SBM

SBM in Latin America

SBM’s connection with Latin America go back to 1992 when Managing Director Stephen Bleakley first came to Argentina to climb mountains. He returned to establish a network of property specialists across Brazil, Chile and Argentina.

 

SBM’s Partner in South America, Lucila Blasco shares her insights into the impact of Covid-19 in South America. She explains how countries are responding to the pandemic as well as managing existing economic and political pressures.

South America during Covid-19

Since the outbreak of Covid-19 in the region, Stephen and I have spoken to many of our contacts in the region to understand the local impact on people and businesses.

First and foremost, we are grateful that every single one of our clients and partners are in good health and staying safe. But, at the same time, it is clear that the region is feeling the strain of the situation.

The response and effects of Covid-19 have been varied. In Brazil, for example, President Bolsonaro has prioritised keeping business active. Today, Brazil is one of the countries with most Covid-19 deaths and the number is still growing. It has led to negative public opinion and  press coverage with images of mass graves and riots.

In a drastically different way, Argentina was quick to start isolation. There have been less than 1,000 Covid-19 related deaths so far, and the spread has been mostly contained in the city of Buenos Aires so many provinces can return to active industry and commerce. But patience is wearing thin in what is called ‘the world’s longest quarantine’ and its impact on the wellbeing of people and businesses.

Picture above: Palermo, usually a busy shopping district, is quiet in June 2020. Pedestrians wear masks. After weeks of non-essential businesses being closed, a sign reads: “We’re closing permanently. It was impossible to support 80 days of closure. Thanks for all these years.”

Huffing and puffing won’t bring bricks down

Brazil’s economy has been suffering a strong devaluation since the beginning of the year. Across sectors, investors are seeing opportunities and the overall economic outlook is one of growth.

According to a trusted SBM advisor, property investors have their eyes set on Brazil as the weak currency drives down property prices but opportunities will be hard to spot. Interested investors must find distressed property owners in a rush to sell as most landowners in Brazil are wealthy families willing to wait out the tough times.

In Argentina the pandemic has created an additional pressure. The property sector had already experienced a large drop in values and now the housing market in Buenos Aires has decreased by almost 20-25% since its peak by some estimates. This has been mostly driven by the devaluation and the drop in construction costs. But according to Diego Alchourron, property consultant at Zoning Real Estate,  property continues to be the safest investment within the Argentine economy and he expects capital to be diverted into bricks.

In Chile, the pandemic came at a time when the country was struggling with social unrest and political turmoil. In some cities, stores had closed in the face of riots and had to close again due to Covid-19, making it a tough time for businesses and retailers.

Horacio Morales, an independent property consultant, expects to see significant changes in what has traditionally been a ‘landlords’ market’. He said that the office market downturn in 2014-15, which caused long vacancies in many cases, will still be fresh in people’s minds and landlords will prioritise healthy cashflows over prices.

Working from home

Across the region, employees are working from home while offices remain empty. In this context, landlords everywhere are granting relief in the form of price freezes, lease deferrals and temporary discounts.

For most companies, working from home is not entirely new. Previously considered a perk and only restricted to occasional days, Covid-19 is changing attitudes and will help people transition to a world of increased remote working.

No one knows exactly what to expect as countries ease out of lockdown. Working from home is likely to become the new norm for many and offices may have to adapt to allow for social distancing until there is a vaccine for the virus.

One thing is for sure: the world post Covid-19 will look different from what it was before and tenants have an unique opportunity to rethink their property strategy and renegotiate the terms.

 

Image: Social distancing instructions in Argentina, including the recommendation of not sharing mate (a traditional caffeine drink) – a big challenge, as it’s a deeply rooted practice and one that symbolizes openness and dialogue.

Landing in real estate

I started working with SBM at the end of 2018 on a project for the sale of a large property on the banks of the Río Paraná in Zárate, Buenos Aires. Personally having more of a commercial background, it was a fantastic way to land in the world of real estate.

Looking at it from the perspective of a project manager, there are lots of similarities: the importance of outlining milestones, ensuring communication among all players, being diligent about regulations and the legal framework. I learned two things that are dramatically different from any experience I had had so far:

1) There is no list price in real estate. The closing number may be miles apart from the valuation, the asking price and the offer. Timing, negotiating, and implementing the right strategy can ‘easily’ triple a price.

2) Real estate is a small world. Local brokers, landowners and buyers respond to an intricate network of relationships and pressure – and they talk! In this context, an outside consultant based in the UK can provide freedom from in-country dynamics and change the rules of the game.

Lucila Blasco, SBM Partner
South America

Published: 16th June 2020

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