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Palacio de Hierro Polanco: New benchmark of luxury department stores worldwide

The opening of the new El Palacio de Hierro store, at the site once occupied by the Moliere 222 shopping center has created a milestone in the development of luxury department stores worldwide. With an investment of US$300 Million, the new Palacio de Hierro Polanco is not only very large but also very luxurious. Its 55,248 m2 of sales area makes it one of the largest department stores in the world, but what it makes it stand out from any other store is the quality and the number of luxury brands that have a presence.

Captura de pantalla (351)The department store concept emerged during the second half of the nineteenth century with some legendary stores such as Le Bon Marché (1852), Printemps (1865), La Samaritaine (1869) and Galeries Lafayette in Paris and continued in the early twentieth century with the opening of iconic stores like Harrods (1905) in its current location and Selfridges (1909) both in London.

The concept grew quickly in the United States after 1920 with the emergence of JC Penney and Sears, and spread globally with the development of the American Mall in the 1950s. There are currently department stores in virtually every region of the world, just to mention some well-known; La Rinascente, founded in 1865 in Italy and El Corte Ingles, founded in 1934 in Spain, but even in the Soviet Union, Lenin founded the GUM department store in Moscow in 1921. There are some countries with very successful department stores concepts such as the UK where John Lewis, House of Fraser, Harvey Nichols, Marks & Spencer and Debenhams are from and South Korea where we can find Lotte and Shinsegae.

In Latin America, there are also very successful department store concepts; worth mentioning are Falabella, founded in 1889, Ripley, Almacenes Paris and La Polar from Chile, Oechsle founded in 1888 in Peru and Siman
and Felix B. Maduro from Central America. In Mexico, the two largest chains, El Palacio de Hierro and Liverpool, which were founded by European immigrants more than 100 years ago, with no doubt feature some of the best department store design globally.

Captura de pantalla (350)The new Palacio de Hierro Polanco, located in the prime block surrounded by Moliere, Horacio, Homero and Platon, is reborn as the ultimate destination of luxury, fashion, home and style in Latin America and is not only the largest department in our continent, but the first to accommodate new concepts and brands from around the world. It is worth noting the ladies’ shoe section with 1,800 m2 and the gourmet area which includes a terrace of 1,570 m2.

Paying tribute to the Mexico City, the store is inspired on some of the most representative districts of the capital. For example, the central corridor that crosses the entire ground floor represents Paseo de la Reforma, the capital’s main artery. Lomas de Chapultepec and Polanco are represented in the next level dedicated to ladies’ fashion; while the second floor of gentlemen, technology and gourmet, are influenced by the Roma-Condesa corridor. Finally, the Pedregal de San Angel neighborhood is interpreted on the third floor of Home & Furniture.

The store’s four-story vertical circulation, led to the creation of two courts, the principal one, sports a spectacular glass dome trough which the BAL Tower can be seen in all its glory; the second, has an imposing LCD screen on its ceiling, reproducing digitally the image of the historic stained glass of the original El Palacio de Hierro store, created by Jacques Gruber in 1921.

International design firms such as TPG Architecture and Gensler were in charge of interior design. The iconic pyramid building of El Palacio de Hierro, was tapped again by Javier Sordo Madaleno, firm responsible for the original design of this mixed-use project opened in 1997.

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Gava Capital: Supporting the future major developers in Mexico

The best opportunities can arise from the worst circumstances, and Gava was one of the companies that knew how to take advantage of the 2008 crisis to enter the real estate sector, helping small and medium developers to grow their businesses.

Captura de pantalla (331)Andreu Cors recalls that in 2009, the global financial crisis coincided with a deceleration in Mexico, when the funds that had existed and the investments being made in the real estate sector disappeared. However, there was still a strong housing demand and there were good developers who needed capital to complete projects.

“The opportunity lay at the bottom curve of the cycle, when everyone was getting out of the business and we had the vision to get in, which allowed us to participate in the upswing of the sector’s cycle. Today, we have 11 strategic partners with 29 projects in development, after five years of operations”, Andreu Cors explains.

Gava sees important potential in the medium markets, including Merida, Veracruz, Queretaro, Tijuana, and naturally also in Guadalajara, Monterrey, and Mexico City.

