Brazil Retail Overview

Brazil Retail Overview
2013 - 2014
GLA distribution by region
North
5%
Brazil Growth
560,407 sqm
21 Malls
Northeast
15%
1,959,751 sqm
68 Malls
The Brazilian retail sector is enjoying the
impact of some robust macroeconomic
trends. Unemployment remains low and
approximately 50 million people have
joined the middle class, eager to spend.
Sales in shopping centers grew by an
annual average of more than 8% in real
terms through the last four years, while
mature malls continue to exhibit low
vacancy rates.
This large emerging middle class has a
pent-up demand to consume, and new retail
developments started to spring up across
the country. More than 100 new malls were
opened in the last four years, swelling the
national total by approximately 27% to 495.
Significantly, 50% of these developments
are located outside of major metropolitan
centers. Second- and third-tier cities, including
ones close to the Amazon in the North of the
country, have recently gained their own malls.
The country is awash with new developments
and most cities with at least 250,000
inhabitants have the potential to support a
mall-type retail development.
This scenario has attracted the interest of
international retailers, more than 50 of whom
entered the Brazilian market in the last few
years. Newcomers range from iconic fastfashion brands Topshop and Forever 21 to
luxury retailers such as Tods, Bottega Veneta
and Chanel. However, international stores still
account for just a small percentage of overall
retailing in the country.
2 | Retail Overview 2013 - 2014
Mid-West
8%
Brazil Macro Conditions
1,069,906 sqm
45 Malls
Macro Figure
2010
2011
2012
2013
2014 (E)
2015 (E)
GDP Growth Rate (%)
7.5
2.7
1.0
2.3
1.8
2.7
Inflation (%)
5.9
6.5
5.8
5.9
6.0
5.7
Unemployment Rate (%)
6.7
6.0
5.5
5.4
5.8
6.0
SELIC Interest Rate (%)
10.66
10.9
7.14
9.9
11.33
12.11
Mall Sales Growth yoy (%)
14.2
13.3
15.5
8
6-8
5-7
Southeast
58%
7,537,708 sqm
247 Malls
IMF, Brazil Central Bank, IBGE, OIT, JLL Analysis
• Total Land Area: 8,515,767 km² (the 5th largest in the World);
• 5th largest population (2,8% of the world population);
• 6th GDP in the world and first in Latin America;
• The middle-class increased and today represents half of total brazilian population
(2.7 USD Tr - IMF 2013)
GLA Total Stock
12,9 M sqm
South
14%
1,812,606 sqm
87 Malls
Retail Summary
• Total Shopping Centers 2013: 495
• GLA Stock 2013 (millions sqm): 12.940
• To be opened in 2014: 39 Malls (1,113,304 sqm)
• To be opened in 2015: 19 Malls (514,185 sqm)
• Density: 64 sqm/1,000 inhabitants
• Sales in Shopping Centers increased 8,4% from 2012
• 2013 sales: R$ 129 billion
• Average traffic: 415 million visitors/ month
• Mall average size: 25,500 sqm
• Generated jobs: 843,254
Abrasce, JLL Analysis (April 2014)
Retail Overview 2013 - 2014 | 3
Mall Market Evolution
Property Size (GLA)
376
363
351
39.9
43.5
7.492
8.253
408
392
48.5
46.7
45.3
9.512
9.081
8.645
430
52.2
10.344
457
57.0
11.403
495
64.1
12.94
535
69.5
14.106
558
Mix (GLA)
Super Regional 8%
Regional 19%
72.4
Food 18%
Small 29%
14.803
Fashion 45%
Others 13%
Home Goods 5%
2006
2007
2008
2009
2010
GLA (Millions sqm)
2011
2012
# Malls
2013
2014 (E)
Medium 44%
2015 (E)
Convenience/Services 13%
Small: up to 20 thousand sqm
Medium: from 20-40 thousand sqm
Regional: from 40-60 thousand sqm
Super Regional: over 60 thousand sqm
GLA/1k Inhabitants
The numbers demonstrate nominal growth since 2009 in all fronts: 26% in new developments; 42% in GLA and 74% in total sales.
These indicators show the consumption in Brazilian malls is growing, despite the high interest rate making the sale’s national average of
approximate R$12.000/square meter.
