Credit: pxhereInvestors' Perception on Brazilian Real Estate Investment
August 11, 2020Real Estate
GRI Club Brazil real estate members, investors and developers, gathered to analyze the different points of view of both national and international players regarding Brazil’s political and economic situation, business opportunities, real estate development and future assets perspectives.
Are Government fiscal stimuli key to restoring economic growth? What can be expected from private international and domestic investors? How will funds evolve? Where to find new opportunities and future gains? What will change in adjustment strategies? What can be expected from asset occupancy, prices, rents, value and yields? What transitory changes can we expect from real estate assets and which ones are going to prevail? What will the cycle look like and how to be competitive?
These and several other questions were discussed on July 29 among over 60 industry leaders sharing perceptions and experiences. Check out the main points discussed below.
A few months after the first COVID-19 case in Brazil, the real estate market has learned a lot and has become better organized to combat the effects of the pandemic in the country so far. In a challenging environment the perspective of an economic recovery is better than it was some months ago due to the government's economic package and a reestablished consumer confidence. During these unprecedented state of affairs, the low interest rates could present good opportunities for local real estate players. Nevertheless, for some inventors, the peak of the crisis has yet to strike Brazil and it may just get worse before it gets better.
Even if the real estate market is impacted negatively, most local and international investors still see potential in Brazil in the upcoming years and are actively looking at encouraging new opportunities on a long-term basis. International investors are finding it more and more challenging to compete with local investors from Brazil. Lately, there has been an increase in capital raised such as new IPOs by big home builders or new REITs (or FIIs) led by big fund managers and asset owners chasing yields.
While local players are finding it harder to compete with the locals, and have had to change their strategy by focusing on new acquisitions and developments. This leads to the question of how can international investors take advantage of capital formation and flows that are local. The expertise and knowledge of international investors can add value to the various segments that are not yet as developed in Brazil and can access a huge number of connections abroad that local players can't to create new business opportunities and deals.
This shows that although Brazil is becoming less dependent on international capital, the exchange of experience between local and international investors adds a lot of value for the real estate market. On the price side, some of them believe that we are going to have price adjustments and some may say that Brazil has never been so cheap. But, for international investors this is not a reality yet. It's a very challenging moment to underwrite deals on some asset classes and they want to gain more conviction on what will be the likely outcomes for the upcoming months.
On the asset side, key investors in Brazil are benefitting from the growth of the online sector and further e-commerce penetration in the industrial and logistics sector. If there is a winner in the current scenario, it would be the industrial and logistics assets as new opportunities for the country in the short and mid-term. Investors are also questioning the return to the offices and what the new spaces or work models will look like in the post-pandemic period. Demand is going to be impacted in the next few months with the need for social distancing. Even with developers and investors rethinking their real estate assets and workplace strategies, de-densification will play a major role in the next few months.
The residential market, the largest and one of the most important real estate sectors in Brazil, has great expectations for the next months and it is one of the most prominent and resilient asset classes in comparison to others that were more affected by the crisis. Unlike other sectors, the prolongation of quarantine and its effects on a possible reopening have affected hospitality, as well as shopping and retail assets, generating uncertainty for these assets in the upcoming months.
Brazil is standing well in comparison to other countries in Latin America and emerging markets, but it will have to compete with global developed markets when it comes to capital deployment for a greater recovery and future growth.
Market Sentiment from GRI Real Estate Brazil Club Members:
Can you already see the light at the end of the tunnel?
Yes - 56%
Yes, but not sure if what I see is the light at the end of the tunnel or an oncoming freight train - 29%
No - 15%
Do you agree with the statement: "Brazil real estate market has never been so little dependent on foreign capital"
Yes - 84%
No - 16%
Do you believe Brazil is cheap at the moment?
Yes - 54%
No - 46%
Imagine you can pick one and only one asset class to invest tomorrow, which one would that be?
Residential - 38%
Industrial/Logistics - 33%
Land Development - 9%
Offices - 9%
Alternative Assets (co-living, Student Housing, Senior Housing) - 7%
Hotels - 4%
Retail - 0%
When do you believe that your team will be 100% back to the office?
Now, we are here! - 16%
August - 2%
September - 9%
October - 14%
November - 2%
December - 2%
2021 - 55%
*Polling questions were answered by 60 senior executives in the real estate market on 29th July 2020.
The debate was attended by Brian Finerty (Equity International), Michel Wurman (BTG Pactual), Roberto Perroni (Brookfield Property Group Brazil), Ron Rawald (Cerberus Capital Management), and many others.
