A Resilient Economic Backdrop
Portugal's economy painted a picture of steady and resilient growth throughout 2025. Gross Domestic Product (GDP) saw a moderate increase of 1.9%, largely propelled by a robust 3.5% expansion in private consumption. This indicates strong domestic demand and consumer confidence, which are crucial for the retail sector. Encouragingly, inflation is beginning to moderate, with forecasts settling at a more manageable 2.3% for the year. The labour market also shows positive signs, with the unemployment rate on a consistent downward trend, projected to hit 5.7% in 2026. With GDP growth expected to accelerate to 2.3% in 2026 before normalising, the overall economic outlook provides a stable foundation for retail activity.
Shifting Tides in Retail Demand
Whilst the economic climate was positive, retail demand experienced a slight softening in 2025. The year saw approximately 800 new shop openings, a 14% decrease compared to the previous year, suggesting a more strategic and cautious expansion approach from retailers.
High street retail format continues to be the undisputed leader, commanding 68% of all new openings. This highlights the enduring appeal of prime urban locations. Shopping centres followed at a distant 16%, with stand-alone units making up 8% of the new market entries.
The Food & Beverage (F&B) sector was the primary driver of activity, accounting for a significant 45% of all new openings. The fourth quarter was marked by several notable large-scale transactions, including new stand-alone shops by grocery giant Mercadona and home goods retailer Casa Peixoto, both securing spaces between 3,800 and 4,000 sq.m.
Rental Trends: Stability in Prime Locations
The continued dominance of high street retail in attracting new tenants points to stronger demand and consequently lower vacancy rates in these prime segments compared to shopping centres and retail parks.
In terms of rental costs, prime rents held firm across all retail formats in the final quarter of 2025. When looking at the year-over-year comparison, high street retail locations in both Lisbon and Porto saw rent increases, a testament to their sustained demand. In contrast, rents in shopping centres and retail parks remained unchanged. Looking ahead, the forecast suggests a short-term rise in prime rents, driven by resilient demand in core, high-traffic locations.
A Strong Pipeline for Construction
The supply side of the market saw significant activity in 2025, with the completion of five retail schemes that added a total of 51,930 sq.m of Gross Leasable Area (GLA) to the market. Key projects included the inauguration of the Nova Vila Retail Park (22,000 sq.m) and a major 10,000 sq.m expansion of Vila do Conde Porto Fashion Outlet.
The development pipeline for the next three years is robust, signalling confidence in the future of Portuguese retail. A substantial 192,500 sq.m of GLA is planned, with a clear strategic focus on retail parks, which account for a staggering 87% of this upcoming supply. Major projects already under construction include:
- Retail Park Póvoa de Varzim (21,000 sq.m)
- Azores Retail Park (18,000 sq.m)
- RIA 125 Retail Park (17,000 sq.m)
- City Center Covilhã (18,000 sq.m)