Sebastián Garza T. notes that the business of Gava has been to find the talent with which to share values and develop relationships based on trust. Developing real estate comes after the relationship has been established.

Roberto Cantú of Grupo Avante, one of Gava’s developer partners, emphasizes that values such as honesty, teamwork, respect, and trust are important in the business relationship built between the two companies. Meanwhile, Federico Sada Rivero of Insar, adds that their relationship with Gava has been like a family, knowing that Gava isn’t going to let them down.

Andreu stresses that the developers they are looking to fund are small or medium companies that already have some experience, and which have built their capital with money from friends and family; “we offer companies the opportunity to move to the next level, supporting their growth, improving their processes and institutionalization, obtaining more capital to develop bigger projects. When they are already developing or operating, they have very little time to start new projects, because they’re dedicating more time to these aspects; so we come in to help secure the land and structure the projects during the initial phase,” he added.

Sebastián Garza T. adds that, “we’re a mix between a developer and an investment fund, we work hand in hand with our partners from the beginning, supporting the search and negotiation for land, enriching the planning stage, or securing bridge loans, as well as helping with the structuring and financial connections. Many of our partners appreciate the discipline of our processes, as we help them to put their businesses in order and focus on what’s important.”

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Gava helps developers grow

Among the advantages that Roberto Cantú Alanís finds working with Gava, he highlights the quickness of response, the business vision, and the constant drive to go beyond and make a difference in the market. The reality has exceeded expectations, he notes. “This has been an enriching experience: from the personal touch, the constant push for the accelerated growth of the project, the search to reduce risks, and their focus on increasing profitability”.

From his perspective, Federico Sada Rivero of Insar, comments they’ve been working with Gava for five years and they are currently collaborating together on five projects. “We were Gava’s first formal partners, and it’s been an experience that has brought much value added, as they are very clear on the methodology and the indicators needed for good decision making in the life of the projects, which has complemented our experiences as developers”.

“We’ve found there are many advantages to having them as a partner: they’re quick and precise in making decisions, they add value to the business structure and they are very good at generating new business”.

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MAPIC 2015, 21st Edition of the World’s Leading Global Retail Real Estate Show

The concept of MAPIC seems simple and obvious today, but when it was launched in 1995, it was both audacious and visionary. The idea of giving international retailers a large overview of sites where they could develop on an international scale, anticipated the massive globalization of today’s retail. Over the years, the retail real estate industry has gone through many ups and downs but MAPIC remained at the forefront of the industry, welcoming a large number of new retail brands and developers from around the world.

Though some attendees dropped out due to security concerns in the wake of the Paris terror attacks, MAPIC’s 2015 edition was one of the most successful ever, with developers and retailers declaring themselves bullish about international expansion and showcasing their projects; MAPIC hosted 8,100 delegates and 470 new brands. The impact of digital on retail, with topics such as omnichannel and the collection and processing of data, but also which brick and mortar solutions can suit digital players’ needs, were key topics at this year’s MAPIC. It were particularly discussed and analyzed at the MAPIC Innovation Forum, an area of the exhibition hall dedicated to innovation, where delegates could attend conferences and presentations to learn about the use of innovative technologies and solutions to increase footfall and retail property value.

A strong focus on entertainment in shopping centers or retailtainment was done at MAPIC, highlighting the fact that shopping centers are increasingly becoming leisure destinations and not merely places to “shop and go.” A dedicated pavilion brought together new market players from the retailtainment industry. The efficiency and return on investment of pop-up stores, which are developing fast and can take multiple forms, was also discussed in a dedicated conference session.

USA, country of honor at MAPIC 2015

The United States is a pioneer in the retail industry and has been represented at MAPIC since the first edition. The United States has always been dynamic and creative whether in the field of shopping centers, retail brands, retailtaiment or digital. That is the reason why the USA was selected as the Country of Honor at MAPIC 2015. A pavilion dedicated to key US players in the retail real estate industry and several sessions of the conference program focused on the US retail market and its specificities.

