Investing in Commercial Real Estate in Brazil: A High-level Analysis of Real Estate Impact Investing Trends

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In Brazil, real estate is one of the most important national industries and is considered a barometer for the economy. If we combine real estate and civil engineering services, their contribution to the GDP reached 10.6 per cent in 2020.[2] On account of its size, it is one of the first industries to feel the effects of any economic crisis and one of the last to recover. This can partly be explained by the scope and intricacy of its production chain, which demands the direct and indirect participation of suppliers from several other industries. Another relevant aspect of the industry – one that can also help explain its cycles and performance curves – is that real estate products are high-value assets and, as a rule, its best results are achieved during favourable macroeconomic periods, with accessible and abundant credit (both for production and for the acquisition of properties) and with the support of favourable public policies.

According to data from the Brazilian Chamber for the Construction Industry, for every one million reais invested, civil construction creates 7.64 direct jobs and 11.4 indirect jobs, contributing 492,000 reais and 772,000 reais respectively to GDP.[3] Most of what is invested for this purpose in Brazil is returned in the form of GDP, employment, tax and income. Furthermore, the construction industry is one of the top job generators in Brazil, second only to the service industry – which is also indirectly impacted by real estate development.

The real estate industry in Brazil is cyclical and experienced a big boom over the past 12 years, especially during 2009–2010 and 2014–2016; however, the market boom did not last. From then on, it suffered a major recession and has performed poorly. The market boom was largely driven by investments promoted in Brazil in connection with the 2014 World Cup, with matches held in 12 host cities, and the 2016 Olympics, held in Rio de Janeiro, the second largest city in Brazil and the fourth largest in Latin America. The recession that the real estate industry was already facing, in the wake of the economic situation of the country as a whole, was further worsened by the covid-19 pandemic, which impacted the entire global economy and, for the real estate industry in Brazil, particularly affected the commercial sector, with sudden increased vacancy rates due to social distancing, business closures and lockdown policies.

Commercial real estate market in Brazil – the covid-19 pandemic and its current status

It is well known that the covid-19 pandemic has had a worldwide economic impact, and Brazil was not immune. In Brazil, a National Public Health Emergency Declaration was issued through Ordinance 188 by the Ministry of Health, on 3 February 2020 – expiring only on 22 April 2022, following the slowdown of the epidemic in the country. Since then, several rules have been issued, some of them directly affecting the real estate industry – more precisely the commercial real estate market, which will be explored further in this article.

Among such rules were:

  • decrees ordering the closure and restrictions on operation of shopping malls in the city of São Paulo, the largest city in Brazil, as early as March of 2020;
  • legislation governing the use and occupancy of office buildings during the pandemic, restricting the number of simultaneous occupants; and
  • laws restricting the operation of bars and restaurants and business activities.

The decrees sparked intense debate and reactions across the industry, such as tenants terminating their leases before the expiration dates and leases that remained in force being renegotiated, with intense debate on lease payments and charges levied during the period in which the commercial spaces were fully or partially closed. Without making an exhaustive list, it is worth noting that, since the upsurge of the pandemic, several court rulings have been handed down in this context, some favourable to tenants and some favourable to landlords.

Specifically, regarding the real estate and commercial office buildings sector, a significant uptick in the establishment of remote working policies by companies that used to occupy commercial office space was apparent – combined with the return of spaces and square footage by companies. This was a warning sign for real estate developers and investors regarding the future of office space: once companies started to adopt remote working policies, the companies suddenly required, at least in principle, less office space for their operations. Would that be the end of corporate buildings as we knew it? Would the world fully adopt remote working?

As for sites intended for restaurants and bars – centres for social gathering and, therefore, substantially affected by lockdown measures adopted during the pandemic, the greatest concern that arose was how to maintain, in such uncertain times, the occupation of those sites and how to bear their inherent fixed costs (such as the property tax (IPTU) and other charges, in addition to the lease rental cost itself). And would consumers be willing to gather in such spaces? Would they feel safe and confident after the vaccine rollout? Or would people start to favour intimate gatherings, in small bubbles in their homes?

