Friday, June 25, 2010
If you’ve been following my dispatches, you’ll know that I’m bullish on office space and rentals in Fortaleza, north-east Brazil.
These plays just got better.
Last week, the approval of Ceara’s ZPE was announced. This is a “Zone for Processing of Exports”. It’s a duty- free zone established adjacent to the port of Pecem and forty minutes west of Fortaleza. The scale is massive: the zone is more than 10,500 acres in total. Businesses located within this area will pay practically no taxes on inputs purchased and finished goods exported. There will also be less bureaucracy and customs procedures for its exporters.
Pecem port had already been slated for a multibillion dollar investment. THE ZPE announcement means that an additional 200 export oriented companies are expected to set up operations here. This isn’t a new idea. In fact, it’s been mooted for fifty years. The vested interests in Sao Paulo didn’t want it to happen. Now it has. Part of the project will be the construction of a cargo airport in Pecem to facilitate exporters.
The new businesses in the ZPE are expected to open offices in Fortaleza, too. Visiting executives will likely spend much of their time in short-term rental condos in Fortaleza’s prime areas. This will further exacerbate the shortage of short-terms rentals and office space.
There’s been lots of good news coming out of Fortaleza and Ceara. The economy grew by 3.2% last year…it added a record number of jobs… unemployment fell… and passenger numbers at the main airport surged another 34.5%. As for air cargo…up by 68.9%. This area has outperformed the rest of Brazil for each of the past 15 years. This is a boomtown in a country that’s seriously on the up. A country that according to The Economist will be among the top 5 global economies by 2024.
You can profit.
There is a chronic shortage of hotel beds, short-term rentals and office space in Fortaleza. The short-term rental play is to buy on or close to the boardwalk…or in areas like Iracema Beach that the boardwalk is growing towards. This is where tourists want to stay. However, you aren’t limited to the tourist market. This is also where business travelers and executives on assignment want to be based. Not only is there a shortage of current supply—there’s a lack of developable land. Demand will continue to increase with limited supply in the pipeline. Yields are strongest on small condo units in the 500-700 square-foot range.
Fortaleza’s office market shows a similar story. There’s a chronic shortage of office space in the area where businesses want to be based. I’m talking about Aldeota…
Fortaleza has the wind at its back—and there’s no sign it’s going to stop blowing! Those of us that have bought here already are enjoying capital appreciation and rental yields in double digits. 19 months ago I recommended a project called Landscape. Members of my RETA group who bought units in Landscape in January 2009 have seen the value of their units increase by close on 40%.
But don’t worry, there’s still time to profit in this boomtown. I’ll bring you details of a new opportunity in the boardwalk area next week…so stay tuned.