If, on the one hand, the high interest rate scenario poses challenges for several sectors of the Brazilian economy, including the real estate market, it also opens up space for the growth of residential leasing, an extremely consolidated market in the United States and Europe that has been gaining more and more space in Brazil.
The product still faces obstacles because it is an embryonic market in the country, but it is becoming an increasingly attractive option for institutional investors in the face of the search for rent, caused especially by the detachment of income and purchasing capacity of families, in addition to the difficulty of access financing, but also for the flexibility and wide range of services offered to customers.
One of the main global real estate investors, Brookfield was present at the discussion and brought its vision for the future of the market in Brazil: “This product is very well developed by us in the United States, where we have 60,000 units. Brazil is still a long way from the main regions of the world in terms of professionally rented residences, but there is a great deal of room for development”.
Assets in operation in Brazil already show that there is demand available in different income ranges, from the very highest standard to the B and C classes: “When you see the map of residences in Brazil, if you join the two classes [B and C], we say in almost 50% of households in the country”, comments one of the company's executives.
It is worth noting that social leasing is one of the best alternatives to meet the housing deficit that exists in Brazil. Even the city of São Paulo, which has the largest real estate market in the country, has just revised its Master Plan, providing for the production of HIS (Social Interest Housing) in well-located areas, close to services, public transport and urban infrastructure - a of the flags defended by the GRI Brazil Committee Multifamily & BTR.
Another point highlighted by the executives is the importance of maintaining control over the property in order to offer greater comfort to tenants, as well as to the owner - the institutional investor or real estate fund quotaholders. The operation is a key point in adding value to rental prices.
This value can be naturally updated as churn occurs - according to investors, a low percentage of tenants leaving is positive for gaining price in units.
If there is demand, what is missing?
According to industry players, one of the main challenges for consolidating the thesis is funding, whether in banking lines or in the real estate investment fund industry. Part of the problem is due to the short history of the market in Brazil.
Unlike other consolidated classes, such as offices, malls and logistics assets, the residential for income has not yet completed the development cycle until the sale of assets, that is, there are still no examples of the exit of the investment made.
“To take off the price of professional rental compared to retail, it is necessary to add experiences. So we don't rent the square meter, but experiences. Inside the developments there are facilities, there is someone taking care of the services and the ESG (Environmental, Social and Governance)”, says an executive.
These services include a 24-hour market, gym, car and bicycle rental, laundry and pet services, as well as concierge and room service, depending on the asset's profile. The fit out is another important point in building the price and expanding the portfolio, mainly aimed at the economy class, where the cost of decorating the unit cannot be too high.
This menu is one of the main attractions of the residential market for income to serve customers at different times in life, but who have in common the search for flexibility.
Faced with this challenge, the presence of the institutional investor is essential to create a relevant portfolio, with properties acquired at the right price, providing power of scale and sophistication to the thesis.
Another need is for a more robust database for risk analysis. This precariousness of information affects banks, which are one of the main financers of real estate projects, but because they do not fully understand the multifamily model, they charge higher rates for the product, even if it is a residential asset.
“It is very difficult to have a funding of TR (referential rate) for the construction of residential for income. Therefore, if you have to choose, it makes more sense for a residential property to be sold as it is easier to obtain funding from the bank. So I think the market needs to mature at the credit end, to understand and try to develop this line that makes more sense for the industry as a whole”, says a player.
Expectations
The probable fall in the Selic rate from the second half of the year could be a lever for the growth of residential income real estate funds, also attracting institutional investors, such as pension funds, whose presence brings security to a market that historically has individuals as a major player. articulator in the phase when the project is already generating income.
It is expected that this gap in the development phase will begin to be filled with scheduled asset deliveries. A strategy shared at the meeting for the development FIIs is the payment of a guaranteed income to the shareholder in the construction phase, in order to make the investment attractive even without the rental income.
Technology to scale
The multifamily product is embedded with technology to facilitate the leasing process on platforms that connect owners and tenants, as well as providing tenants with ease in their demands. For owners, technology is a great ally in gaining scale.
A consolidated example in the market and present at the meeting is Housi, a Vitacon spin-off created to solve a demand from the developer itself, which delivered its apartments to small investors as a blank slate that needed to receive furniture to then be made available for lease. .
“In the same way that cell phones have advanced, buildings have also become platforms and need to be full of experiences, opportunities and life. We operate throughout the real estate market chain focused on generating income in residential assets”, says Danny Spiewak, COO of Housi.
The company currently has more than 300 projects connected to the platform, in more than 120 Brazilian cities.
Just as it is easier to lease, the unit shutdown process also happens quickly. However, a balance is needed between protecting the rights of tenants and creating favorable conditions for the growth and development of this market.
“From a legal and juridical point of view, what matters most is eviction. There goes a lot of local justice. São Paulo has been very quick and efficient with evictions, but we have been refining our delay notification process”, comments the leader of a tech-driven operator.
Long x Short-stay
As for tenancy length, it is important to consider the need for minimal amenities when discussing long-term housing in compact spaces. Although it is essential to offer a suitable environment for residents with amenities such as coworking, gym, leisure areas and other facilities, there are cases where location is imperative, especially in the context of lower incomes.
Affordable value per square meter is another key factor in attracting and retaining residents. This specific case illustrates the importance of approaching social housing broadly, recognizing the diversity of needs and preferences of residents.
At the other end of income, luxury assets must offer a wide range of services, in addition to the premium location, aiming at the flexibility and comfort sought by the high-income consumer.
