Boston, MA -- (SBWIRE) -- 07/17/2012 -- The Brazilian economy continues to enjoy growth in spite of global economic headwinds. However, the downside risks are growing and many analysts are becoming increasingly bearish towards the emerging market giant. BMI remains above consensus with our Brazilian forecasts for economic fundamentals, and we believe that infrastructure will also perform well although the sector will not be efficiently exploited to its full potential. The outlook for real estate is similar: our full year 2011 data revealed year-on-year (yo- y) growth across all of the commercial sectors and cities surveyed; however, H211 failed to capitalise upon the momentum, particularly in rental rates, of H111.
Key opportunities in the real estate market include:
- Brazil's massive infrastructure deficit and unexploited mineral wealth are likely to see strong foreign direct investment flow continue over the next few years, despite the weaker global growth outlook.
- The 2014 FIFA World Cup and the 2016 Olympics are set to promote investment into sectors that traditionally benefit from major sporting events - including beer, soft drinks and retail - with these events representing an opportunity for Brazil to shine as both an investment and tourist destination. Retail rents are due to outperform over the period.
- The relative ease of access to capital from foreign institutions, through Brazilian banks and through the local stock market, has probably never been greater.
- Brazil's growing international importance as an economy, with its position as a flourishing commercial hub and emergent financial districts, present long-term upside risks to the office real estate segment.
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Key risks to the real estate market include:
- The lingering problems of bureaucracy and a cumbersome legal system, which have acted as a barrier to entry for real estate development.
- External headwinds pose the biggest risk to our outlook: should global growth slow significantly, this could impact international investments and stall growth, particularly in the infrastructure sector.
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