CEO Brazil of JLL outlines prospects for the domestic property market

No doubt about it. We helped develop the national market by bringing international standards, with intelligent buildings and focus on the user experience. In this pandemic context, therefore, relying on the expertise of an international network is especially important. We can anticipate scenarios based on the examples of other countries that are at more advanced stages in dealing with the virus and, thus, import solutions to our market.

Digitalization at JLL takes place on many fronts simultaneously. We invest a lot in technology, either by developing our own tools and making them available to the market; or by buying shares in technology companies to bring new solutions to our clients; or by implementing third-party technology. Our goal is to bring innovation to the market. We do this from design and construction, with tools that allow remote supervision, through monitoring the occupation of spaces, to the use of management apps that optimize processes and increase efficiency.

Offices will look different because of remote working, which is here to stay, but they will still be very relevant. Previously, around 80% of the office area was dedicated to individual work. This must evolve. From now on, the spaces will be more team-oriented, with lounges and meeting rooms, more collaborative environments dedicated to promoting organizational culture. 

The density is expected to fall, but only because, with the hybrid working model, the office will not be used at the same time by all the employees of a given company. It should also be considered that there will be greater spacing between workstations, due to the need for distance, in addition to the provision of larger, inclusive environments focused on the well-being and experience of users. The office will be a meeting place for employees and also a location for events, to bring clients and suppliers together. These events will no longer be just face-to-face, but hybrid, with online streaming, so the spaces will have to be equipped for this. Technology comes with everything from touchless access controls and air quality sensors to prevent the spread of viruses and bacteria to applications for reserving spaces and monitoring sensors to ensure intelligent use. In addition, there are other movements underway, such as the decentralization of offices and the office pass, which gives employees a choice of places to work. In short, there are many trends emerging, all aimed at improving the efficiency of office use and increasing the productivity of teams.

Financial instruments such as CRIs, real estate funds, and publicly traded companies that invest in real estate have brought the property market to another level, with greater liquidity. Currently, with the Selic rate at 2.75% a year, one of the lowest levels in history, real estate is a class of assets that provides an interesting return, with the combination of appreciation of the property and income. 

There are options with better performance at the moment, such as supermarkets, which offer income predictability, and logistics warehouses, which have positive pressure for rent increases and prospects of expanding returns. It is even a good time to enter the hotel segment, taking advantage of the cheaper assets. Capital Markets will continue to grow.

Consumer habits have changed, and the client is not willing to wait for certain products. The main transformation is in the speed of delivery. This increases the use of urban real estate in the logistics chain, getting closer and closer to the consumer. Thus, in addition to the dark warehouses [not identified by brands], locations that acted only as a retail point became distribution points. It is a balance to be struck: if it is kept in the store, which is closer, the costs of a point of sale have to be included, such as rent at a prime location and air conditioning. If the stock is kept in an out-of-town distribution center, it is cheaper, but the delivery is not fast.

Exactly. The consumer is increasingly demanding and looking to know where the product they buy comes from, how it is distributed and what the impact of this is. There is a trend towards local consumption to reduce the carbon footprint, which also appeals to investors with an eye for ESG (Environmental, Social and Corporate Governance). Much innovation is still to come in this segment, with the use of non-polluting vehicles and improvements in the security of the delivery process when the client is not at home, for example. And despite the growth in demand for urban real estate for logistics purposes, the demand for large warehouses will continue to grow, as companies need spaces to store their inputs and safeguard production.

Business hotels, which are the majority in Brazil, are facing the restrictions on corporate travel and the suspension of events such as congresses and conventions, and this could make room for other opportunities. In the future, I estimate that some of the hotels will be reconfigured for long-term stays, with a more residential appeal, improving integration with the city and decreasing the amount of spaces restricted to guests only. This will make the hotel into something more dynamic, with another mix of services. Today, many hotels are already wagering on the staycation concept to attract clients interested in leisure and wellness services.

JLL is constantly evolving. What we are today is very different from what we were 25 years ago, and I believe that the future will also be very different. Technology and transparency are the main influencers of change. Brazil will go through an economic expansion in the coming decades, with the ups and downs of a developing nation. The country has very great potential, including for the growth of our business. Our service mix will probably change, with areas that are more important today losing some relevance and also the opposite happening. 

We are always on the lookout for opportunities. In the multifamily area, for example, which are professionally managed residential buildings for leasing, we have a lot of strength abroad, but this is practically non-existent in Brazil. I believe that the living sector will be a new area for us to operate in the country, due to the changes in people's consumption habits. Furthermore, another opportunity that I foresee is the intermediation of real estate financing. This has evolved a lot in the country in the last 25 years, with the control of inflation, and will continue to develop, which opens up more possibilities for us in all real estate segments.

Just as offices and cars have already undergone this revolution of flexibility, with the possibility of renting for occasional use, the same will happen with housing. The dynamics will change, the dream of home ownership will give way to the possibility of living wherever you want, renting furnished or semi-furnished apartments, with or without services included, for as long as you need. The new generations will not want to live in their assets; they will prefer to invest the capital, have an income that way, and pay rent in exchange for mobility. There is still a lack of organization and financing for this market to develop in Brazil, but I believe that these conditions will be met in the next 25 years. The summary is: there are good prospects for growth in the sectors in which we already operate and in those in which we are yet to operate.