Commercial property in Brazil performing well
High domestic demand and thriving economies mean that since the global financial crisis the Bric economies (Brazil, Russia, India and China) have been the focus of much interest.
Not least the in the real estate market, with property in Brazil appearing highly desirable thanks to the country’s strong economic growth and swift exit from recession.
A recent survey conducted by the Royal Institution of Chartered Surveyors (Rics) suggested that the commercial property market in the country is performing extremely well.
In its Global Commercial Property Survey for the second quarter of 2010 the organisation identified the commercial real estate markets in the Latin American and Asian regions as outstripping those of most of the western world.
Rics chief economist Simon Rubinsohn explained: “The real estate world continues to be split, broadly speaking, between the emerging and developed economies.
“Strong growth in many of the former, including the likes of Brazil, Hong Kong and India, is continuing to boost demand for new space from occupiers as well as encouraging investment activity.
“Meanwhile in many of the latter, fiscal retrenchment allied to bank deleveraging continues to place significant obstacles in the way of a meaningful recovery in the commercial property market.”
Looking at the areas in which Brazil is among those leading the way, the net balance of property professionals stating they had seen an increase in demand over the three-month period is the highest in the world at 85 per cent. This is an increase on the 70 per cent recorded in the previous quarter.
India, another Bric country, is also performing well in this area.
Rental expectations were high with a net balance of 74 per cent and capital values were another area where Brazil is performing well, as these are currently following rental trends. The country is fourth in the world behind Peru, Ghana and France for capital values.
Brazil’s investment transaction activity was also the highest in the world with a net balance score of more than 70 per cent.
Latin America is currently a strong area for investment, according to Rics, yet even looking at Brazil in this regional context the figures are encouraging. The countries included in the region in the Rics survey were Argentina, Brazil, Chile, Canada, Mexico, Peru and the US.
Tenant demand, increases in rents, the number of investment bidders, pipeline development, and rental expectations were all highest in Brazil during the quarter, which was also the only nation to see a decline in available space.
CB Richard Ellis (CBRE) Group has also produced statistics that show Brazil’s commercial property market is performing well. In its semi-annual global office rents survey the property group found that Sao Paulo was now one of the ten most expensive cities in the world to rent in for the first time.
“This is a combination of the appreciation of the real against the US dollar over the past year, the scarcity of new office product and the strength of the local office market,” CBRE said
Latin America was the only region “to show an increase year-over-year in occupancy costs”, with Brazil leading the way. The fastest increases in occupancy costs worldwide were seen in Sao Paulo and Rio de Janeiro.
A number of factors could be influencing Brazil’s attractiveness as an investment destination. The country has a stable political system and a “sophisticated” business environment, according to Neil Shaw, from Shaw Consultoria , Sao Jose do Rio Preto e regiao, Brazil.
Strong gross domestic product growth and improvements in credit are also compounding to contribute to Brazil’s growing success.