Leisure/ Entertainment 2%
Personal Care 4%
Malls Total Sale
160
140
140
120
129
119
100
108
CAGR 13.7% (BRL)
14% (USD)
80
91
74
60
40
Increased integration to the international market
New entrants by year
58
23.9
31.5
68.8
69.0
68.3
58.7
50
20
73.5
64,6
38.2
41.1
2008
2009
0
2006
2007
2010
2011
GLA (sqm)
Sales (R$ billion, nominal)
4 | Retail Overview 2013 - 2014
2013
2014 (E)
USD (Billion/yr)
BRL (Billion/yr)
Malls
2012
2009
2013
Growth
392
495
26%
9.081
12.94
42%
74
129
74%
Up to 2012
Tiffany (2001)
Mac (2002)
D&G (2004)
Gucci (2008)
Chanel (2010)
Burberry (2010)
Hooters (2010)
Prada (2011)
Bottega Veneta (2011)
Kate Spade (2011)
2012
Balmain
Vapiano
Coach
Sephora
Top Shop
MiuMiu
Lanvin
Goyard
Tory Burch
Paula Cahen D’Anves
Officine Panerai
Van Cleef & Arpels
Etiqueta Negra
Zara Home
Balenciaga
IWC
Jaeger LeCoultre
Vans
Laudurée
2013
Breitling
Guess
Fendi
Repetto
Fred Perry
Armani Home
Holly Hunt
Cruciani
Johnie Walker Store
Cremeria Vienna
Le Bilboquet
Nicole Miller
TOD’s
Cold Stone
Desigual
Rochas
Europea Gourmet
New Balance
Michael Kors
Anne Fontaine
Yellow Veuvet Clicquot
1Q2014
Johnny Rockets
Gelateria Dri Dri
Tony Roma’s
Forever 21
Vitra
Apple
Chosen City
for the 1st Store
Rio de Janeiro: 7%
Others: 5%
São Paulo: 88%
Retail Overview 2013 - 2014 | 5
Global retail investment landscape
A diversity of investment opportunities
Rental Prices are coolling off and decreasing in secondary markets
Prime Retail - Rental Clock, Q4 2013
Investment Activity
High
Long-Term
Development Cycle
Medium
Low
Venezuela
Nigeria
China
Italy
Brazil
Spain
Russia
Poland
UK
Turkey
Taiwan
Germany
Mexico
Czech Rep
Hong Kong
Romania
Hungary
Japan
Ukraine
Thailand
France
Long-Term
Investment Cycle
São Paulo, Rio de Janeiro
Berlin, Paris, Hong Kong
Main Characteristics
of a Growth Market:
Indonesia
Malaysia
Nordics
Algeria
Colombia
Vietnam
South Korea
Netherlands
Bangladesh
Peru
Argentina
Portugal
Singapore
Pakistan
Morocco
Chile
Greece
Belgium
US
Bangladesh
After the surge in new malls,
a wave of acquisitions and
consolidation is likely
to follow:
Egypt
India
UAE
Switzerland
Australia
Pakistan
Kazakhstan
Saudi Arabia
South Africa
Austria
Canada
Frontier
Emerging
Growth
Transitional
Mature
Advanced
*This is a general representation of each country’s current position on the evolution curve as it relates to major malls based
on direct investment volumes, construction activity, transparency and international retailer activity.
In February 2014, Iguatemi and
TIAA-CREF announced the
acquisition of WTorre´s 50%
stake in JK Iguatemi, one of
the most prestigious Shopping
Centers in Brazil. R$636 MM
were paid for for 50% of the
total GLA of 36,000 sqm, plus
a future earnout to WTorre.
6 | Retail Overview 2013 - 2014
Quarter City/State
Property Name
Vendor
Purchaser
London
Campinas (SP)
Prado Shopping Center
Unknown
Gazit-Globe
9.500
40,00
Q1
Sorocaba (SP)
Shopping Iguatemi Esplanada
IESC - Iguatemi
Previ
13.789
13,60
Q2
Fortaleza (CE)
Shopping Parangaba
Unknown
Aliansce
12.749
118,00
Q3
Bauru (SP)
Boulevard Shopping Nações Bauru
Carlyle Group
Aliansce
5.700
34,50
Q3
Rio de Janeiro (RJ)
Via Parque Shopping
Unknown
Aliansce
1.774
11,50
Q3
Novo Hamburgo (RS) Shopping Platinum Outlet
São José Des. Imob.
IESC - Iguatemi 8.236
46,20
Q3
Franca (SP)
Terreno para Expansão Franca Shopping Unknown
Sonae Sierra
24,00
Q4
Campinas (SP)
Shopping Galleria
Luis Roberto C. Nogueira
IESC - Iguatemi 9.971
Q4
São Paulo (SP)
Shopping Pátio Higienópolis
Fundação Conrado Wessel JHSF
6.302
350,00
Q4
Bauru (SP)
Boulevard Shopping Nações Bauru
Grupo Vértico
Aliansce
2.600
23,00
Q4
Campinas (SP)
Shopping Galleria
Anhumas
IESC - Iguatem
6.647
55,74
122.733
800
45.466
Total
83,60
Rental Values
falling
Americas EMEA Asia Pacific
Rental Value growth
accelerating
London
Rental Values
bottoming �out
Dubai, Mumbai, San Francisco
Miami, New York,
Huston, Delhi
Chicago
Madrid
Singapore
Area
Sale price
Acquired (R$ MM)
(sqm)
Q1
Rental Value
growth slowing
Beijing
• Mainly development;
• Increasing investor interest;
• Limited liquidity;
• Semi-transparent (negotiation);
• Strong stock growth 10-20% pa;
• International Retailers:
Primary target;
• Expansion into tier 2 and 3 cities.
