The Portuguese economy grew by 0.4% in Q1 2015 and GDP is expected to grow by 0.4% each quarter of 2015, the strongest rate of growth since 2007. According to Oxford Economics, the economic outlook is positive as the Portuguese economy is expected to grow by 1.7% in 2015 before slowing to 1.4% in 2016. Overall unemployment is falling steadily, although youth unemployment remains high at just over 30%, with a significant emigration rate.

^{Source: Savills European Research, RCA, Abacus}

Investors are returning to Portugal after a period of absence since the economic crisis. Major retail deals have taken place in the first half of the year in Portugal and three deals have accounted for one third of the total investment in Portugal this year. Investment Manager Commerz Real recently sold a three property retail portfolio to Blackstone for approximately €500m in which 2 of the malls were based in Portugal.

According to RCA, last year's investment total was already exceeded in the first two quarters of 2015. In Q1 over €600m were invested in Portugal; 51% of which was retail investment, and in Q2 an additional €490m have been transacted; over 80% of which was retail investment. The majority of investment activity is driven by American and private equity buyers who see the potential of the country for future recovery and seek to catch the cycle and benefit from future yield compression. 73% of investments in Q2 (€360m) came from the US compared to only 4% (€18m) which came from EU investors.

Source: Savills European Research, RCA, Abacus

A significant new source of international property investment capital is from Portugal's golden visa scheme, which has seen capital inflows of over €1.5bn over the past three years. The scheme, which grants residency in Portugal to non-EU buyers for qualifying purchases of more than €500,000 in residential real estate, was launched in 2012 and has seen 80% of take-up coming from Chinese buyers. However, the scheme is focussed on individual visas and has not been easy to adapt to larger commercial transactions for multiple visas, with only one or two transaction of this nature taking place.

In Q2, almost 96% of investment was focused in and around the Lisbon area with very little investment being spread to cities such as Porto. Few Portuguese companies have offices in both Lisbon and Porto so commercial investment is very subdued in the north.

After a remarkable start to the year, investment is expected to slow in the second half of 2015 with total investment forecast to be a little over €1.5bn. Prime yields are expected to tighten, and, as the economy continues to grow, office vacancy rates are expected to fall.