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Shopping Centers Today -> December 2007
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MIXED FUTURE
LATIN AMERICAN DEVELOPERS ARE PLANNING MORE MULTIUSE PROJECTS THAN EVER
Brides in Neuquén have no lovely spot to GET photos taken, quips Argentinean developer and architect Daniel Mintzer. But he is about to solve that problem with his riverfront Ribera Urbana, a $30 million, mixed-use project containing offices, entertainment, retail, a hotel and apartments.
Brides aside, there are plenty of solid economic reasons that this and other mixed-use projects are sprouting across Latin America. Rising land prices, free-flowing capital and Latin America’s commitment to diverse urban development are all contributing to a boom in projects that incorporate retail and those other elements.
“Argentina’s mature real estate market is entering a second stage where we need to be more sophisticated and creative,” said Mintzer, president of Buenos Aires-based G&D Developers. “Mixed-use projects are the perfect option, as each component becomes more sustainable and profitable than if built isolated.” G&D is also building a mixed-use center in Buenos Aires called +5411 Puerto Madero. (The number 5411 is the Buenos Aires area code.)
The fact is, the whole region has entered a new stage of development. Mexico alone boasts over a dozen major mixed-use projects. In Mexico City these include the partially opened Antara Polanco and the soon-to-be unveiled Reforma 222, as well as Metrópolis Patriotísmo and Parques Polanco. In Guadalajara, renowned Mexican architect Javier Sordo Madaleno has designed a project called Andares that will feature a 240-store mall, seven residential buildings and an office building.
Other notable mixed-use developments across the region include Costanera Center (in Chile), Los Faros de Panamá (Panama City, Panama), Parque El Golf (Lima, Peru), Paseo Caribe (San Juan, Puerto Rico) and San Fernando Plaza (Medellín, Colombia). Mixed-use centers are also being built in Puerto Madero, an abandoned port area in Buenos Aires, as part of the revitalization of the Río de la Plata riverbank.
In Santiago, Chile, as elsewhere across the region, several factors drive the mixed-use development boom, says Andrés Roi, director of ROI & Associates, a Santiago-based real estate consulting firm. Those factors are sizable lots in excellent urban locations, high land prices that oblige developers to maximize the use of these sites, and the logic of having compatible uses alongside each other. “The availability of a considerable amount of capital in the local market has also made these large-scale projects more feasible,” said Roi.
Mall developers are in the vanguard of mixed-use development. Chilean retailing and mall operating group Cencosud, for instance, is developing Costanera Center. Mall Plaza, a Santiago-based mall developer and operator, is building a mixed-use center in Santiago’s Estación Central area, home to 530,000 residents. The $60 million, 1,345,000-square-foot (125,000 square meters) project contains retail, medical offices, an educational center, a hotel and an office building. This is one of five urban centers the company plans to build over the next three years, at a total cost of $400 million. The company’s flagship project is the redevelopment of the port area in Valparaiso, Chile’s main seaport, with housing, retail, services and entertainment.
Mixed-use projects are hot right now in the U.S. too, of course, but there is greater scope for innovative architecture in Latin America, says one architect. “Excluding Mexico, in Latin America you do not have big anchors like we do in the United States,” said Roberto Linhares, vice president of Florida-based Beame Architectural Partnership. “U.S. projects are tenants-driven, and the tenants often call the shots. In Latin America the projects are more unique, because we have more freedom to work.”
Beame is currently at work on 10 retail real estate projects in Latin America, of which four are mixed-use developments, including Iguatemi Alphaville, a retail-office complex set to break ground next year in the São Paulo suburb of Alphaville. Iguatemi Alphaville, a project of São Paulo-based Iguatemi Empresa de Shopping Centers, consists of a three-level shopping center and an adjacent office tower.
In Honduras Beame is designing a retail village containing a shopping center, a hotel, condo hotel units and a marina, in the coastal town of Roatan. The Honduran Lady Lee retailing and mall developing group is the developer.
