July 25, 2024

Land Hunter Explains the “Psychology” Behind Opening Spaces for Buildings

4 min read
Felipe Rau/Estadão
Felipe Rau/Estadão

Explosion of a new building in Sao Paulo led to Fierce – and expensive – competition for land, particularly in high-income areas. Developers are bombarding hundreds of millions of spaces that were previously occupied by not just homes, but even smaller buildings, which will now become skyscrapers. But finding land in the capital is getting more and more difficult.

This happens for several reasons: São Paulo is already a city with a vast building area, and The current year chart, issued in 2014, high-rise buildings are only allowed to be built in areas close to major public transportation hubs, such as subway stations. Moreover, not many properties have been launched as in recent years. For a basis for comparison, until 2018, the total number of launches made in the capital was 39 thousand units, according to data from Secovi-SP – since then this number has more than doubled.

This generates a “battle of a scythe,” as industry executives and entrepreneurs define it. And companies are willing to pay a heavy price for a good opportunity. In 2021, for example, the developer was even able to partner with the traditional Malzoni family for a plot of about 18 thousand square meters for the construction of a development project. The estimated cost was R$500 million.

The company’s Vice President of Operations, Joao Azevedo, defines this particular purchase as “special” and “unique”, as it is difficult to find a large plot of land in such a desirable nearby area as Avenida Brigadeiro Faria Lima. But negotiating, says the executive, wasn’t easy: “I’ve had more than a hundred meetings with the family,” he recalls.

land hunting strategies

Competition in the market and the difficulty of finding new areas for development led to the development of a new activity: specialists in the “search” for vacant plots throughout the city. This is a movement that has become more organized in recent years and has become a competitive differentiating factor for developers who need to find spaces to make their projects viable.

However, this part is still in its initial stage and not very professional, according to Vitacon’s chief developer, Ariel Frankel. However, the company currently works with about 15 professionals, including self-employed and small businesses, who help with this land mining. “These professionals work at the initial stage, and then we take over the front line,” says the company, which is known for its micro-apartments built in key areas of the city.

The difficulty of finding new land in already sought-after areas led Vitacon to change the profile of acquisitions. The developer recently purchased four small buildings in Jardins. But the company decided not to demolish it because of division law. The way out was to go for a complete renovation. And currently, according to the Executive, there are further negotiations for the purchase of old buildings for the same purpose.

“Searching for land is hard work and a lot of variables as well as legal details. Overall, what we’re trying to offer is a legacy development,” Frankl explains.

The Revenda Real Estate Network has acted as a land “scout” in recent years. Specializing in high-end homes, the company has also created a land search area aimed at small builders.

Small developers come to us because they do not want to inflate values ​​in negotiations with owners. As soon as they know it’s for a construction company, the price goes up,” says Louise Guilherme Gemayel, President of Revenda. According to him, it’s even a way to enable the presence of small businesses in a market dominated by giants.

Discord is also in the outback

If the fighting in the upscale neighborhoods is increasingly fierce, another group of companies is trying to capture what’s left of the city’s fringes. This is the case of Plano & Plano, which already owns a land bank with a public sales value (PSV) of more than R$10 billion. The company focuses on the middle and lower classes, and has a team of 15 people to search for and acquire land. In the past year alone, it has purchased R$2.5 billion worth of space and intends to increase this value by 30% in 2022.

According to Rodrigo Luna, President of Plano & Plano, the lack of supply in the face of very strong demand is causing a strong increase in land prices. Sector variables are construction price and land price. We have some control over construction, but if the value of areas continues to rise, residents will pay the higher price,” says Luna. With the interest rate expected to cross 13% annually soon, this should have a very big impact on companies like Plano & Plano .

Therefore, there is a movement in the sector to have a discussion about the revision of some points of the São Paulo master plan, which currently only allow tall buildings in areas close to transport hubs “what the sector expects is that the executive can discuss,” says Celso Petrucci, chief economist at Secovi-SP : “The possibility of a little increase in the supply of land and even a decrease in the price escalation.”

André Rosa, Director of JLL, has a slightly different view of the current state of the market. According to him, there is still a lot of land to be absorbed. And he sees options that are only now beginning to be explored more, such as retrofitting old buildings. He says, “There is no shortage of land, and what exists is a shortage of land at the right price.”

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