This week's headlines impacting commercial real estate in the emerging markets.
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Headlines:
Global
Gen Z is a generation most shake their heads at, but when it comes to liking malls, no generation does it better. According to a recent ICSC study, Gen Zs say they prefer in-person shopping as much as online. Further, 97% say they regularly shop in brick-and-mortar stores and use online shopping for convenience. Whatever the cause, this matters because Gen Z represents nearly half of global consumers with a spending power exceeding $360 billion that is only growing.
A January 2024 investigative journalism piece by 60 Minutes shined a light on the plight of commercial real estate owners reeling from remote work consequences. The underutilization of offices is a trend that has been covered previously by the Emerging Real Estate Digest: (1) Fairytale of Office-to-Residential Conversions, (2) The Remote Work Ship is Sinking, (3) Is Remote Work a "Bunch of Bullsh*t"?, and (4) Coworking Is Not The Holy Grail.
The combined entity will be a leading infrastructure investor across the globe and it may in the future see value in making targeted real estate investments in the emerging markets. Actis is a leading emerging market investor with impressive track records in Africa, Latin America, and Southeast Asia. General Atlantic dabbles in emerging market investing but it's not part of the ethos as is the case with Actis.
Latin America
In a surprising move, GM has announced a massive $1.4 billion investment into Brazil's automotive sector over the next five years. The move is surprising because only last year GM was closing factories in Sao Paulo to much consternation to the protestors. Ford pulled the plug on Brazil last year after 100 years, but Stellantis and Volswagon are joining GM at the "doubling-down" table.
In a David and Goliath scenario, an El Salvadoran family-owned retailer with 111 stores has successfully acquired a controlling stake in Colombia's largest retailer which has five times the number of stores in Colombia, Uruguay, and Argentina. The acquisition is based on a valuation of $1.18 billion, representing a 51% premium of the share price before the public takeover process was initiated. Previous offers at a similar valuation by a Colombian billionaire were rejected which would have placed the formerly French retailer in Colombian hands.
China has risen to a position of dominance in Latin America which is surprising given the geographic and cultural proximity the region has to America. A pushback from Washington DC seems imminent which represents an opportunity for some investors and strategically positioned countries.
Africa
One of the Development Finance Corporation's 17 most recently approved investments, totaling $3.3 billion, will be for real estate in Zambia. The funding will come in the form of a $17.1 million loan to fund a hotel in Zambia.
A $2 billion port expansion at Maputo in Mozambique is made possible in part due to rife inefficiencies that now characterize South Africa's state-owned ports. Mozambique opted to privatize in 2008 and has been on a steady growth trajectory ever since. Coal exports through Maputo soared 25% in 2023 as companies took measures to divert shipments away from South Africa. The expanded port will nearly double total capacity, with coal capacity increasing 140% and shipping container capacity quadrupling.
Sicomines is a major copper and cobalt producer in the DRC ranking number one in copper production. It began operations in 2008 through a $6.2 billion minerals-for-infrastructure deal but only a third of the promised spending has materialized. The renegotiated mining concession gives more control of production to the government, higher royalties, and reaffirms the commitment to invest in infrastructure as originally promised by the Chinese companies in 2008.
Southeast Asia
The leading bicycle tire company in Germany, Schwalbe, is doubling down on its Vietnam manufacturing operations. It has operated in the country since 2014 with the assistance of its Korean JV partner, Hung-A Ltd. The simultaneous closure of the Indonesian manufacturing operations indicates that, at least in this instance, Vietnam had a superior labor offering. Germany is very much focused on growing economic ties with Vietnam as evidenced by a Chancellor visit in November 2023, and a Presidential visit in January 2024.
A new $300 million fund targeting Thailand hospitality investments has been launched by Thailand's wealthiest family, the Chirathivats. The first investment will be in a low-rise apartment building in Phuket with a price tag of $360 million. Sansiri will co-invest in the project and is a top luxury property developer in Thailand having been founded in 1984 and developed over 318 projects comprising 86,070 housing units across seventeen provinces.
The conflict in Asia over who controls the South China Sea is primarily driven by the fact that China has claimed it all for itself and has the strongest military presence in the region. The Philippines is pushing back, with America's support, and there are indicators that other nations will join the conflict including Japan which recently approved its largest military budget ever.
