liberdade they ranged between €85 and €100 per square meter per month. In Chiado, rents hovered between €130 and €135 per square meter per month.

Rental costs have risen the most downtown since 2014, especially from 2017 to 2018, according to data provided by Cushman & Wakefield. According to the consultancy’s figures, rents in Baixa, more precisely on Rua Augusta, the area’s main commerce and tourism artery, grew by 20% between the end of 2017 and September 2018.

Rental costs saw little to no change on the Avenida da Liberdade, according to data from the various consultancies. For example, Cushman calculated that rents stayed flat at €95 per m2/month, while JLL  saw an increase of €5 m2/month to €90 m2/month. In Chiado, both saw, prime rents, or the most expensive ones in the area, rose by just over 8%.

However, despite the limited growth in rents on Avenida da Liberdade, the consultancies guarantee that that area is not suffering from a lack of interest. “Avenida da Liberdade went through a less active period in relation to the street trade because the stores that came on the market, a result of the rehabilitation of the area, did not correspond to the current demand on the part of store owners for areas with larger dimensions,” JLL’s head of retail. Patrícia Araújo, stated. The head of retail for CBRE, Carlos Récio, believes that Avenue da Liberdade is still the first choice for many luxury brands, but supply is not always in line with demand.”

However, the Avenida da Liberdade seems to be regaining some momentum. “There were new stores opening, such as Massimo Dutti, Arcadia, Sandro and Maje,” said Patrícia Araújo. It was “the only area that demonstrated positive rent growth in the last quarter of 2018, going back to €90 per m2/month,” she added.

Rehabilitation and tourism help Baixa

The increase in tourism in the city of Lisbon, and in particular in Baixa, is one of the principal causes of the increase in rents for stores. However, before the influx of tourists, the area had to be gentrified. That gentrification was made possible by the amendment to the rental regime, facilitating the rehabilitation of old buildings and the replacement of run down stores in Baixa with new, more modern and larger storefronts, and subsequently, more well-known brands.

“The impact of the change in the Rental Law was strongly felt in Baixa, specifically on Rua Augusta, since most of the rentals contracts for spaces in the buildings fell under the previous law. With the legislative amendment, many of these spaces entered the free market and could be negotiated based on their real potential, which had significantly increased in recent years due to the increase of tourism and the improvement to circulation in Baixa, with a greater number of renovated buildings. Rua Augusta currently has rents that fit its profile. It is the country’s best trade (excluding luxury shopping) location, with a very high volume of daily visitors and potential for growth. It is common in other markets in Europe that these locations have higher rents than the luxury areas. An example can be found in Barcelona, where Portal del Angel has higher rents than those of the Paseo de Gracia,” Marta Esteves Costa, of Cushman & Wakefield, explained.

It is for that reason Patrícia Araújo believes that the current trend of price increases in Baixa will continue. “The area continues to present good business opportunities for rehabilitation, making Baixa, especially Rua Augusta, a zone of interest, where rents are reaching high levels and low yields,” she stated.

While rents increased in the downtown area, the number of new stores that opened in recent years rose in tandem, and not only on Rua Augusta, the principal thoroughfare. “The streets under development are mainly Rua do Ouro and Rua da Prata, in the first two blocks and the perpendicular streets, such as Rua de Santa Justa [the elevator],” Mr Récio stated. Even the Rossio has had “strong demand, particularly for the restaurant sector”, but there is a “very reduced availability” of space now, he added.

The Campo das Cebolas, next to the Terreiro do Paço on the way to Santa Apolónia, is also considered part of downtown Lisbon. The area also benefited from rehabilitation and increased tourism, Ms Araújo said, referring to the inauguration of “independent shops and restaurants.” Some of the new restaurants and cafes that in the area last year include L’Eclair, the Cantinho do Avilez and Basílio.

Rents also rise in Porto

The phenomenon of tourism and urban rehabilitation are not limited to Lisbon. On the contrary, Porto has also seen strong growth in recent years and, as in the capital, this has led to more dynamism in the street trade and even more expressive growth in rents, though starting at a lower level than Lisbon.

For example, five years ago, rents on Rua de Santa Catarina – which was always Porto’s main street trade artery – did not go beyond €25 per m2/month. They have now reached between €60 and €75 per m2/month. Much of this growth occurred in 2018, with year-on-year increases of 15% to 20%.

Rents also increased in the Torre dos Clérigos area from 2017 to 2018, from €35 per m2/month to the current €45 m2/month. This is also considered one of the new street shopping areas in Porto and one of the areas that saw the greatest number of new stores opening last year. 22 new stores inaugurated in 2018, according to Cushman & Wakefield.

Numbers at a glance

110 euros per m2/month – the average rent that in Baixa. However, there are already cases of rents reaching 130 euros per m2/month;

55 euros per m2/month – the average rent in Baixa five years ago;

90 euros per m2/month – the average rent on Avenida da Liberdade, little changed over the past four years;

135 euros per m2/month – the rent in Chiado, one of the most expensive areas in Lisbon;

70 euros per m2/month – the highest average rent on Rua de Santa Catarina in Porto, the most expensive street in the city. Rents increased by more than 55% since 2017;

40 euros per m2/month – the average rent in Clérigos, in Porto, currently one of the most sought-after by brands and stores.