Self-Storage Market Blossoms in Brazil

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By David Blum

It’s often said that when one door closes another opens. This has been the case for self-storage development. Though new development in the United States has shriveled since the peak years of 2003 to 2008, and the volatile economies of many European countries have limited expansion in that region, a bright spot of opportunity exists in Central and South America. Stronger economies; a growing middle class; major commercial, retail and residential development; and year-after-year growth in gross national product have begun to crack open that door.

Since 2004, I’ve been fortunate to work with potential developers throughout Central and South America. I first traveled to Sao Paulo, Brazil, to work with an American-based investor who had the vision to bring American-style self-storage to a country where the product was virtually unknown. At the time, there were fewer than 25 facilities throughout Brazil, which had a population of close to 200 million people. Most of these operations were the equivalent of pre-first-generation U.S. stores.

Over the next six years, Guarde Aqui built three high-end projects. In 2011, 70 percent of that portfolio was sold for $56 million to Equity International, a major American development conglomerate with more than a billion dollars invested in Brazil. Equity, along with many other capital investors, saw the potential growth of this segment and wanted to own and expand the branded operation.

Challenges Remain

Each country offers unique obstacles to overcome when developing self-storage. In Brazil, though much has changed over the years in terms of product availability and resources, some things have remained the same. The challenges we faced with those first three projects still exist.

For example, the simple task of registering the corporation, which used to take 18 months, can now be completed in about six. In the United States, we're accustomed to this process being complete in a matter of hours. In the past, we had to import products like security systems, doors and hallways from the States at the additional cost of a 93 percent duty. Today local steel manufacturers produce adequate hallway systems.

Examples of first-generation self-storage facilities in Sao Paulo.

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