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Boston, MA -- (SBWire) -- 04/11/2014 --Brazil presents an extremely favourable picture, with the hosting of major sporting events in 2014 and 2016 prompting the construction of suitable infrastructure. However, there have been reports that only a fraction of the available budget has been used and that numerous projects are running behind schedule, prompting concerns that the country - specifically Rio - will not be ready in time. These two events are also quite misleading, as they will give a short-term boost to the sector, and it is unlikely that this will be sustained after the 2016 Olympics, despite promises that a legacy will be left. However, the rising incomes of Brazilians is prompting a surge in popularity of high-end retail, with Fortaleza anticipated to post positive results for high-end retail rents and net yields over our five-year forecast period.

In addition to the downwards revision of economic data, the construction segment is also underperforming its potential. This is despite significant declines in industry costs, which resulted in deflation for the sector. However, last-minute World Cup preparations and investment into new power capacity and airport expansion projects all provide bright spots and will drive the market out of a slump. 2014 looks to be a better story, with construction growth of 4.2% anticipated due to a ramp up in building facilities needed for the 2016 Olympics.

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Retail is another area of optimism in the Brazilian real estate sector. Between H211 and H212, many retailers experienced sales growth of almost 9% year-on-year (y-o-y), with some planning expansions based on these positive figures. The growth failed to continue into 2013; however, the Brazilian Association of Franchising still believes that 122 new retail centres will be constructed in the country over the next five years. This will result in the presence of luxury and international brands expanding. Brazil's high street rents will continue to rise and are already the most expensive in Latin America.

Key developments in the sector:

- Real GDP growth in 2013 is set to disappoint, at just 2.8%, with 2014 set to see just 3.0% year-on-year growth. Bright spots come in the form of the PAC II growth acceleration programme, the World Cup and the 2016 Olympics, with construction set to see growth of 4.2% in 2014. However, with reports that constriction for the latter event is behind schedule, it remains to be seen whether all the projects currently in the pipeline will be realised.
- There are a number of projects in the pipeline including the construction of a distribution centre in Sao Paulo. In September 2013, it was reported that US commercial real estate company Prologis had won a contract to oversee the facility, which is due to measure 576,000 square feet. It will be used by Walmart's local online division, WMB Comercio Eletronico.

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