47
new credit policies furthering growth in consumer spend, and With mortgages currently accounting for around two
home-buying, and an increase in retail activity leading to growth percent of Brazil’s GDP, the lack of credit is not as damning as in
in manufacturing. In addition, São Paulo, Mexico City and Buenos other emerging markets. Sam Zell, chairman of Equity Group
Aires’ office markets all need more Grade A product to satisfy Investments and Equity International, which has a strong focus
demand, which is a magnet for future FDI. But investment is still on Latin America, previously highlighted demand for entry level
limited, and report respondents list São Paulo, Mexico City, Rio de housing in markets such as Mexico as post-crisis recovery
Janeiro, Buenos Aires and Monterrey as the top five cities in terms opportunities. Equity International is already developing affordable
of FDI attractiveness. housing in Mexico and Brazil. The rampant speculation evident in
other emerging markets has also not spilled over into much of
The residential sector, as in other markets, has seen Latin America, with countries such as Brazil - which is currently the
substantial decline in mid to high-level housing demand, with world’s ninth largest economy - viewing real estate as a tangible
renewed focus on affordable entry-level housing, which is commodity, and therefore a noticeable absence of speculative
holding its own. Despite a general malaise across the region, investment activity in recent years, as well as over-development.
sales targeting lower-income households have remained stable
and this sector is set to benefit from government stimulus In its Latin American Quarterly market perspective, released
efforts designed to facilitate access to mortgage financing. The in April 2009, Prudential Real Estate Investors (PREI) noted
continued accessibility of mortgages in Mexico, and growing that office vacancy rates are on the rise as companies look to
opportunities in Brazil to first-time and low income buyers, is cut costs and postpone regional expansion plans, as well as a
driving residential development. In Brazil, the government has weakening in the retail sector. This appears to be the case across
established a US$15 billion stimulus programme called ‘Minha the region as a whole. Mexico City’s office market has been in
Casa Minha Vida’ which aims to implement a series of measures to decline for around 12 months, although vacancy is low by historical
increase the number of mortgages provided to homebuyers, while standards. According to PREI, more space is becoming available
drastically reducing financing costs and red tape hassles. A total of for sublease, rents are dropping and new projects are on the wane.
one million new homes will be developed under the programme, Brazil’s busiest office market, São Paulo, rose modestly during Q1
representing two percent of GDP. Mexico is seeing the same pattern 2009 but vacancy rates in Rio de Janeiro remain at significantly
of stagnation in the middle to high income bracket, but lower income lower levels, with a degree of rent stabilisation which indicates a
families continue to consider property purchases due to increased weakening market. In Argentina, vacancy rates in Buenos Aires –
access to mortgage financing through the country’s public housing which has minimal FDI - have remained low for the last four years
agencies. This has seen Mexico’s largest housing development due to lack of financing affecting construction activity.
companies shift focus to this in-need sector. Furthermore,
mortgage rates have been held down by strong competition among Transaction activity in the commercial property markets has
financial institutions. effectively stalled as investors sit on cash reserves and wait
for distressed assets to identify themselves. For international
investors this could provide some extremely attractive oppor-
While Brazil and Mexico lead the FDI
tunities as the region works through the downturn. Despite the
development wave in the region, mainly due
decline in consumer confidence impacting the retail sector, there
are some markets which are seeing mid to long-term development
to supply-demand issues, the smaller and
growth; however, tenants across the region are also seeking to
more mature markets of Peru and Chile
renegotiate leases to reduce rents, shorten terms and increase
landlord contributions to expenses. Expansion plans are being
remain on the investment sidelines
placed on the backburner as many retail corporations concentrate
on reducing expenses and maintaining occupancy levels. Wal-Mart
Mexico is planning to continue its expansion into the region. In
February 2009, the company announced that it would open over
250 new stores in new cities, at a cost of US$808 million, and
several other large multinationals are also considering local market
expansion. Brazil’s retail activity actually increased in Q1 2009, up
by six percent in January year-on-year, following a three-month
decline. Other local developers announced new shopping centre
developments worth a combined total of US$108 million. French
supermarket giant Carrefour has also revealed that it plans to
invest US $870 million to open 70 new stores in the country over
the next two years.
t
Facing page: Copacabana, Brazil
Left : Monterrey, Mexico
PREVIEW Cityscape Dubai
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