Brazil's Real Estate Development Changing Location Focus

Online, May 19, 2010 (Newswire.com) - It's hard to argue with the popularity of southeastern hubs for Brazil's development, long focused on Sao Paulo and Rio de Janeiro. Due to this popularity, competition in those areas for land and development resources is quite fierce. Investors and developers with an interest in Brazil are now taking notice of the previously obscure northeast region of the country.

The Northeast Begins to Grow

With 7% economic growth, the northeast region recently drew more than 1000 local and international investors to Rio Grande de Norte's capital. A three day event was organized to attract private equity to Brazil's commercial real estate industry, primarily in this northeast region. With diverse industries and less competition, this region is beginning to draw foreign investment interest.
Most of the 7% growth rate is attributed to government initiatives to spur tourism in the region. Hundreds of millions of dollars in infrastructure and transportation projects has added support for more industry, bringing jobs to the area. A growing middle class employee base needs housing, and a number of high rise residential projects have been constructed to satisfy this demand. Salamanca, an international developer, has teamed with local development company Ecocil to develop more than 25,000 residential units in the northern areas over the next five years. There is also interest in hotel development in the area, as there are currently 42,000 rooms in the region, but no international brand hotels. Rumors of an interest on the part of Ritz Carlton haven't been confirmed, and the Brazilian Ministry of Tourism states that no agreements have been made.

Malls Move to the Rain Forests

Another development that has taken on momentum in Brazil is the construction of shopping malls in rain forest areas. As the new projects to date have been built in areas deforested many years prior, there has been little resistance from environmental groups. Right now, five Brazilian cities in the Amazon have populations of at least 300,000 people. This is considered a threshold for commercial development. It is projected that by the end of next year, four of those five cities will have American style shopping malls.

A Sour Note in the Good News Song

While all of this commercial and residential development sounds very positive for Brazil's real estate markets, Sam Zell's Equity International unit just sold 9 million shares in Gafisa, a large Brazilian home builder. It represents a 34% decrease in ownership by Zell. It remains to be seen if this is a prediction of problems in Brazil's residential real estate market.

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