Demand for residential garages and stores soars with licensing simplex

The possibility of converting garages or stores to residential use in a simplified way has caused demand for these properties to soar. Immediately after the publication of the Simplex for urban planning licenses in January of this year, real estate agents saw a sharp increase in requests for these spaces. The shortage of houses on the market, coupled with high prices, is leading the Portuguese to look for alternative housing solutions. But in this niche, too, there is more demand than supply.

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Between February and April, Re/Max reported an increase of 8.2% in demand for garages, 7.6% for stores and 1.1% for warehouses compared to the three months prior to the publication of Decree-Law 10/2024 (October to December). According to Manuel Alvarez, president of the chain in Portugal, Re/Max “received an average of 1921 requests per month for stores in the three months prior to the Decree-Law, but in the following three months the number of requests exceeded two thousand per month, averaging 2067 per month”. Even in January it reached 2375 requests. “If we restrict ourselves only to buy/sell deals, demand for stores increased by 18.4% between the two periods and for all three types of property as a whole by 14%,” he added.

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Rui Torgal, CEO of Era, recognizes “a clear increase in demand for this type of property since the beginning of the year”, which seems to show “a relationship between the creation and consequent entry into force [em março] of the Simplex for housing”. In the first five months of this year, Era Portugal recorded “an increase of 84% in reported sales of garages, 172% in stores, and 158% in warehouses” compared to the same period in 2023. As he explains, if we add to the crisis the country is going through in the housing sector “a law that makes it easier to convert garages, stores and warehouses into housing, I think we have the perfect scenario for demand for this type of property to increase”.

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The demand for these properties is “a question of price”, says Marco Tairum, CEO of Keller Williams Portugal. “Garages, warehouses and in some cases also stores and offices have a more attractive price per square meter than residential property.” However, at this stage, demand is being impacted more by the possibility of converting spaces into housing than by the owners of these properties, he believes. Proof of this is that, this year, the number of these spaces for sale at KW is identical to that of 2023, around 800 spaces. Era saw a year-on-year increase of 30% in garage sales in the first five months of this year, but a drop of 30% in commercial space and 25% in warehouses.

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Re/Max also saw an increase in supply, “but not as significant as desirable”. According to Manuel Alvarez, considering all types of property and business, “the network’s supply increased by 8.1% between February-April 2024 compared to October-December 2023”, but in garages, stores and warehouses “for buy/sell deals it didn’t exceed 1%”. At the end of May, Re/Max’s portfolio of these three types of property for sale was around 4,000 units, while at the end of December 2023 it was just over 3,900 units. At Century 21, the supply of these properties for sale has increased since January by around 10% compared to the same period last year – however, it only represents 6.5% of the portfolio, reveals the CEO, Ricardo Sousa. At the moment, the chain has 951 spaces of this type for sale.

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The offer is concentrated in the big cities. At Re/Max, 8.6% of these properties are in Lisbon, 5.1% in Sintra, 3% in Braga, 2.8% in Guimarães, 2.7% in Oeiras and 2.3% in Porto. In Era, the country’s two largest metropolitan areas have the most listings, but Leiria stands out as the city with the most garage listings in the last five months. KW also has more listings in the metropolitan areas of Lisbon and Porto, and on the island of Madeira. Despite this movement in demand and supply, it is not yet possible to ascertain whether these properties that can be transformed into houses are for own use or for business purposes, points out Rui Torgal.

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With the new urban licensing rules, it’s possible to convert residential properties into spaces that qualify as equipment, commerce and services. Those interested only have to give prior notice of their intention to the local authority, which has 20 days to respond or start the inspection process. This possibility that arises with Simplex is “a positive contribution for all citizens who want to own their own home at more affordable prices”, but “it will never be the solution to the housing crisis” that the country is going through, says Rui Torgal.

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“It’s a drop in the ocean,” says Marco Tairum, who also points out difficulties in converting these properties into housing. For example, “if you have a 300 m2 store that only has a store window, you won’t be able to create rooms, since all the rooms need to have natural light”. For Manuel Alvarez, “conversion is not and will not be enough” to solve the high shortage of housing, “it’s just part of a complex solution”. For his part, Ricardo Sousa points out that the problem “requires both structural and temporary solutions”, which include reviewing regulatory policies, making land occupation limitations and urban densities more flexible (including high-rise construction), adopting more efficient and sustainable construction methods, among others.

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Original article by Sónia Santos Pereira in Dinheiro Vivo

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