MAPIC AWARDS 2015

As every year, the competition aimed to reward the most dynamic retailers and shopping centers in terms of innovation and creativity in 2015. The organized received a record number of 110 applications this year, and they were amazed by the innovation, creativity and excellence of the projects presented.
The winners of the MAPIC Awards 2015 were:


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Dynamics of the finished new housing industry and market outlook

In the 40 most important real estate markets of the country, 2015 brought a continuation of the consolidation trend seen in the Middle, Residential, and Residential Plus markets insofar as the number of project starts is concerned. The conditions of size, profitability, and feasibility of developing projects in those segments would seem to favor more and more project starts in the middle and upper segments of the market. However, in the overall result, the number of project starts in 2015 was 31% lower than the number of starts in 2014, thus breaking the upward trend that began in 2010 and seemed as if it would continue for longer to gradually recover the dynamics of new project starts.

Project starts for 2016 will depend mainly on planning, land purchases, management, and investments started, in the best case scenario, in 2015.

For the affordable entry level segments (S and E), the guidelines for mortgage financing, as well as the effects on the profitability of projects in these segments, given the longer time required compared to higher value segments, will continue to affect a smaller number of affordable entry projects started over 2016.

The volume of units started in 2015, however, has shown no clear signs of recovery. The volume of unit starts has been on an ongoing downtrend since 2007, without it reversing significantly.

 Captura de pantalla (284)In nearly every segment, the volume of unit starts in 2015 has decreased significantly compared to the number of units started in 2007. In the best case, the decrease was 35% (Middle segment); however, the extreme drop was seen in the S segment (77% less unit starts in 2015 vs. 2007). Overall, the volume of unit starts in 2015 was 78% lower than in 2007, going from  417.8 thousand unit starts in 2007 to an estimate of slightly over 92 thousand unit starts in 2015. This opens up great opportunities to weed out the market and make room for new projects.

The relative stability of the overall sales volume will allow imbalances between supply and demand to prevent distortions in prices or purchase terms.

The sales in the 40 main housing markets in the country have remained at slightly over 300 thousand units per year in the period from 2010 to 2014. In 2015, the scarcity of project and unit starts has hampered a full recovery of the supply to make the demand want to remove inventories. Thus, in 2015, the total sales volume is estimated to be 26% lower than in 2014. Ahead, if the planning processes for starting up new projects in 2016 do not bear fruit and
the project starts in 2016 do not replenish the offer of housing depleted by the market, sales volumes of finished new housing could fail to recover.

The train of new unit and project starts could have effects next year on the monthly sales volumes in each city. As, overall, the sales progress is over 55% of the units under construction, the markets are deemed to lack an excess supply, which would see a positive response from monthly sales volumes through the entry of new projects in agreement with the market.Captura de pantalla (283)

If new projects are not started, the lower number of finished new housing units offered will generate significant decreases in sales volumes. Thus, at the current sales level and without new project starts to replace the sold
out ones, units for sale will suffer a significant depletion in 2016.

The impact on average national prices, based on the lower supply dynamics, and thus, a similar response from demand, has been limited.

Thus, average prices per unit have remained stable, recovering, in the best case scenario, the inflationary increase. Some strategies of reducing the inhabitable area, as well as standardizing the attributes and finishes, will make it possible to limit the increase in prices to maintain the stability of sales.

Upcoming price increases are expected to depend on changes in the structure by market segment; that is, the sales of higher segment products will start to gain market share, rather than seeing price increases for the same product in the same segment.

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Sustainable Real Estate Portfolios: GRESB and the new “business case”

In Mexico, sustainability applied to the built environment has been associated to certifications such as LEED® and environmental technologies such as photovoltaic panels, wind turbines, and high-efficiency HVAC systems just to mention a few. Among today’s sustainability challenges for real estate developments, the monetization of the intangible benefits and the access to innovative financial mechanisms play a prominent role. Recent international initiatives shape solid answers to these challenges, reinforcing the “business case” for the investment in real estate portfolios with a sustainable approach.

Today’s reality puts us face to face with irrefutable facts: during this 2015, an important number of financial institutions established ambitious goals for the end-use of funding to attend critical social challenges. For example, Bank of America announced a $50 billion USD commitment for low carbon emissions solutions. As well, Citibank assumed a $100 billion USD engagement to reduce climate change impact and provide environmental solutions that benefit society. In addition, Goldman, Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo banks, together issued a statement, inviting world leaders to formalize policies against climate change. In the debt markets, Deutsche Bank announced its intention to invest $1 billion euros in green bonds, echoing the recent Barclays and Zurich Insurance Group announcements.