Another important warning sign identified during the pandemic for the commercial real estate market – in Brazil and abroad – concerned the future of shopping malls, especially with the exponential increase in the volume of online sales in the digital shopping world. Would fully digital sales make shopping malls – originally conceived as large shopping hubs, usually with high concentrations of people and with little or no natural light and ventilation – obsolete? Or would malls be able to resume growth in the post-pandemic world?

The commercial real estate market has been faced by the above questions for the past two years; they have been the subject of constant debate by developers and investors in the industry. Developers and investors have made their own forecasts and have been looking for potential solutions to mitigate the unexpected risks and consequences brought by the covid-19 pandemic.

However, the real estate market is resilient and has a unique ability to reinvent itself. As overused as the phrase may be, it is true that moments of crisis are also moments of opportunity. Currently, the Brazilian real estate market has been demonstrating its strength and retaking its leading role in the country’s economy. The residential real estate sector can be pointed to as one of the great drivers of the recovery, but the commercial real estate sector has also been recovering and reinventing itself, adapting to the new times, to the post-pandemic world, in which bygone values have gained new life and increased in importance, especially those related to sustainability and social policies.

Post-pandemic real estate market – growth of ESG

If, on the one hand, some property owners found themselves concerned amid the turbulence mentioned above and often had to make difficult compromises to keep their properties occupied, on the other hand, some sectors saw remarkable growth, one example being the logistics sector. However, given the difficulties then being faced by people all over the world, the pandemic was responsible for raising the importance of social well-being to new levels, which impacted the main sectors of the world economy, especially the capital markets and large corporations, which started to take environmental, social and governance (ESG) measures. The real estate market has followed this trend and has progressed in preparing to meet the challenge of the exponentially growing demand for real estate development projects that implement ESG policies that follow the ESG measures.

‘ESG’ was a term coined in 2004 in a study conducted by the Global Compact in partnership with the World Bank called ‘Who Cares Wins’. It emerged from a challenge posed by UN Secretary-General Kofi Annan to 50 CEOs of large financial institutions about how to integrate social, environmental and governance factors into the capital markets.

Almost 20 years later, the challenge has evolved into an undeniable reality and brought irrevocable change to corporations and their leaders. A survey conducted by the Global Network of Director Institutes showed that 85 per cent of the nearly 2,000 directors involved believe that, in the long term, we will focus more on ESG, sustainability and value creation for stakeholders.[4] McKinsey & Company pointed out in another survey that 83 per cent of C-suite leaders and investment professionals say they expect that ESG programmes will contribute to increased shareholder value within the next five years.[5]

Interest in the search term ‘ESG’ in Brazil virtually tripled from February 2021 to February 2022. Searches for this term grew 150 per cent as compared with the previous 12 months, according to a Google Trends survey carried out at the request of Jornal O Globo.[6] Brazil was the Latin American country that most searched for the acronym ‘ESG’ during the 12 months of the survey and one of the 25 countries in the world that most searched for the subject during that period. In 2021, interest in ESG reached a new record high in Brazil. In other words, Brazilians had never searched for the subject as much as they did last year – a record that can still be broken again in 2022.

Brazilian companies are increasingly understanding and adopting ESG criteria. Operating in compliance with ESG requirements increases business competitiveness, whether in the domestic market or abroad. In the present world, in which companies are closely monitored by their stakeholders, ESG is a source of strength, lower costs, better reputation and greater resilience amid uncertainties and vulnerabilities, and this is true for the real estate and construction markets, although each of them in its own way.

According to Ernest & Young’s Climate Change and Sustainability Services, ESG information is essential when making investment decisions,[7] and ESG criteria are fully aligned with sustainable development goals (SDGs), a key subject of debate in the financial market. The 17 SDGs bring together the greatest challenges and vulnerabilities of society as a whole.[8] Therefore, they focus on the main issues to be closely monitored. In addition, they open up great opportunities because they are needs-orientated.

In Brazil, the relationship between SDGs and business is evident in large companies. According to a survey carried out with companies included in the B3 Corporate Sustainability Index, of the Brazilian Stock Exchange, 83 per cent have implemented processes for integrating SDGs into their strategies, goals and results.[9]

Although ESG is a relatively recent concept, Brazil has been paying attention to the ESG agenda for a long time, especially in relation to environmental and social issues. As for the environment, the world’s eyes are turned towards the Amazon and other relevant biomes; the first United Nations Conference on Environment and Development, Eco-92, was held here and, two decades later, Rio+20 introduced new environmental challenges for the planet. In the social field, Brazil has also struggled with poverty and inequality, always seeking initiatives to fight hunger, whether through government programmes, the third sector or even private player initiatives.

