After the historical slowdown of the Brazilian economy and the brake imposed on all segments of the real estate market for a record amount of time, the expected recovery in the sector has been showing some concrete signs since the second half of 2019. Growth has been experienced in several sectors (logistics, retail, commercial, and residential), reflecting current economic policy, approval of labor and social security reforms, and signs that the government will proceed with tax reform. The decrease in unemployment and inflation, the maintenance of interest rates at a record low level, the increased faith in the economy, and the evident improvement in credit conditions also contribute to optimism, all ideal ingredients for the resumption of the real estate market starting in 2020.

The exponential increase in the number of residential developments in some cities in Brazil is directly related to the low interest rates on real estate financing and the decrease in the unemployment rate. Caixa Econômica, for example, announced that it will launch financing with fixed interest rates and without adjustment for inflation in March of this year. The reduction in interest rates is a natural fertilizer for real estate funds, which have shown impressive capital funding power (in number of transactions and volume of funds), also attracting more conservative investors because they are less volatile than stock portfolios. The current restriction on the acquisition of real estate by pension funds (which have always been major investors in this market) also contributes to a greater interest in real estate funds.

The heating up of the economy leads to a greater search for locations in the logistics sector (spaces in commercial and industrial warehouses), retail and office spaces, and this means that real estate fund portfolios continue to be filled with assets with good income performance. While, in 2018, the market for high-end commercial spaces in São Paulo closed with a vacancy rate of around 18%, today it stands at approximately 15% and, in some regions considered premium, it has reached less than 10%, according to market consultants.

These positive indicators have an immediate impact on the type of activity that the market demands. The demand for appraisals and discussions involving the structuring of collateral and credit risk is decreasing. On the other hand, there has been an increase in the search for legal advice in structuring new business opportunities throughout the development process of ventures, with a special focus on meeting changes in the population's mindset, which seeks new forms of housing, leisure, and work in a increasingly shared economy.

There has also been an increase in transactions to expand real estate fund portfolios and new capital funding, as well as a growing interest on the part of clients in bringing properties into good standing for future transactions or new investments. It is not by chance that institutional investors in Brazil have begun to bet that the sectors with the best performance in 2020 will be retail and e-commerce, followed by the real estate market.

Another important and expected change, which will certainly bring positive results for the real estate market, is the flexibility of the rules regarding foreign investment in Brazilian companies that invest in agribusiness. The matter is not settled and still faces strong resistance. Even so, it is possible that some change will happen in this area in 2020 and that foreigners will return to invest in the acquisition and leasing of rural properties in Brazil with greater legal certainty, although subject to limitations.

All this expectation of growth must be monitored, but with caution and long-term vision. It requires aggregated knowledge and a complete view of the pros and cons of each bet and new development, especially those projects that requirement a large investment in infrastructure, sustainability, technology, and urban mobility.

A new cycle of growth in the real estate market has already begun, with repercussions in all sectors of the economy due to its high capacity for job creation. This new cycle of ours will have more cautious players, who are better prepared and capable of fueling more sustainable growth in the market.