• Franchises dominate, but some
buy-backs.
Brazil Main Retail Transactions 2013
In 2013, most of Brazil
Capital Markets activity in
Shopping malls came from
local companies, such as
Iguatemi and Aliansce, acting
as integrators and increasing
their equity stake in shopping
malls they already operate. Cap
rates have increased, following
the upward trend in the SELIC
rate, which is now at 11%. Most
interest is in operating malls,
and we have seen a cooling in
project acquisition appetite.
Also notable is the return
of Westfield’s 50% stake in
Brazilian JV with Almeida Junior
back to Almeida Junior, for book
value. Official reports cite the
difference in long term perspectives
as reasons for the return.
Brazil: Tier 2 and 3 cities
Moscow
Washington DC
Boston, Los Angeles,Shanghai
Milan, Sydney
US positions relate to the overall market Source: Jones Lang LaSalle, January 2014
Retail Assets are more resistant than office and industrial
20%
18%
16%
Real Capital Analytics, JLL
Repurchase of Almeida Junior from Westfield
Quarter City/State
14%
Property Name
Vendor
Purchaser
Area
Sale price
Acquired (R$ MM)
(sqm)
Q2
Blumenau (SC)
Blumenau Norte Shopping
Westfield Group
Almeida Junior
57.372
190,33
Q2
Blumenau (SC)
Shopping Center Neumarket Blumenau Westfield Group
Almeida Junior
15.750
167,61
Q2
Camboriu (SC)
Balneario Camboriu Shopping
Westfield Group
Almeida Junior
12.500
136,83
Q2
Joinville (SC)
Joinville Garten Shopping
Westfield Group
Almeida Junior
15.000
187,175
Q2
São José (SC)
Continente Park Shopping
Westfield Group
Almeida Junior
21.000
240,765
121.621
923
Total
Real Capital Analytics, JLL
Iguatemi will end up with 64% of
the JK Iguatemi and TIAA-CREF
with 36%. This transaction, still
under due diligence, hints the
scope of future transactions
in this sector: Focus on prime
assets in consolidated markets,
with growing tickets and with
institutional investors.
12%
10%
8%
6%
2005
2006
2007
H1
2008
H2
2008
Industrial & Logistic
H1
2009
H2
2009
H1
2010
Retail
H2
2010
H1
2011
H2
2011
H1
2012
Office
H2
2012
H1
2013
H2
H1
H2
2013 2014 F* 2014 F*
Interest Rate (SELIC)
Retail Overview 2013 - 2014 | 7
The future
The retail sector in Brazil has had a tremendous growth in the past years
and the vast majority of developers today understand its value. Most new
urban office tower and hotel have a retail component. There are several
mixed-use projects being completed and the few already in place are
enjoying great results.
The urban enclosed malls represent the majority of existing developments;
however we started to notice some other formats being developed such as
Outlets, Power Centers, Strip Centers and Life Style Centers.
In terms of structure, the future of the sector is likely to undergo
consolidation in secondary markets and increase in efficiency and
liquidity (some with international money) in the prime markets.
International retailers shall continue to debut in Brazil despite the entrance
barriers still in place. This is bringing more competition to the local retailers
though helping to raise the bar for the market in general. We envision the
continue professionalization and maturing of the market stakeholders.
Finally, we noticed the foreign companies that do best in Brazil are the
ones who make a long term commitment to be in Brazil, avoiding basing its
decision on the humor of the economy at a given moment. Brazil has had
good improvements in the last decade, but still has a lot more to go. The
economy might have its ups and downs in the process of greatness, so the
enterprises that are here regardless of the speed bumps, shall have greater
chance of reaping the benefits of this great market of 200 million people.
For more information,
please contact:
www.jll.com.br/brazil/en-us
São Paulo
Av. Das Nações Unidas, 12.551, 23rd floor
04578-903 São Paulo/SP
Tel: +55 11 3043-6900
Fax: +55 11 -3043-6999
Monica Lee
Global Clients Leader
Phone: + 55 11 3043-6947
Mobile: + 55 11 97544-5208
[email protected]
Alexandre Cesar
Retail Division Leader
Phone: + 55 11 3043-6258
Mobile: + 55 11 97577-6610
[email protected]
JLL Brasil
www.jll.com.br
facebook.com/JonesLangLaSalleBrasil
Twitter: @jllbrasil
linkedin.com/company/jll
Rio de Janeiro
Av. Presidente Wilson, 113, 10th floor
20030-020 Rio de Janeiro/RJ
Tel: +55 21 2277-2700
Fax: +55 21 2277-2749
Marina Lima
Global Clients
Phone: + 55 11 3043-6972
Mobile: + 55 11 96496-0837
[email protected]
Roberto Patiño
Client Solutions
Phone: + 55 11 3043-7140
Mobile: + 55 11 96473-9427
[email protected]