Over the past few years, however, following a global trend and driven by the challenges and new perspectives arising from the pandemic, ESG issues have gained traction and are increasingly among the focal points of investors in the country, as discussed above. Beyond the previously mentioned concerns with ‘E’ (environment/sustainability) and ‘S’ (social issues), the ‘G’ factor of the acronym has also been gaining momentum in Brazil, largely due to recent cases of alleged corruption in many of Brazil’s largest companies – especially after the world-famous ‘Operation Car Wash’ scandal. Thus, the Brazilian market increasingly takes into account the ESG indexes of each company, offering greater security to investors and mitigating risks of losses arising from sensitive environmental, social or governance issues.

A survey conducted by the consultancy firm Deloitte carried out in March of 2022 with 2,000 executives from 21 countries, 127 of them in Brazil, shows that Brazil is above the global average for ESG. While 80 per cent of Brazilian companies are already using more sustainable materials (such as recycled and low-emission products), the global average for this is only 67 per cent. Seventy-three per cent of Brazilian companies train their employees on the impacts of climate change, while the global average for this is 57 per cent. And 71 per cent of Brazilian companies have increased their energy efficiency — worldwide, the rate is 66 per cent. Fifty per cent of Brazilian companies have developed new sustainable products or services, while the global average is 49 per cent. Requiring suppliers and business partners to meet specific sustainability criteria, another major challenge, is a reality for 48 per cent of Brazilian companies (versus 46 per cent worldwide).[10]

Several rankings have been released on economic sectors that have advanced the most in the adoption of ESG policies and measures. Among the most ESG-engaged are the cosmetics, retail and finance industries. On the other hand, the real estate and civil construction industries commonly appear last in this ranking, with low engagement and less effective ESG efforts. Other data supporting the same conclusion comes from a survey carried out by Ranking Merco, in partnership with the Brazilian Association of Business Communication (Aberje), which lists the ‘Top 100 Responsible’ Brazilian companies in ESG measures.[11] Real estate, despite being one of the most important industries of the Brazilian economy, has contributed only eight companies to this ranking.[12]

This below-average ESG performance can be explained by the high cost of real estate products and the financial impact that adopting ESG measures could have on the industry. Location and other features and amenities of each real estate development project are still factors that substantially impact the customers’ purchase decisions, according to the Brazilian Association of Real Estate Developers (ABRAINC); therefore, any cost increase to make these projects more ESG-friendly is a decision that is still made cautiously by real estate market players.[13] Another contributing factor is that, in Brazil, many real estate and construction companies are family-owned businesses, hindering the adoption of the latest corporate governance and transparency measures.

In contrast, a study entitled ‘Property Purchase Journey’, conducted by ABRAINC and the consultancy firm Brain Inteligência Estratégica, points out that ESG criteria have become a decisive factor for property buyers.[14] Most of these buyers were seeking houses, but it is nonetheless possible to use the study to grasp how the minds of potential property buyers in Brazil work. To make the purchasing decision, 66 per cent of respondents said they would be willing to pay more to have solar energy (the highest rate in the survey); 57 per cent would agree to pay a higher price to have nature integration, while 56 per cent would pay more to have rainwater management technology. These were three of the four items most mentioned by respondents (the other was connectivity technology, with 56 per cent). Only 15 per cent of the buyers would be willing to have solar panels removed from the property and pay less for the purchase – which means that the vast majority valued this sustainability item above cost savings.

The real estate industry has long sought to adopt more sustainable practices, both through environmental certifications (such as the LEED certifications offered by the Green Building Council (GBC)) and through the adoption of environmental management systems, such as ISO 14001 from the International Organization for Standardization. According to a survey conducted by the GBC, civil construction accounts for approximately 75 per cent of Brazil’s annual consumption of natural resources, 44 per cent of the country’s energy production and 39 per cent of Brazil’s energy-related net carbon emissions. However, developments with sustainability certifications consume 40 per cent less water and 30 per cent less energy and generate 65 per cent less waste – pointing to a solution that promotes sustainable growth. In addition to these benefits, these developments are also more flexible, have lower consumption and lower raw material costs, and thus often offer higher resale values.