Captura de pantalla (272)Multilateral Development Banks also lead the way, offering this fiscal year 2015, $28 billion USD in financing for initiatives related to mitigating effects of climate change by raising funds through the green bonds markets, as World Bank lead in 2008. In the private sector, this 2015 green bonds have been issued by ANZ Bank, ABN AMRO, Bank of America, DNB, Morgan Stanley and YES Bank. The use of the resources has been destined to financing renewable energy and energy efficiency projects, fuel-efficient transportation systems, and sustainable buildings.

With increased frequency, investors have expressed their interest in the identification and quantification of the performance factors for ESG (Environmental, Social and Governance) integrated in the real estate debt. They recognize as well that the ESG issues in the decisionmaking processes for real estate investment and management is an important emerging practice.

This way, the comparative evaluation of the sustainability performance of real estate companies that own and manage real estate funds, helps generate and reinforce the necessary market force to bring Environmental, Social, and Governance (ESG) issues as the vanguard of business. By participating in the voluntary program GRESB (Global Real Estate Sustainability Benchmark, a real estate sustainability evaluation) companies and fund managers will be able to manage their portfolios facing challenges such as the volatility of energy supply, stricter legislation in the fight against climate change, increased energy efficiency requirements and changes in the preferences of corporate tenants.

GRESB was funded six years ago in the Netherlands, attending the growing need and interest of financial institutions and investment funds to validate the environmental sustainability, social responsibility, and internal governance strategies that their real estate portfolios were implementing, and their real performance in each of these areas.

Since its foundation, GRESB has managed to evaluate 2.3 trillion USD in asset value, representing 61,000 assets, 87 fund managing and real estate member companies, as well as 707 total participants. As part of the fields that this evaluation accounts for, we find business administration, climatic risk and resilience, transparency and warranties, energy performance, waste management, water use, health and wellbeing, and community and tenant participation.

Among the member fund managers and companies that report in GRESB, CBRE Global Investors, JP Morgan Asset Management, Prologis, Prudential, Grosvenor, and Boston Properties stand out, just to mention a few. The participants of this evaluation are from diverse countries and present diverse typologies including industrial, commercial, and residential projects. Some of the companies are: Credit Suisse, Aberdeen Asset Management, AXA Real Estate, Delancey, Investa, Morgan Stanley, Oxford Properties Group, and Thor Equities, among many others.

It is a reality that the extended use of sustainability certifications in buildings, such as LEED, BREEAM, CASBEE, just to mention a few, have facilitated the corporative environmental reporting for asset and property managers all over the world. LEED certification, the most used and recognized in Mexico, occupies first place of the international standards used by the properties that report in GRESB, accounting for 30% of the total.

In Mexico, still no national companies have taken part in this sustainable real estate portfolio assessment. However, there are companies that operate as of today in the country and do report their building performance worldwide. In the continent there are 10 members, all in Brazil, of which 1 is a public company and 9 are private entities.

Bioconstrucción y Energía Alternativa (BEA), as a pioneer consulting company and sustainable building and LEED certification leader in the Latin American market, promotes GRESB in Mexico and throughout the continent, decidedly promoting the development of a sustainable built environment, since the conceptualization of the properties, passing through operation and maintenance best practices, up to its financial viability and ESG compliance.

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Intelligent Buildings: Intelligent Design

Real Estate in Mexico is, as we know, every day more competitive and, in recent years many recipes and keys for Real Estate success, in the past number we talked about the importance of forming teams as the key to success. In certain moments this phenomenon looks like those magazines were every kind of remedies and magic recipes to be in shape are offered every time. I wonder if we are before a marketing maelstrom about Real Estate.

In my experience from almost 30 years dedicated to architectural design and a good portion of it along Real Estate developers, I’ve seen a common denominator and this is: the efficiency in building performance.

