Shopping Centers: Sector on the upswing leveraged by the new middle class

There is one sector of realty construction in Brazil that has nothing to complain about: the sector of shopping centers or shopping malls. Surveys of the market have been providing evidence of the good phase that the sector - which this year will have a record number of inaugurations - has been experiencing. According to the ‘Cadastro de Shopping Center’ (Register of Shopping Centers) - a database developed by IBOPE Intelligence (a marketing/media research company) - 2013 will have the largest number of openings of shopping malls in the history of Brazil: 64 new malls. According to the survey, 35 or over half of these new ventures are located in the country’s Southeast region, confirming the economic leadership of the region. The survey reveals the strong rise of the Northeast region’s market, with the opening of 12 new ventures by the end of 2013. The South will get half of that, with six shopping malls - the same number as in the country’s North region. The Center-West region will receive five new ventures. Among the reasons for this performance is the growth of the middle class, mainly based on high rates of employment.

Among the new shopping centers, 44 (39%) will be opened in 38 municipalities that do not have this type of establishment, confirming the expansion of the industry to medium-sized cities after their consolidation in major urban centers. Medium-sized cities in the country’s Southeast still attract the main investments, with 19 mall openings. The North region stands out with nine ventures followed by the South with seven projects, the Northeast with six, and the Center-West region with three new malls.

Projects under execution

Another survey conducted by ITC – ‘Inteligência Empresarial da Construção’ (Construction Business Intelligence), shows 172 malls under design and in construction in Brazil, with total investments of over US$ 8.4 billion. At the design stage alone there are 85 projects, while the remaining 87 are at different stages ranging from the performance of feasibility studies to construction and inauguration. Outstanding in this scenario are the Boulevard Shopping Boa Vista in Fortaleza, Ceará with an investment of US$ 300 million; the Cerrado Shopping in Vila Velha, Espírito Santo - US$ 260 million; the Savoy Bauru in São José do Rio Preto, São Paulo - US$ 250 million; the expansion of the Betim Shopping in Goiânia, Goiás; the expansion of Manaus Plaza Shopping in Curitiba, Paraná; and the New Iguatemi Shopping Mall in Rezende, Pará.
According to the ITC survey, the largest number of projects is in the Southeast region with 90 units. The Northeast appears next with 50 mall construction projects. The South region accounts for 25 units and the Center-West will receive seven new shopping malls. In the survey per state, São Paulo comes out alone in the lead with 57 projects, while Minas Gerais appears next with 16 projects and Rio de Janeiro in third place with 11 units.

Continuous performance

The survey results provide evidence of the good ‘phase’ in the sector which, as early as 2012, broke the record of openings in the last 13 years by putting 27 new establishments into operation. The result was growth in the sector's revenues, with a high of 10.65% in sales compared to the previous year, reaching a total of R$ 119.5 billion (US$ 59.7 Bn), according to data from the Brazilian Association of Shopping Centers (Abrasce), with the average number of frequenters reaching 398 million visitors monthly. In all, the sector closed 2012 with 457 shopping centers in operation, compared to 351 in 2006, with sales growing two-fold over this period, climbing sharply from R$ 50 billion (US$ 25 Bn) to R$ 119 billion (US$ 59.5 billion). The excellent performance in 2012, according to the association, can be explained by the low rate of unemployment, the increase in total wages, and credit which is still at appreciable levels. The market of shopping centers is responsible for 19% of the nation’s retail and 2.7% of its GDP. The expectation in the sector regarding 2013 is for an increase of 12% in sales.

According to Abrasce, of the 27 malls that opened for business in 2012, only eight were located in state capitals. Despite their varied profiles, most of these malls were built in cities with populations of 101,000 to 500,000 inhabitants and the average size of these projects is 31,000 m² of Gross Leasable Area (GLA). Outstanding among the medium-sized cities that will be included in this roll as of this year are: Linhares (ES); Pouso Alegre (MG), Limeira (SP), Pelotas (RS), Arapiraca (AL), São Goncalo (RJ); Pindamonhangaba (SP), Parnaíba (PI), Juazeiro do Norte (CE), among others, according to Abrasce.

