Brazil’s Retail Property Market Potential

Despite two months of lower than expected retail sales figures, Brazil’s retail property market is showing great potential for institutional investors and as a result a number of big name players are opening up specialist funds targeting this emerging, expanding and exciting Brazilian property market sector - meaning that individual investors can find a way to tap into the potential as well.

As stated June and July’s retail sales volumes were depressed despite ambitious predictions from analysts, but we are to believe that the drop in retail spending was only temporary and based on the fact that more consumer spending than was expected was directed towards the car market.  On the whole the retail market in Brazil is expanding at an unprecedented rate.

IBGE, the Brazilian government’s statistics agency reported that there was a surge in spending in the car market in June and July to the tune of almost an eight and a quarter percent rise on the previous months and that this was the sole reason for the temporary move away from clothing, furniture and appliances.

Their findings make sense because there has been a general trend for wage increases and interest rate reductions in Brazil and these factors are fuelling the purchasing power of a newly emerging and strong middle class and it is this emergence of a buying hungry population that has led to the retail property market becoming a hotbed for institutional and now private investment.

In the past it has been pension funds that have been profiting from the rise in the number and success of shopping centres and retail outlets in Brazil.  Up to 40% of all shopping centre property assets in the nation’s current 601 shopping malls are already owned by pension fund institutional investors - but the good news for the rest of us is that the market is expanding physically.  There are 52 new malls already under construction, 23 are already in the planning stages and the market has the capacity for up to 14 more malls to be built a year for the next four years.

In a bid to tap into this strong period of expected growth and the long term sustainable returns predicted from the retail sector in Brazil the likes of ABN Amro and Brookfield Asset Management have both launched specialist real estate funds to allow individual investors to gain exposure to the market.

ABN Amro Asset Management has launched a fund called ‘Brazil Equity’ in the UK already and the minimum level of investment is USD 250 which makes it highly accessible and Brookfield Asset Management has created a USD 700 million Brazilian property fund specifically targeting shopping centres in Brazil.

Brazil’s retail property market potential is very real and means that the retail property market is a sector well worth watching…

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