Carnival, Copacabana and Caipirinha’s lure millions of tourists each year to Brazil, but today more than just the lodging market is booming. The retail market’s unprecedented growth is piquing the interest of investors and retailers’ seeking expansion and looking to rebalance their portfolios, according to JLL Research, launched today at the International Council of Shopping Centers (ICSC) retail real estate conference (RECon) in Las Vegas.
“The low unemployment rate and greater access to credit has created a flourishing middle-class that spent more than R$1.17 trillion 2013. That spending, coupled with Brazil’s urbanization and on-going improvements to its infrastructure, is creating longevity and stability for the retail real estate market,”said Alex Cerqueira César, Head of JLL Retail in Brazil. “Since the recession we’ve seen tremendous international interest in Brazil, and we don’t anticipate a slowdown anytime soon.”
Brazil’s emerging economy and relatively stable financial and political arena, has prompted investors seeking strong returns to access product at a development stage or purchase an equity stake in an operating mall. While cap rates have increased, following the upward trend in the SELIC rate (now at 11 percent), investors continue to set their sights on the market. Brazilian shopping centers have had an annual average growth rate of 8.4 percent during the last four years, and retail sales are on the rise. In 2013, centers pulled in R$129 billion, a 74 percent increase since 2009. With growing demand, comes the need for additional space. More than100 new malls opened their doors in Brazil during the last four years. During the next two years, 58 new malls totaling 1.6 million square meters are slated for development, and more than half of these new developments are located outside the main metropolitan centers.
Yet, while malls and shopping centers remain an attractive option for investors to place capital, urban mixed-use developments are catching the eyes of international retailers. Since 2012, more than 55 new international brands have entered the Brazilian market. Newcomers range from iconic fast-fashion brands and restaurants to luxury retailers. Vapiano, with its innovative concept of made-to-order, fresh, house-made meals opened its first restaurant in Brazil in Ribeirão Preto, in 2012 and plans to expand its operation countrywide. Spanish fast-fashion Desigual opened its first shopping in Brazil last year, in São Paulo, and Nike plans to open its brand experience shop Nike Category Store in Rio de Janeino. It will be the brand’s biggest Factory Store in South America with 2,400 square meters in Recife, capital of Pernambuco in the northeast region of the country.
Brazil’s retail market, though still emerging, is well on its way to maturity. If you’re comfortable with some risk, Brazil’s retail market can hold great value. In the coming years, we expect increased liquidity in the prime markets.