Realty Construction: nothing shakes the sector in Brazil

Neither the insecurities caused by the world financial crisis nor the risk of a blackout in manpower were reason enough to shake the confidence of investors in the construction industry in Brazil which continues heated, with a high-volume of project introductions creating jobs and wealth for the country. Analysts of this segment of the economy are betting on the continuity of this trend, and even on significant growth therein from now through 2016, driven by major international sports events and strengthening of the economy, which have put Brazil on the agenda of international investors.

Among the industrial, commercial and residential segments of construction, the number of projects rose 3.4% in 2011 compared to 2010. In terms of investment volumes, the figures exceed US$ 421 billion, which is 29.8% higher than the amount invested in the previous year. The figures are provided by ITC (Inteligência Empresarial da Construção - Construction Business Intelligence) which has been monitoring and reporting on the evolution of the construction sector for almost 35 years, conducting research on new ventures in the segments of residential, commercial and industrial construction throughout Brazil.

This process of growth is bolstered mainly by the segment of industrial construction. Construction works involving new manufacturing plants, factory yards, and infrastructure projects (in areas such as energy and sanitation) received US$ 290.6 billion in investments in 2011. But the truth is that all these sectors have invested heavily during the period. Standing out in ‘number of projects’ are those related to: Consumer goods (271 works), Energy (428 works) and Sanitation (418 works). And in ‘volume of investments’, the Agro-Industrial, Energy, Ferrous Metals, Mechanical and Petroleum sectors represented, respectively, shares of 14.3%, 19.7%, 21.8%, 15.2% and 19.5% .

Of the total number of commercial construction projects reported in 2011, Commercial Buildings accounted for 37% and Highway Construction claimed 14.2%. Investments in the sector were US$ 86.2 billion and the most outstanding were Corporate Buildings with 12.6% of the total; Shopping Malls with 9.4%; Hotels & Resorts with 16.7%; and Highways 44.1% of investments.

Residential projects also increased and investment rose a sharp 17% in 2011. The incentive from the federal government and the appetites of the big players reveal a positive scenario (see details in this edition). With investments at around US$ 44.6 billion and constructed area rising from 76.2 million m2 in 2010 to 88.7 million m2 in 2011, growth in the segment was 14%.

In the number of works, growth was 8% climbing to 6,500 new projects, including buildings and condominiums of homes, compared to 5,981 recorded in 2010.

Among the different regions of Brazil, the Southeast stood out with 6,590 works (representing 57% of total), followed by the North and Northeast with 2,153 (18.6%), the South with 1,960 (17%) and the Center-West with 856 projects (7.4%); again according to ITC.

Of the total number of works analyzed in 2011, about 44% were at Phase 1 or, in other words, at the early stages of construction. Works of industrial construction totaled 1,130; commercial construction 1,635; and residential construction accounted for  2,313;  with 804 product launches and 2,908 projects under design.

Phase 2, in which works are already underway, represented 31.4% of all the works for the period. Industrial works totaled 408, commercial 727 and residential accounted for 2,492, with 1,037 at the stage of Finishing.

Secovi sees stability in 2011 and growth in 2012
The Syndicate of Companies in the Purchasing, Sale, Leasing and Management of Residential and Commercial Realty of Sao Paulo (Secovi SP -  São Paulo State Housing Syndicate), acknowledged as the largest syndicate for the sector, released its “Balanço do Mercado Imobiliário em 2011 e Perspectivas para 2012” (Report on the Real Estate Market in 2011 and Outlook for 2012). In its evaluation of the market, Secovi-SP uses a new indicator (index), which may become part of the currently adopted indices and, further, notes that the speed at which information and knowledge spreads in the real estate industry has created the need to extend the variety of indicators that can help to understand the paths and trends for the sector.

According to data from the report, 2011 was a year of adjustments in the market for new residential properties in the city of Sao Paulo. The volume of product launches remained at the levels observed in 2010, with the replacement of supply, and the pace of sales surpassed the historical average - even at a time of slight economic instability, triggered by the crises in the United States and Europe.

To Vitor Marques, director of the Marques Construction Company, it is important to point out that Brazil is coming from a recent past in which the market behaved very positively. "Therefore, lower sales, indexes indicating slower sales and fewer product launches do not necessarily mean a crisis in the market. On the contrary; the numbers and prospects are for very good behavior for the sector”,  he said.

As the Secovi report points out, in 2012 the European economy should continue to "move sideways", unlike the US which is already showing faint signs of recovery. In Brazil’s economic scenario, the outlook is much better: growth in GDP should be around 3.5% and it will be the time for full employment and growth in the total national payroll. "Global turmoil is easing, incomes in Brazil continue to rise, as do the number of jobs," said Vitor Marques. "Financing of mortgages in Brazil is still unrepresentative in comparison with other countries, but there are incentives to build popular housing," he adds.

In addition to these aspects, according to data provided by Secovi, Brazil has a high potential for domestic consumption and there is a forecast for growth of some 30% in credit for housing with funds coming from savings accounts, which completes the scenario of favorable expectations for the sector in 2012.

Ranking points out the biggest and the best in the realty sector
In March, ITC (Inteligência Empresarial da Construção - Construction Business Intelligence) announced the winners of the 8th Edition of their ranking - “Top 100 in Construction” based on the number of square meters (square footage) built and the most sustainable. "The ITC ranking shows: the reality in the sector, which regions of Brazil grew most, and which segments were outstanding. The 8th ITC Ranking is an actual photograph of the current construction market," says Guillermo Vidal, Chairman of ITC. The 100 construction companies which built the largest number of square meters will be honored and the winners in the 15 categories will be awarded the trophy of the event. With a team of professionals, ITC runs a survey among the engineers responsible for the works to obtain details on their construction projects and build the most comprehensive database on construction works in Brazil. Daily and on-line, ITC provides a complete description of projects at the design stage and ongoing. There are numerous data providing the location, current stage of work, schedule, investment values and constructed areas; buyers of materials, engineers, telephones, emails and participating companies.

The ITC Award is given for the following categories:
Record holder: the highest square footage built in Brazil; Regional Residential: construction companies with the highest square footage in São Paulo, Rio de Janeiro, Minas Gerais, Espírito Santo, South, Center-West and North / Northeast; Low Income Residential: the builder with the highest square footage in construction of low-income housing in Brazil. Commercial: the two largest construction companies in Brazil in square footage construction in the commercial segment; Industrial: the two largest construction companies in Brazil in square footage built in the industrial segment, ITC SustentaX for Commercial Sustainability: the construction company ranked among the top 100 according to the criteria of sustainability in the commercial segment; and ITC SustentaX for Residential Sustainability: the construction company ranked among the top 100 according to the criteria of sustainability in the residential segment.

The ITC SustentaX Sustainability Award will acknowledge, based on the most stringent criteria, the construction companies that are the most sustainable in the Commercial and Residential segments. The award is unique in the sector and evaluates the environmental initiatives in construction works as well as issues relating to sustainable management. This award is a partnership between ITC and the SustentaX Group which specializes in corporate sustainability.