Finding a good place to open an office or a franchise in Brazil can become a difficult job nowadays. This article will explain what are the reasons for this current business location shortage in Brazil.
Why location shortage happens in Brazil?
Business location shortage in Brazil is related to the increase of job offer. With the good moment for the economy people have more access to credit and better salaries. That's the law of supply and demand and as all social classes in the country have more money to invest in their own business, the price for renting of commercial establishments raise.
Over the last two years this growth was of 80% over the inflation and the key money - allowed in Brazil -, raised twice.
Where exactly does it happens ?
There are different places where this shortage is taking place, but apart from major business areas such as the metropolitan areas of São Paulo, Rio de Janeiro, Porto Alegre and Belo Horizonte, cities located in the countryside with a strong street market and a considerable population - such as Campinas, Sorocaba and Bauru to name a few -, also have their commercial properties overestimated.
The situation in shopping malls is the same. Commercial establishments saw renting prices increasing 200%. In big cities such as São Paulo, the price for renting in key locations such as Jardins and Paulista Avenue can achieve R$ 150.000 and the key money can surpass R$ 8.000.000.
High renting prices are inhibiting franchising companies from establishing in Brazil, making them lose space in the market. In 2011 these companies reported R$ 75,9 billions, but this number could be better if the rent prices were not so high. Some franchises are changing the stores models, making them smaller in order to avoid losses due to rent prices.
One important point is that franchises would rather not staying in big cities as São Paulo and Rio de Janeiro. These establishments are moving to places near the commercial centers around those cities, where the rent price is not overestimated.
A good alternative to run away from these overestimated commercial establishments are the new areas called “strip centers”, usually located near gas stations.This new address for franchises and stores seems to be a good alternative for those who don't want to pay high rent prices.
The problem of the “strip centers” is that they can not support all sorts of establishments, these areas are indicated to franchises that works with food and grocery stores, they are not places that support clothing stores, for example.
Strip centers are places that people stop by when going to gas station, for example, so they hardly go to these areas only to buy specific items , they would rather go to the mall.
These places don't have key money and the rent price is a lot cheaper, but the renting period for these establishments are not long, approximately of four years and then the rent price must be reviewed.
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