The quest for new markets

5R Shopping Centers – a company that specializes in the prospecting, planning, developing, marketing and managing of shopping complexes - bet on market diversification and has reaped good results. In two years, the company has already launched nine projects focused on cities with populations of over 200,000 inhabitants, namely: Rio Grande (RS), Uberaba (MG), Uberlândia (MG), Americana (SP), Alvorada (RS), Piracicaba (SP), Porto Alegre (RS), Natal (RN) and Manaus (AM).
Among the main characteristics of these projects is the adoption of the ‘mixed use’ development model which includes the construction of residential and commercial buildings in addition to hotels in the same project. This increases the flow of people to the establishment besides driving the local economy. The architectural and design projects of the shopping malls, executed under commission by the Conceito Arquitetos company, are uniquely developed for each region with elements that are evocative of the local culture.

The Praça Rio Grande Shopping Center in the city of Rio Grande (RS) will feature a gross leasable area (GLA) of 28,000 square meters, 122 shops, a hypermarket, leisure complex and ‘stadium-type’ movie theaters, parking for 1,700 vehicles and is scheduled to open in the first half of 2014. The project also includes the construction of commercial and residential towers as well as a hotel and a cultural center.
For the construction of the Praça Uberaba Shopping Center, 5R Shopping Centers is investing R$ 230 million (US$ 115 million). The company expects this mall to begin operating in the second half of 2014. With a GLA of approximately 27,000 m² (first phase), the project will receive 142 stores and parking for up to 1,500 vehicles. The project includes the construction of a fitness center, supermarket, university, office tower, hotel and a residential condominium.

On 140,000 square meters of land which it acquired from the Alto Umuarama company, 5R will build the Praça Uberlândia Shopping Center - a multipurpose project which will include a hotel, university and commercial buildings. The GLA of the mall will be 34,800 m² with a capacity to accommodate 195 shops in addition to a movie theater complex, hotel, university and home center. The site will also offer parking for 1,800 vehicles.

Developed in cooperation with Thomasi Camargo in the city of Americana, the Praça American Shopping Center will receive investments of R$ 150 million (US$ 75 million). A hotel and office towers are planned. The project will have a GLA of 32,700 m² (with the possibility of expansion) and includes the installation of 187 shops, recreational complex for children and another movie theater complex with six 100% digital projection rooms. The project is scheduled to open in the first half of 2015.

The Praça Alvorada Shopping Center in Alvorada (RS) is being developed in cooperation with Grupo Pedra Branca and has funding of R$ 140 million (US$ 70 million). The opening is scheduled for the second half of 2014. The constructed area of the project will be 80,000 m2 and the GLA will be 27,600 m².  The mall will feature 133 shops, a movie theater complex with six digital projection rooms, a complete food court and parking for 1,700 vehicles.

5R Shopping Centers made its first acquisition in the sector with a participation in Shopping Park Taquaral in Piracicaba (SP) estimated at R$ 180 million (US$ 90 million). In cooperation with Thomasi Camargo, the project - which had previously been released as ‘Taquaral Shopping Park’ and is scheduled to open in the second half of 2014 - received technological innovations and thematic regional decor and was renamed ‘Praça Taquaral Shopping Center’. The mall is the anchor of the Park Unimep Taquaral multipurpose project, developed around the Methodist University of Piracicaba (UNIMEP) and the UNIMEP Theatre, and also includes the construction of a hotel, planned residences, a convention center and corporate buildings.

The Praça Cavalhada Shopping Center is a project developed in cooperation with Titton Brugger, with estimated investments of R$ 150 million (US$ 75 million). Besides the shopping mall, the project also provides for the construction of a commercial tower. The architectural project and unique design is inspired by the meaning of the word ‘Cavalhada’: an ancient camp where the king's horses were kept. The complex will have 157 stores and 31,000 m² of GLA.

