Last month Latin Business Chronicle published this story about the status of Venezuela’s commercial real estate market. NAI Global’s Venezuela-based member, NAI Ferca, is featured in the story. Copyright, and republished with permission from, Latin Business Chronicle. Part 1 appeared yesterday.
URBAN EXPROPRIATIONS
Until now Venezuela’s policies of ending landownership and distributing land has been in rural areas, but there is now growing concern that those type of policies will also reach the cities, España says.
Case in point: the expropriation of Sambil La Candelaria, announced by Chavez on June 11. Sambil La Candelaria was originally scheduled to open in March and was just about to open after all legal permissions and permits had been complied with, according to Russ Dallen, a Caracas investor who is editor-in-chief of the Latin American Herald Tribune.
The move will hurt both small businesses and consumers, critics charge. “The people who will be most affected by this seizure will be the 200 plus small merchants who have invested in this shopping mall and approximately 100 employees who work there,” said an editorial in the VenEconomy newsletter.
Miguel Octavio, head of research at leading Venezuelan investment bank BBO, said low-income consumers also would be affected. “This Mall, built exclusively with private sector funds, was aimed at the poorest sectors of Venezuelan society," he told the Latin American Herald Tribune. "After building the Sambil in the East of Caracas and others in Margarita, Maracaibo and San Cristobal, the Cohen group decided to go for it and built this mall oriented towards the lower classes and placed it in a business area which has deteriorated in the belief that it will improve the area and will allow people to spend their time safely at their mall."
While a growing number of Venezuelans want to sell their residential properties, there are few buyers, however. As a result, there is now a large over-supply of residential property, he adds. “There are a lot of people that want to sell their properties,” España says. “The problem is that there aren’t many buyers.”
The Venezuelans that do buy, do so mostly in foreign market like Miami, New York, Panama and the Dominican Republic, he points out.
Venezuela’s commercial real estate sector is faring better, although it has also been hurt by falling demand and prices. While there has been a marked decrease in demand from U.S. multinationals, there has been a growth in demand from Chinese, Iranian and African companies, España says.
With only small growth in new supplies of modern office buildings, those are quickly picked up. Torre Gerencial, Torre Digitel and Edificio Galipan in Caracas have all been sold out even before they open. “They haven’t been completed and are already sold out,” España says.
Typical clients include local companies, especially in finance, as well as foreign multinationals and embassies.
Meanwhile, the construction sector now also faces threats of expropriation. Last week, Chavez said he would take over any construction company that stopped work as a result of a new law that forces them to stop increasing prices despite growing inflation.
Last month, Venezuelan troops seized a pasta-processing plant owned by U.S.-based Cargill. That followed an April take-over of a Cargill-owned rice-processing plant. Cargill declined comment. Those moves followed the March take-over of a eucalyptus plantation owned by Ireland-based Smurfit Kappa.
Now, it appears, Tetra Pak is the next target. During a broadcast Sunday, Chavez singled out the Swedish packing firm as an example why Venezuela should lift its patent protections. “The statement by President Chavez obviously surprised us given the international recognition of the importance of patents,” Jörgen Haglind, a senior vice president of Tetra Pak, said in a statement. “We will initiate talks with the ministry to better understand the rationale of his statement.”
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