Main trends in the commercial real estate market in Brazil

We know that the real estate and construction industries still have a long way to go before fully adopting ESG measures and attracting more and more investors – and also to satisfy the ESG demands of their end customers, as can be seen in the survey above. Still, it is already possible to see some changes and trends in the market, especially in the commercial real estate market, with disruptive and innovative solutions. Attention to ESG measures is growing in the corporate world and companies that claim to be ESG-friendly tend to invest in office spaces that reflect their core principles and values.

Across the market, new and less aggressive construction techniques are being adopted that respect natural green areas and incorporate materials that are less harmful to the environment or to the people handling them. Water reuse and the adoption of clean energy (whether as cogeneration or as the main power source), mentioned above in the ABRAINC and Brain Inteligência Estratégica survey, are a reality in new real estate development projects – all the more important in a country with an abundance of sunlight and high rainfall.

Having a good relationship with the communities surrounding new development projects, with special attention to making use of the local workforce (preferably from the surrounding areas) has become mandatory. In addition to generating employment and income for the neighbouring communities, it not only raises awareness about the local reality and its needs, but also fosters partnerships for the restoration and maintenance of squares, parks and other green areas.

The retrofit option, an idea widespread in Europe but still growing in Brazil, is another important ESG tool, as it replaces obsolete and outdated materials with more sustainable and energy efficient options and revitalises old urban spaces without the need to explore new areas.

The covid-19 pandemic, which accelerated the adoption of remote working, making it almost an obligation in some sectors, also gave rise to the concept of the ‘anywhere office’ – developments designed to allow its users to work properly, with suitable infrastructure, from anywhere. This is a more structured expansion of the home office concept, which forced many people to craft homemade solutions to work problems.

Regarding corporate office spaces, the market has embraced concepts that value company employees and reduce the environmental impact of professional relationships. One such concept is the idea of decentralised offices, instead of headquarters located in large centres, so that offices are closer to employees, thereby reducing commuting time and, consequently, CO2 emissions. The incorporation of natural light (including by encouraging companies to end the workday in the late afternoon), shared offices and areas for socialising and brainstorming (allowing for relaxed social events for company personnel) are a growing trend throughout the country.

The transformation of shopping malls into large entertainment venues (no longer intended just for shopping), with architecture increasingly different from the traditional mall, is an ongoing trend in Brazil that has also gained momentum in recent years. Appreciation of natural light, ventilation and landscape design became even more important after the covid-19 pandemic, a period that raised many questions about the future of closed living spaces. Contrary to expectations, the shopping mall sector has been growing in the country, finding new spaces and coexisting with the expansion of e-commerce, occupying what is currently called the ‘phygital’ market.[15]

Logistics was one of the sectors that grew the most during the coronavirus pandemic. Brazil saw a boom in the use of apps and shopping websites. The sector envisioned strategic distribution centres closer to their final consumers – including by forcing delivery apps to move into stores that had gone dark so as to compete with each other or with traditional brick and mortar players. In this regard, abandoned kitchens of bars and restaurants also emerged to serve delivery apps. Adopting this business model is a strategy that allows market players to explore new territories in the city and to get closer to potential consumers, reducing greenhouse gas emissions due to the reduction of the need to travel long distances. The result is innovation in service of the new times – and a contribution to ESG.

Finally, real estate companies and, specially, civil construction companies – deeply impacted by Operation Car Wash, as mentioned above – have sought to create ESG committees (focusing especially on governance) and adopt transparency and compliance measures. These companies have come to understand that the three letters of the ESG acronym are closely linked to each other – and that they should be looked at closely for the foreseeable future.

How to invest in the Brazilian real estate market

Brazil has several legal frameworks for both direct and indirect investment in the real estate market. Indeed, many public spheres in Brazil have sought to guide and lead the ESG debate for those wishing to invest in real estate.

