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Recent changes to letting laws in Portugal are expected to inject new life into city centres, according to Luis Antunes, head of capital markets at Cushman & Wakefield in Lisbon.

Portugal scrapped its long-standing rent controls in late 2012 as part of requirements by the so-called troika (the European Commission, the European Central Bank and the International Monetary Fund) to release another round of funds.

Under the new law, landlords are allowed to increase rents which had remained the same for decades and are encouraged to renovate city-centre buildings. ‘Owners were hostages of the tenants because they could not evict them. This is changed now and investors should come in and see what is happening to city centres,’ Luis Antunes told PropertyEU.

High-street retail was the sector which most benefitted from these changes, he added. ‘Demand in prime zones continues unabated, despite the declining trend in the rest of the market,’ Antunes added. Several retailers are entering the market or have expansion plans to reap the benefits of the opportunity to open in new central locations.

Existing retailers are expanding while others have recently entered the market including Amorino, the fashion brand So Chic, SMEG, Zadig& Voltaire, Hilfiger Denim and 7Camicie.

The positive development in high-street retail clashes with Portugal's overall stagnant if not declining investment and occupier market. In total, the country saw as little as €25 mln of commercial real estate asset trades in the first three months of the year while rents continues to be under pressure both in shopping centres and in the office sector.

However, market experts believe the repricing will spur some investment activity in the coming months.‘We have already seen a correction of yields and rents,’ Antunes said. ‘Fund managers which need to boost their performance will start looking at our market but also opportunistic investors which feel that they are buying close to the bottom.