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Shopping Centers Today -> December 2001
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RIO DE JANEIRO DEVELOPERS LOOK TO THE SUBURBS
By Susan Thorne
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No
room in Rio: Carioca Shopping opened in May outside the built-up
city.
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Rio de Janeiro isn’t the largest or economically most important city in Brazil — those titles go to mega-city São Paulo — but it may be the country’s most lively retail destination.
The Carnival City has a strong shopping center industry that is expanding rapidly into new territory in the suburbs, fed by a customer market that is hot to shop. The State of Rio de Janeiro that encompasses Rio has the strongest economic growth in Brazil, according to its Economic Development and Tourism Ministry; and shopping center sales were predicted to have grown by 15% there in 2001, according to ABRASCE, the Brazilian shopping center council, a partner of ICSC.
“Brazil has some of the best shoppers in the world,” said Antonio Paulo Pierotti, founder of Conshopping, a Rio-based retail property consultancy. “They don’t necessarily have a lot of money, but they love to shop. And we have a young country with a big teen-age and youth market who are great retail customers.”
Rio’s population of 8 million is particularly shopping-minded — more so than São Paulo, Pierotti said — and tourism swells that market significantly. Fashion retail is especially prominent: Rio is home to many designers of flamboyant summer fashions, and a sizeable market of brand-conscious customers seeks out indigenous and international designer labels. Between 3.5 percent and 7 percent of the city’s inhabitants’ gross income is spent on apparel, Pierotti said.
Rio’s complement of shopping centers has grown steadily over the past two decades, from two malls in 1981 and 10 in 1991, to a total of 32 today, including 19 regional malls.
In the city itself, a serious crime problem downtown, characterized by frequent muggings, kidnappings and worse, has helped promote the construction of secure, multistory enclosed malls, noted Mauro Moreira, audit partner with Andersen business consultants in Rio de Janeiro.
“Shopping centers are considered an island of safety,” he said, adding that they typically have an intense security presence to deter crime, including armed guards at the entrances.
However, there are few opportunities for major new mall projects in the densely developed downtown core with its expensive real estate.
“It would be like trying to build a mall in Manhattan,” said Moreira. The geography of the Rio area, with its scenic but steep seven hills beside the sea, also limits the number of suitable mall sites. Consequently, much of the development is taking place in outlying suburban districts, supported by the growing population base and the increased purchasing power of working-class residents there.
An example of this kind of development is Carioca Shopping, a two-level, U-shaped mall that opened in May in Vicente de Carvalho, part of Rio’s northern district. Carioca (the name is an affectionate local term for a person born and raised in Rio) follows a North American-style design and merchandising model. It features a 21-tenant food court, including a McDonald’s outlet; an eight-screen Cinemark movie theater with stadium seating; 249 specialty stores; anchors Bon Marché (hypermarket) and Leader (department store); and exterior parking for 1,693 vehicles.
“But at 350,000 square feet of GLA, it’s not large by North American standards; it’s built to Brazilian scale,” said Paul Duval, president of Shopinvest, a Rio-based developer, planner and leasing firm that is one of five development partners for the center. (The others are Brazilian firms Atlantica, Pargim, Barpa and Supra.)
Carioca’s target market is the 1.2 million residents and working-class shoppers who live within a 15-minute drive of the center.
“Their per capita incomes are low compared to the U.S.,” Duval said. “But the volume of shopper traffic makes up for the lack of high spending power. Instead of having one woman who buys three blouses, we bring in three women who each buy one blouse.”
A lower-to-middle price point is reflected in the tenant lineup, with bargain-priced C & A Fashions serving as an anchor with a 22,000-square-foot store. Jeans and shoes are featured prominently in the merchandise mix instead of upscale apparel.
The lower-middle-class customer has become more important to retailers and shopping centers since Brazil’s monetary reform in 1994, which saw the introduction of a new currency — the real — and an effort to stabilize the economy and attract foreign capital. While these measures have been only a qualified success, they have at least increased spending on the part of many ordinary consumers.
“With the stability of the Brazilian currency over the last few years, consumers have a better sense of their money’s worth and their purchasing power,” Duval said. “Consequently it is easier to plan your budget and assume credit.”
That burgeoning buying power has helped spur the development of several suburban Rio shopping centers since the mid-1990s, including Iguau Top Shopping (1996) and Shopping Grande Rio (1995) in the outlying, lower-income Baixada district; and more recently, Leopoldina (December 2000), Passeio (November 2000) and Penha (June 1999). New additions this year include Carioca, plus the 125,000-square-foot gross leasable area Center Shopping Rio in the Jacarepagua suburbs to the west, developed by ECIA Irmaos Araujo, a Rio-based company. Center Shopping Rio has 119 specialty stores and is anchored by Leader Magazine, Casa & Video, SuperEx, Lojas Americanas (a Brazilian variety store chain) and a small amusement park.
The focus on lower-income suburbs appears to be a winning approach. Carioca Shopping has averaged 32,000 visitors daily since opening, and demand from retailers for space has been so strong that the leasing agents are able to charge key money to buy the privilege of signing a five-year automatic-renewal lease. (Tenants not paying key money are eligible only for three- or four-year terms.) Center Shopping Rio was fully leased for its opening this past April.
One factor that makes these suburban malls attractive to retailers is the lack of competition from similar retail offerings in the outlying areas that they serve. Jacarepagua, for example, had only strip centers and small stores before Center Shopping Rio was developed.
“Since the shopping center’s opening, the population in this area has been able to buy products and goods of higher quality,” explained Alessandra Araujo, spokeswoman for ECIA Irmaos Araujo. “Before that, they had to go to other neighborhoods for such merchandise.”
The great majority of retail tenants in Carioca and other Brazilian malls are outlets of domestic rather than foreign companies. North American and European retailers are increasingly finding their way to South America, but remain less numerous there than in many parts of the world. Such retailers tend to enter the Brazilian market by way of São Paulo’s market of 14 million inhabitants, which has 40% of the gross domestic product of Brazil and an economy larger than that of Mexico; Rio is typically a second step. The strongest foreign presence is in the hypermarket sector, Pierotti pointed out; Carrefour has been in Brazil since 1979 and Wal-Mart has eight Supercenters, for example.
Most new shopping centers today include a hypermarket, though Brazilian chains like Pao de Açucar (“Sugar Loaf”) also play an important part.
On the horizon, both Shopinvest and Irmaos Araujo are going further afield to districts outside Rio with concepts similar to those of Carioca and Center Shopping Rio. All of which will make Rio and its environs livelier still.
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