Some Brazilian municipalities have conceived projects that offer discounts on IPTU to taxpayers who adopt environmentally friendly practices, such as renewable energy, harvesting and using rainwater, improved waste management and construction of resources such as green roofs and permeable pavement.

Brazilian regulators are starting to demand more sustainable practices in new real estate developments. In Rio de Janeiro, for example, new regulations require that some new buildings incorporate rainwater harvesting and meet energy efficiency criteria.

Real estate investment funds are also requiring the adoption of sustainability principles, raising funds for smart city ventures in major urban centres of the country. One such example will be built in Brasília, the capital of Brazil – a smart city will be developed in an area of one million square metres and will house several new buildings. The goal is to create an innovation district and home to tech companies and startups.

The National Bank for Economic and Social Development (BNDES), the main financing agent for the country’s economic development, has been increasingly addressing the importance of sustainability and governance, developing financial instruments (such as green bonds) to raise capital for sustainable economic initiatives. These new instruments favour a fresh approach to the funding of residential, commercial and other real estate projects developed under BNDES guidelines, such as compliance with Brazilian law and the environmental licensing regulation.[16]

Foreign investors and developers are welcome in Brazil and, in general, do not face any barriers or resistance to investments in urban real estate anywhere in the country. Depending on the venture and the legal framework, there could be certain restrictions, and tax impacts also differ on a case-by-case basis. Brazil has a track record of accommodating and welcoming different types of investment structures in the real estate market, whether through direct or indirect investments, always in line with current legislation.

Final considerations

Although the concept of ESG is still unknown to a large part of the population, Brazilians perceive its effects and its importance in everyday life; investors and consumers have been increasingly demanding ESG initiatives from corporations; while the government pressures companies to adopt greener, cleaner and more transparent approaches. Environmental, social and governance issues have become a key element in the survival of institutions – as well as the planet itself.

As a crucial sector for any nation, construction and real estate services needs not only to participate, but to be one of the leaders of the ESG debate, especially in a country where ESG concepts have always been so vital and widespread. As mentioned above, the direct and indirect impact of the real estate market chain in Brazil is enormous and deeply affects the country’s GDP. This opens up a great investment opportunity in a society that has recently experienced economic, political, social and public health crises, the latter in particular caused by the covid-19 pandemic. May the response to all of them, whether in the real estate industry or otherwise, walk hand in hand with ESG.


[1] Maria Eduarda Bérgamo and Rafael Bussière are partners of Campos Mello Advogados in cooperation with DLA Piper’s real estate practice.

[2] According to information from the Brazilian Institute of Geography and Statistics (IBGE), available at, accessed in October 2022.

[4] Global Network of Directors Institute (GNDI) research, available at, accessed in October 2022.

[6] Survey by Google Trends at the request of Jornal O Globo, available at, accessed in October 2022.

[7] Rede Brasil do Pacto Global, available at, accessed in October 2022.

[8] As clarified by the United Nations on its Brazilian website, the ‘Sustainable Development Goals are a global call to action to end poverty, protect the environment and climate, and ensure that people everywhere can enjoy peace and prosperity’ and such 17 goals would be as follows: poverty eradication; zero hunger and sustainable agriculture; health and well-being; quality education; gender equality; clean and affordable energy; decent work and economic growth; industry, innovation and infrastructure; reducing inequalities; sustainable cities and communities; action against global climate change; life on water; life on land; peace, justice and effective institutions; and partnerships and means of implementation.Available at -br/sdgs, accessed in October 2022.

[9] Rede Brasil do Pacto Global, available at, accessed in October 2022.

[11] Among the studies, we emphasise the Global Positioning Sustainability (GPS) ranking by Walk the Talk by La Maison, available at and the Top 10 Companies with the Best ESG Value of B3, available at, both accessed in October 2022.

[12] Ranking Merco Empresas, available at website, accessed in October 2022.

[13] A study entitled ‘Jornada de Compra do Imóvel’ (Property Purchase Journey), conducted by Abrainc and the consultancy firm Brain Inteligência Estratégica, mentioned on, accessed in October 2022.

[15] ‘Phygital’ being a term that bridges the gap between the physical world and the digital world.

[16] More details and information on this matter can be found at, accessed in October 2022.

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