By Ludwig Menke
Are Government fiscal stimuli key to restoring economic growth? What can be expected from private international and domestic investors? How will funds evolve? Where to find new opportunities and future gains? What will change in adjustment strategies? What can be expected from asset occupancy, prices, rents, value and yields? What transitory changes can we expect from real estate assets and which ones are going to prevail? What will the cycle look like and how to be competitive?
These and several other questions were discussed on July 29 among over 60 industry leaders sharing perceptions and experiences. Check out the main points discussed below.
Summary
With the notion that the Brazilian economy would continue to grow in the first months of 2020, the real estate market was preparing itself for a cycle of new project development, with positive growth projections for the sector. However, the current scenario generated by the Coronavirus has impacted different sectors of the economy and the real estate market has suffered a shock.A few months after the first COVID-19 case in Brazil, the real estate market has learned a lot and has become better organized to combat the effects of the pandemic in the country so far. In a challenging environment the perspective of an economic recovery is better than it was some months ago due to the government's economic package and a reestablished consumer confidence. During these unprecedented state of affairs, the low interest rates could present good opportunities for local real estate players. Nevertheless, for some inventors, the peak of the crisis has yet to strike Brazil and it may just get worse before it gets better.
Even if the real estate market is impacted negatively, most local and international investors still see potential in Brazil in the upcoming years and are actively looking at encouraging new opportunities on a long-term basis. International investors are finding it more and more challenging to compete with local investors from Brazil. Lately, there has been an increase in capital raised such as new IPOs by big home builders or new REITs (or FIIs) led by big fund managers and asset owners chasing yields.
While local players are finding it harder to compete with the locals, and have had to change their strategy by focusing on new acquisitions and developments. This leads to the question of how can international investors take advantage of capital formation and flows that are local. The expertise and knowledge of international investors can add value to the various segments that are not yet as developed in Brazil and can access a huge number of connections abroad that local players can't to create new business opportunities and deals.
This shows that although Brazil is becoming less dependent on international capital, the exchange of experience between local and international investors adds a lot of value for the real estate market. On the price side, some of them believe that we are going to have price adjustments and some may say that Brazil has never been so cheap. But, for international investors this is not a reality yet. It's a very challenging moment to underwrite deals on some asset classes and they want to gain more conviction on what will be the likely outcomes for the upcoming months.
On the asset side, key investors in Brazil are benefitting from the growth of the online sector and further e-commerce penetration in the industrial and logistics sector. If there is a winner in the current scenario, it would be the industrial and logistics assets as new opportunities for the country in the short and mid-term. Investors are also questioning the return to the offices and what the new spaces or work models will look like in the post-pandemic period. Demand is going to be impacted in the next few months with the need for social distancing. Even with developers and investors rethinking their real estate assets and workplace strategies, de-densification will play a major role in the next few months.
The residential market, the largest and one of the most important real estate sectors in Brazil, has great expectations for the next months and it is one of the most prominent and resilient asset classes in comparison to others that were more affected by the crisis. Unlike other sectors, the prolongation of quarantine and its effects on a possible reopening have affected hospitality, as well as shopping and retail assets, generating uncertainty for these assets in the upcoming months.
Brazil is standing well in comparison to other countries in Latin America and emerging markets, but it will have to compete with global developed markets when it comes to capital deployment for a greater recovery and future growth.
Market Sentiment from GRI Real Estate Brazil Club Members:
Can you already see the light at the end of the tunnel?
Yes - 56%
Yes, but not sure if what I see is the light at the end of the tunnel or an oncoming freight train - 29%
No - 15%
Do you agree with the statement: "Brazil real estate market has never been so little dependent on foreign capital"
Yes - 84%
No - 16%
Do you believe Brazil is cheap at the moment?
Yes - 54%
No - 46%
Imagine you can pick one and only one asset class to invest tomorrow, which one would that be?
Residential - 38%
Industrial/Logistics - 33%
Land Development - 9%
Offices - 9%
Alternative Assets (co-living, Student Housing, Senior Housing) - 7%
Hotels - 4%
Retail - 0%
When do you believe that your team will be 100% back to the office?
Now, we are here! - 16%
August - 2%
September - 9%
October - 14%
November - 2%
December - 2%
2021 - 55%
*Polling questions were answered by 60 senior executives in the real estate market on 29th July 2020.
The debate was attended by Brian Finerty (Equity International), Michel Wurman (BTG Pactual), Roberto Perroni (Brookfield Property Group Brazil), Ron Rawald (Cerberus Capital Management), and many others.
The GRI Club Real Estate agenda in Brazil
The GRI Club Real Estate Brazil eMeetings agenda for 2020 is now available. Know what's ahead.By Ludwig Menke