“The wave of new retail and mixed-use in Latin America is very exciting,” said Jeff Gunning, vice president of Baltimore-based RTKL Associates. The firm is designing an expansion of the MultiPlaza Pacific mall, in Panama City, Panama, that could include housing, offices and a hotel.
In Mexico RTKL is working with Grupo Gicsa on several projects, including Capital Reforma, a mixed-use project in Mexico City with a Park Hyatt Hotel and some offices, high-end apartments and retail space. Yet another RTKL-Gicsa project is the 840,650-square-foot Paseo Interlomas, an enclosed shopping-entertainment center with a hotel, being built in an upscale district of Mexico City. Gicsa and RTKL are also working on Terminal Buenavista, a retail center being built over an existing subway station in Mexico City.
“These are examples of the very strong workload we are seeing as a result of the significant retail development activity and investment in Latin America, where developers watch U.S. and world trends and are successful in creating projects that rival any of the new projects in the U.S.,” said Gunning. “The world has become so much smaller, in terms of how markets influence one another.”
International equity funds have already poured millions into Mexico, and are starting to do so in Brazil as well. Parque Arauco, Chilean developer of Parque El Golf, in Lima, Peru, is now partially owned by Equity International, a private equity firm affiliated with Sam Zell’s Equity Group Investments. Consisting of an upscale mall, two office towers and a hotel, Parque El Golf will be located in San Isidro, an exclusive corporate and residential neighborhood.
Meanwhile, after almost a decade of no significant investments, Iguatemi Empresa de Shopping Centers has several expansions and ground-up projects, not all of them mixed-use, in the pipeline, having raised some $224 million in an initial public offering this year.
Homebuyers are getting affordable mortgages, which is driving the residential component of Latin America’s mixed-use projects. In Mexico, for instance, it is now possible to get mortgage loans with terms longer than 10 years — even up to 30. Many families can finally trade up their housing or invest for the first time in real estate, says Ricardo Rosette, a Mexico City-based retail vice president at CB Richard Ellis.
“The flow of international funds into Mexico has also pushed down [financing] costs for new projects and has opened the doors to new opportunities,” said Rosette. “The local mall industry has seen the threat posed by new players and has wanted to keep the lead with aggressive projects. Retail-real-estate-wise, we are seeing developments that were once unheard of, such as projects that incorporate housing. Developers are not limiting uses to just office and retail.”
Latin America’s large metropolises have preserved a mixture of building uses in their city centers, unlike many of their U.S. counterparts, which are often deserted after offices close at the end of the day.
“We are a mixed-use community where housing, offices and retailers have always coexisted,” said Florencia Aguilar, director of capital markets in the Buenos Aires office of Cushman & Wakefield. Developers are now trying to replicate this model in communities that are less densely populated to generate the needed critical mass and to draw retailers to the projects, Aguilar says.
The price of land in Mexico City is so steep that building high-density projects is the only way developers can turn a profit, says José Carlos Loaeza, director of the retail division at Colliers International’s Mexico office. In Mexico City’s prime office areas, prices range between $2,500 and $4,000 per square meter, according to Loaeza. So eager are landowners to maximize their sites that many are burrowing below ground as well as building high, undeterred by construction costs that rise from an average of $600 per square meter above ground to $1,000 per square meter below the surface.
Expanding economies drive demand for office space, which in turn creates need for nearby housing, retail and hotels. Buenos Aires-based Newside is to break ground next year on Madero Harbour, a roughly $200 million development that calls for four office towers, three residential towers and a shopping center with 861,000 square feet of leasable space, the only mall in Puerto Madero. Nearby, the new Latin American headquarters of international oil and gas company Repsol YPF is under construction.
“Each use in our project is key, because it gives weight to the others,” said José Luis Villaveirán, Newside’s vice president. “Puerto Madero will eventually have at least 10,000 employees that will generate traffic to the mall during the week.”
And its harbor setting will doubtless serve as a perfect backdrop for wedding photos.
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