Profiting from the 2014 World Cup in Fortaleza Part 1
|On May 31st this year, I sat in a crowded restaurant on Fortaleza's boardwalk. Everyone was silent. No one even dared fumble with their cutlery. The tension was unbearable...that was until the restaurant erupted. Champagne corks started flying, tables were for dancing. Far away in Nassau (on the Bahamas) Fortaleza was named as a host city for the 2014 Soccer World Cup. We were glued to the live feed. |
This was good news. We knew it would mean dramatic infrastructure upgrades, investment in tourism, media attention, a feel-good factor and marketing of Fortaleza. The tournament itself will see a tourism boom and unprecedented global exposure for Fortaleza.
I'm back in Fortaleza...and writing to you from the same restaurant. This is my eighth scouting trip here in sixteen months. The opportunities are so good and the market moving so fast, I need to come here every two months. Now Fortaleza is getting down to the serious business of planning and delivering the infrastructure it needs to have in place for 2014.
The mood on the ground is one of excitement. There's a buzz in the air. The Governor, Cid Gomez, summed up the feeling of the city when he said: "The movement of wealth that an event like this can bring to our region is undoubtedly a landmark in our history." There is unity of purpose here. This is Fortaleza's chance to show the rest of Brazil and the world how great a show they can put on.
I find a real estate market and economy here that is already benefiting from The World Cup Effect. Companies involved in, or pitching for projects associated with 2014 Soccer World Cup, arrive weekly in town. The two five-star hotels (The Gran Marquise and Hotel Luzeiros) on the boardwalk I visited were full. Corporate lettings were unavailable....and this is the low tourist season. Already strong demand has accelerated since this announcement. If you hope to travel here in the peak domestic tourism times of mid-December through Easter, you need to book accommodation now.
This is good news for those of us who have an interest in the short-term rental market in Fortaleza.
Foreign investors looking to profit from this World Cup Effect are on the prowl in numbers. Mostly from Northern Europe, these guys have seen this trend before. Real estate prices in South Africa rose by a whopping 35% in 2005 with the hosting of the 2010 World Cup a major driver. A sense that "green shoots" are emerging in Europe is encouraging investors who have been cautious because of problems in their home countries.
The big buzz in Fortaleza (and surrounding areas) is about the huge investment in tourism and infrastructure. The government is spending 9.8 billion reais ($5.25 billion) in Fortaleza in the lead up to 2014. 63.3% of this spend will be on infrastructure projects. The governor released a list of projects that will be delivered for the 2014 games in June this year.
850 million reais will be spent on tourism projects--gentrification of urban areas and installing attractions like the state aquarium. And big amounts will also go toward things you'd expect--improved internet access, better gadgets for the police, new equipment for the hospitals, and so on.
Transport infrastructure, with a 6 billion reais spend is the big winner. The government is committed to delivering quality projects that will encourage and facilitate the economic development of the region.
The Fortaleza area is going to see a major upgrade in road (there will be a new ring road), rail (Fortaleza is getting a metro system), bridge, port, and airport infrastructure. This will make certain areas more accessible and desirable. This will drive real estate prices in these areas higher.
Many of the projects on the governor's list could create an opportunity for us to profit. Here are a few that have caught my eye:
• The South Line of the Metro will cost 1.8 billion reais. This will link downtown with middle-class areas and outlying industrial areas.
• 450 million reais is to be invested in the stadium. This area will also benefit from improved transport infrastructure.
• Over 100 million reais has been committed to new roads and road upgrades in the Morro Branco area. 800,000 tourists visited this area last year. Expect this number to rise as infrastructure improves. In addition to the local investment, the new ring road will reduce the drive time to this area to 45 minutes.
• Fortim (to the east of Fortaleza) has been identified as an area to host visiting teams’ training camps. The government is already negotiating to host Spain. This project will involve a major upgrade in tourism infrastructure in addition to huge marketing exposure for Fortim.
• Road access is on its way to the village of Praia Bela from Aquiraz. This is a relatively small project (10.3 million reais) but will have a huge impact on Praia Bela. This area will also benefit from the completions of the bridge and new road from Praia du Futuro to the Beach Park area.
• Further funds have been allocated to upgrading the boardwalk area. And to the east of the boardwalk, the Port of Mucuripe is getting a 120 million reais passenger terminal.
• 9.7 million reais has been allocated to complete the bridge over the Coco River. Another 62 million has been allocated to link this bridge with Fortaleza’s ring road. This project will have a big impact on Praia du Futuro and the area that’s going to open up on the other side of the bridge.
If we buy pre-construction today in areas set to benefit from The Path of Progress, by the time we take delivery of our units in three years time, this new infrastructure will have been delivered or will be within months of being delivered. Neighborhoods will change beyond recognition. Particularly the areas around the new aquarium, around the stadium line and the tourist areas (like Morro Branco) to the east.
The end users (of which there are many in Brazil) won’t catch on to this until they can see, touch, and jump on the infrastructure. Our place is ahead of them.
Stay tuned in the coming weeks for Part II, as I explore opportunities created by these projects.
|A finance graduate, Ronan McMahon worked in the e-business consultancy and dot-com industries before joining International Living as Real Estate Marketing Director in January 2004. Ronan has been an active real estate investor since his early twenties and joining International Living gave him the opportunity to marry his personal and professional interests. Last year Ronan took up the position of Executive Director with Pathfinder.|
Pathfinder is International Living's preferred Real Estate advertising partner. Pathfinder scouts the globe to find the most unique and value-oriented real estate opportunities.
Ronan writes International Living's Real Estate Trend Alert and regularly contributes to International Living's print and online publications. Ronan has travelled to 15 countries in the past 12 months alone following real estate trends with the potential for profit. Instinct, experience and an unrivalled black book of contacts give Ronan McMahon access to the inside track to unique profit opportunities.
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