Porto Maravilha will change the face of the Rio real estate market

Leitura de 7min

One of the largest urban renewal projects in the world is starting to receive its first developments.

The urban renewal project that promises to change the face of the real estate market in Rio de Janeiro – possibly almost doubling the stock of high-end corporate buildings over the next five years – is starting to take shape.

A first phase began in 2009 and is still in progress. City authorities have made very significant changes, for example building an access road to Rio Port and completely redeveloping streets and avenues. Now the Porto Maravilha – literally, “Marvelous Port” – project starts its second and more visible phase.

R$1.8 billion has been allocated so far for the second stage, within investments that are expected to total R$8 billion through 15 years. Projects include significant changes in the road system in the region, to serve a population projected to rise fivefold to 100,000.

Projeto do Veículo Leve sobre Trilhos | Foto: CDURP – Prefeitura do Rio de Janeiro

The main change now under way is demolition of the Elevado da Perimetral, an old elevated highway that runs through the port zone and separates it from downtown Rio. This reflects new thinking about traffic in the region – Avenida Rodrigues Alves will become an expressway, while Praça Mauá will be connected to Avenida Francisco Bicalho by the new Avenida Binário do Porto.

This new avenue will have three lanes of traffic in each direction and follow the same route as the planned Light Rail Transit (LRT) system that will run from the Santos Dumont downtown airport to interconnect with bus and BRT lines, the Metrô (subway) system, trains and ferries. Almost half of the projected R$1 billion cost of the LRT will come from the federal government’s Faster Growth Program (PAC).

The Porto Maravilha development enjoys a strategic location – it is close to the city center, just 2 km from Santos Dumont Airport and 11 km from Galeão International Airport. This, together with the program of improvements, should very soon turn the location, currently an immense construction site, into an object of desire and make it a business hub.

The  JLL Market Intelligence team has produced a detailed study of the Porto Maravilha development to map out potential real estate opportunities for companies that want to move into the area.

Marcelo Sasaki, research manager at JLL, emphasized the great development potential of the region, with a particular focus on commercial real estate.

By 2017, the stock of space in the Porto Maravilha area will represent a very significant share of the Rio de Janeiro high-end office market. Today, Rio has 1.5 million square meters of Class AA offices. The Port region alone has the potential to add around another million,” he said.

A domino effect

The positive effects of redeveloping the Port go way beyond the five million square meters of the area itself.

One visible example of this is the real estate development now occurring in neighboring districts. These have taken advantage of the positive image being created by the upgrading of the Port region to launch commercial and residential projects.

The benefits of this reurbanization have spread beyond neighborhood borders and been used by developments from Tijuca to Caju. Even with work at this early stage, the impacts can be detected in neighboring districts,” said Alberto Silva, president of the Rio de Janeiro Port Region Urban Development Company (CDURP), a body created by the city in 2010 with the mission of managing the urban development of the area.

Mônica Barg, director of JLL Leasing, commented on the importance of some anchor projects such as the Mauá Pier, the Museum of Tomorrow and the Rio Art Museum, together with a Central Bank (BC) building. These have the effect of encouraging new occupants to move into the area.

“The process of government and cultural organizations moving into the area adds value all around, and will also boost tourism in the vicinity of the Port,” she said.

As they wait for clients to appear, major companies have begun to stake out their presence in the region.

Odebrecht Real Estate Developments launched the Porto Atlântico venture in March, consisting of seven towers with estimated potential sale value (PSV) of around R$1.7 billion. Divided into two construction stages, each with its own delivery schedule, the site will house office buildings, two hotels of the Accor chain and corporate towers with a helipad. As one of the pioneers in the region, the development will serve as a thermometer to determine average rental levels around Porto Maravilha.

Given that the stock to be delivered in the Port consists of high-end commercial buildings, Barg said, this top-quality supply will impact rental prices across the city, but in particular in the center where most buildings are retrofitted.

“There’s no doubt that the buildings in the Cinelândia region, which are close to the Metrô, will suffer less. However those in the Castelo area, which are more distant, could see their rental prices affected much more,” she predicted.

“Firms that currently have offices scattered in different buildings without much infrastructure are likely to be interested in moving to buildings in the Porto Maravilha, to gain the advantage of having their operations concentrated in one better-equipped building,” Barg said.

Guilherme Soares, the director of Project Development and Services at JLL, noted that the revitalization of the port will generate improvements on a major scale even when compared to the largest revitalization projects carried out internationally.“Without doubt there is no project in the world today that brings together so many interesting features as the Porto Maravilha,” he said.

If you take into account the volume of engineering and infrastructure works, the progress that will be made from the social point of view, the urban reorganization with the creation of a new neighborhood, and the effort being put in by the private sector working in partnership with the three levels of government to make the project a reality, then you start to get a better idea of the unprecedented transformation that is under way in Porto Maravilha,” Soares said. He also praised the design and the way the project was put together. The first challenge was the documentation for the area, followed by legal approval and funding mechanisms.

Financing for Porto Maravilha was made possible through the largest Public Private Partnership (PPP) yet conducted in Brazil. The Caixa Econômica Federal (CEF), a state savings and loans bank, used resources of the Guarantee Fund for Length of Service (FGTS), a federal fund that covers all registered workers, to buy the entire issuance of Certificates of Additional Construction Potential (Cepacs) relating to the Porto Maravilha redevelopment. Cepacs are certificates issued by city authorities that can be purchased or repurchased by private investors who thus acquire the right to increase the floor area ratio of a development within the designated area. The CEF acquired all of the Porto Maravilha Cepacs from city authorities in 2011 for R$3.5 billion. This amount and the profit earned on reselling the Cepacs go to funding infrastructure work and other developments in the Porto Maravilha area.