Investing in the Future of Real Estate and Construction
#Talkingwith Leonardo Peres / M7 Real Estate
In another edition of #talkingwith we invited Leonardo Peres, Managing Director of M7 Real Estate in Portugal and responsible for its acquisition in 2015. Leonardo have extensive experience in capital markets, analysis, and commercial real estate transactions, and will share with us his perspetive about M7’s expansion strategies, the current challenges in hiring reliable partners, and the future of construction in Portugal.
What are M7’s main objectives, and what types of investments have been made?
M7 is an international investment management company, or more precisely, a fund manager specializing in commercial real estate. We partner with international investors, primarily large institutions and private equity funds, to invest in and manage a diversified property portfolio.
The main investment focus of M7 is commercial real estate, with an emphasis on “light industrial” properties. This segment includes business parks, retail warehouses, logistics warehouses, industrial assets, and offices. With a presence in several countries, such as the UK, Denmark, the Netherlands, Germany, France, Spain, Finland, Ireland, Luxembourg, and Portugal, our portfolio varies depending on local opportunities.
In Portugal, we act as a bridge between international investors and the local market, which has significant growth potential. We manage all phases of the investment cycle, from acquisition to effective property management and, ultimately, the sale. Our team in Portugal consists of around 4 experienced staff, and we rely on external partners for complementary services such as construction, property management, and legal consultancy.
As an international investor, how do you perceive the construction market in Portugal?
The Portuguese construction market has undergone a significant professionalization over the last 15 years, largely driven by the entry of foreign capital and its high standards. The sector has evolved substantially, with greater sophistication and standardization of processes.
Today, Portuguese construction companies operate at a level comparable to their international counterparts. I would even say that, in terms of quality, Portuguese companies now surpass Spanish companies, although Spanish firms tend to be more aggressive on pricing.
Nevertheless, challenges remain in Portugal’s construction sector, particularly the lack of reliable data on construction costs, which stems from a potential lack of transparency. This makes it harder for investors like M7 to make accurate forecasts.
How does the regulatory environment in Portugal impact the execution of construction projects? What are the impacts for investors like M7?
The regulatory environment in Portugal indeed presents specific challenges, particularly due to lengthy licensing procedures, which can delay construction projects and, consequently, deter some international investors. However, we have seen improvements with initiatives such as the Simplex program. That aims to simplify these processes and make the country more attractive to investment.
For M7, this means that we need to adopt a strategic approach from the outset, investing in very detailed architectural and engineering projects to ensure accurate cost forecasting. We also work in close collaboration with local experts, who have a strong understanding of Portuguese regulations and help us mitigate risks and align our projects with industry trends.
What are the main challenges M7 faces in the construction sector in Portugal?
Compared to more established markets, such as the UK, there is greater standardization in cost reporting and data sharing. In Portugal, however, we still face difficulties in obtaining reliable data on actual construction costs. This directly affects our ability to forecast investment returns.
Another challenge is the tendency to start projects with underdeveloped designs, which requires deeper involvement from our side in the early stages to ensure planning accurately reflects the final project. Of course, the shortage of skilled labor remains a critical issue for the sector, impacting project timelines and costs.
What strategies do you consider crucial for improving cost predictability and minimizing risks in construction projects?
Although the construction market in Portugal has evolved, there are still opportunities for improvement. For instance, increasing transparency in data sharing, establishing market benchmarks, and encouraging more open communication between companies would help. This would lead to more accurate cost projections, reducing risk for investors and making the construction market more competitive and efficient.
Investing more time and resources in the project phase can be crucial. A well-defined Preliminary Information Request, closely resembling the final licensing project, would help identify potential challenges early and align expectations with all stakeholders, avoiding surprises during execution.
Finally, I believe that the “design and build” model, where a single entity or two companies working closely together oversee the entire process, from design to construction, is an effective way to mitigate risks, resulting in greater cost and timeline certainty for investors.
How does M7 select its partners in the Portuguese market, and what role does proactive collaboration play in overcoming project challenges?
The selection of our partners is a highly strategic process. At M7, we value a solution-oriented approach, and it is essential that our partners share this vision. We look for partners who not only offer good prices but understand that projects require flexibility and collaboration.
Our approach goes far beyond contractual terms. We prioritize a relationship of mutual trust, where everyone works together to identify solutions that benefit all parties involved. In Portugal, this is even more important due to the market’s specific challenges. Proactivity and the ability to resolve issues openly are factors we value in our partners, whether in construction, management, or legal services.
In market consultation, is trust then a decisive factor in choosing contractors?
Absolutely. While price is an important factor, it is not the only one. We value a more holistic approach, which includes the contractor’s ability to meet deadlines, the quality of communication, and, most importantly, a genuine commitment to collaboration. Proven experience and consistent performance over time build trust. What truly distinguishes a contractor is their ability to proactively face challenges and offer effective solutions.
Additionally, the contractor’s market reputation is fundamental. When there is trust and collaboration, the project flows much more efficiently, benefiting everyone involved.
What topics will shape the future of the construction sector in Portugal?
Sustainability, technology, and the rehabilitation of existing structures are, in my opinion, the major topics that will significantly shape the construction and real estate market in the coming years.
Sustainability, especially the adoption of ESG principles (Environmental, Social, and Governance) and efforts to reducing the carbon footprint, presents both challenges and opportunities for the sector. Many projects already incorporate sustainable materials and seek certifications such as BREEAM and LEED to ensure environmental responsibility.
Technology is integral to the future of construction and building management, driven by the continuous wave of digitalization and the concept of smart cities gaining momentum. Companies that embrace new technologies will be more competitive and better prepared for the future.
Moreover, I believe that creatively adapting existing buildings will be crucial. With 80% of buildings globally surpassing 30 years of existence by 2050, there is a great opportunity to repurpose old structures, transforming them into modern, efficient, and sustainable spaces through innovative design solutions.
Success in this evolving scenario will depend on adapting to change, adopting new tools, processes, and mindsets, while prioritizing environmental practices throughout the entire project lifecycle.