The Praça das Dunas Shopping Center in Parnamirim, in the metropolitan region of Natal (RN), is being developed in cooperation with Grupo Capuche - a local developer and contractor - and provides for an investment of R$ 300 million (US$ 150 million) – scheduled to open in 2016. The shopping mall will be built on 68,250 m² of property and will have a GLA of 42,345 m², 208 shops, a food court with two restaurants and 34 fast-food operations, and a movie theater complex with eight fully digital projection rooms.

The company is investing R$ 350 million (US$ 175 million) to build a shopping mall in Manaus (AM) in cooperation with a group of local investors. With a GLA of 48,000 m², the project will be built on Avenida das Torres - one of the newest avenues in the capital of Amazonas state. The launch will be in the second half of this year. Work on its construction is expected to begin in 2014 and the mall should be open for business in 2017.

Adhering to sustainability

Increasingly, construction projects adhere to sustainability, both during construction as well as in their operating model. Thanks to sustainable initiatives and social work in the community, RioMar Shopping Fortaleza received AQUA certification for ‘High Environmental Quality’ in the program phase. With that, the establishment is the second mall in the Northeast region to have this certification.
AQUA Process certification is issued by the Vanzolini Foundation and takes into account strict sustainability criteria which include reduction of environmental impacts and better conditions of health and comfort of the building throughout its life cycle.

Environmental performance is achieved through the use of architectural and technical solutions developed from the planning of the project during the program phase, through the executive projects during design and construction, to final delivery divided into 14 categories. RioMar Shopping Fortaleza was rated ‘excellent’ in eight categories.

This recognition means that the venture goes beyond conformity with technical standards and pre-established regulations which are aimed at improving performance in the reduction of the demand for natural resources, but also considers the venture’s relationship with the surrounding neighborhoods and better conditions of comfort and health for users, customers and employees, as well as ensuring a low-impact construction site.

Among the categories noted as excellent by AQUA Process is the relationship of the building with the surrounding neighborhoods, the management of water and energy and waste that have been provided in the operation. In the case of power consumption, for example, architectural design provides for glass domes atop the mall which will afford the benefit of natural lighting, reducing the demand of artificial lighting during the day by 60%. The system of irrigation which reuses water will be able to save more than 50% of drinking water.

The JCPM Group had the consulting services of ProActive, a company that specializes in project management and business sustainability in the process of obtaining AQUA certification. The first project in the shopping center sector to receive certification at the design phase was RioMar Recife – another investment made by the JCPM Group.

RioMar Fortaleza is a JCPM Group investment with funding estimated at R$ 600 million (US$ 300 million), the creation of 3,000 jobs at the work site. Completion is scheduled for November 2014. Located in the District of Papicu (Bairro Papicu), the building is to be constructed on 114,000 m² of land and will have a total of 319,000 m² of constructed area, with a business tower. The project will have 380 stores on 94,000 m² of GLA.

Jockey Plaza will be a multiuse space/shopping center

NUMBER OF SHOPPING CENTERS THAT ADHERE TO FREE MARKET FOR ENERGY GROWS

Every two weeks, one shopping mall in Brazil adheres to the Free Market for Energy considering the data for the last two years. Since 2010, the adherence of these establishments has grown 118%; a burst of growth that raised the number of establishments that are free to choose their supplier of electricity to 109 units. The rise is due to the reduction of around 10% to 20% in tariffs and also to ensure a supply of energy derived from clean sources, such as wind power, solar, biomass and Small Hydropower Plants (SHPs).

Companies with energy bills of over R$ 100,000 (US$ 50,000) per month can become ‘special customers’, that is, they are not required to purchase energy from their local concessionaires. “This movement demonstrates how the model is efficient in reducing costs and ensuring policies of sustainability”, Reginaldo Medeiros – president of the Brazilian Association of Energy Dealers (Abraceel) explains.
In 2002, Parque D. Pedro Shopping in the city of Campinas (SP) was the first mall to adhere to the Free Market for Energy. Since then, the number of adhesions has done nothing but grow. “This reveals how these experiences have been positive”, adds Medeiros. The data is provided by the ‘Câmara de Comercialização de Energia Elétrica’ (CCEE - Chamber for Commercialization of Electrical Energy) - an agency created in 2004 to register and keep the books on the contracts established in the market for electrical energy in Brazil.