In this case, talk about Intelligent Buildings is not about the BMS systems and technology associated with its operation; is about buildings that have been designed from a holistic point of view; this means, those where every aspect has been taken into account, not only its aesthetics, building efficiency and area ratios. I’m referring to buildings in a wider context: its life cycle, like energy consumption ant its impact in the environment like, apparently simple strategies can achieve outstanding results and tangible benefits to Developer.

I will refer solely to office buildings for not trying to cover too many punctual aspects that may result confusing.

The project and design of a building may take from 12 to 24 months or even more time of work, build it could mean from 18 to 36 months, depending on size and obviously its operation and maintenance could mean up to 50 years, a period where any deviation in operational cost signifies an important amount of money. More over, if we take into account that the greater part of companies expense that use those buildings is in their personnel that works there goes up to 80% of their operation cost is directly related to the work place and this one, at same time, with the building.

Captura de pantalla (265)Other aspect to take into consideration is how the construction cost is composed, it is specially important if we consider that often, the lack of attention to those issues that are great money consumers. Typically the direct cost of construction in Mexico is composed in this way: Substructure and foundation 20%; superstructure 25%; MEP 35%; finishes 13%; exterior 5%; others 2%.

However, given that structural safety and systems functionality are regulated by codes, it tends to be lack of criticism in those issues and they are given as solved without adequate analysis: although they represents up to 80% of the cost construction. More over, the impact in the operation cost could last for the entire life cycle, making it even more expensive.

Counterwise, often more attention is taken to finishes and visible components of building that represents marginal initial costs and may achieve a greater impact in user perception and promote productivity.

With environmental rating systems, this situation has been changing in recent years and will continue change in the future. In other hand, and from energy perspective, buildings in Mexico accounts for almost the half of energy consumption: 47.6% according to National Commission for the Efficient Use of Energy (CONUEE in Spanish) and the source of that energy is fossil fuel in more that three quarters 76.56% and only 1% wind and 0.05% from other renewable sources. Here some data about how energy is use in a building: HVAC 41%; lighting 42%; office equipment 8%; other 9%.

As you can see, illumination, HVAC systems accounts for the bigger part of resources, that is why the emphasise its intelligent design, for this, there are many systems, devices and technology that are changing very quick this composition. With the arrival of LED lighting and control systems every time more affordable and available, lighting in near future will not be a great problem.

Finally, we could say in general that a more energy efficient building is more sustainable; however, with a deeper analysis, we may confirm that in some occasions monetary and energy costs associated to construction materials are ignored; embodied energy could be higher to its savings during operation. For this reason we should select regional materials and assure that during its manufacturing process the energy required is appropriate. There are many source of information and LEED design guides are an excellent beginning.

In VFO architects we are conscious about all of these issues and we are worried about to design building that perform as good as possible, taking into consideration aesthetics and functional aspects, our buildings have been LEED certified and re certified, what reveals our commitment with life cycle and architectural solution lasting, that is the case of HSBC tower, that have been in operation for more than 10 years from now with a LEED Gold certification and under 2.2 version and now re certified with Platinum under Operation and Maintenance certification under more stringent system. This is commitment and result of make Intelligent Buildings with Intelligent Design

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Elevating the Corporate Real Estate Function to Excellence

JLL introduces the third biennial report on global corporate real estate trends. The viewpoints of more than 500 CRE professionals paint a challenging picture for the current and future state of the industry. Although there is progress in transforming CRE (Corporate Real Estate) teams structurally and procedurally, CRE professionals report worrying limitations in the ability of the CRE function to create strong relationships with business stakeholders and support functions.

Increasing demands for CRE to deliver against a broadening agenda of tactical and strategic tasks is creating a “pressure cooker” that threatens to damage the evolution of CRE as a function. As part of our survey, we asked respondents to outline those characteristics they believed would elevate the contribution of the CRE team to the organization (Figure 1).

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In some respects, the number one elevator – delivery of cost savings – is illustrative of the current condition of CRE. The strong reporting line to the C-suite (and in many cases, the CFO); the muscle memory of recent years whereby CRE teams have delivered double-digit cost savings; and the continuing fragility of the economic and operating environment have all created an expectation that success is predicated on delivering more of the same. But CRE teams cannot continually deliver cost savings simply through tactical market or building-based activity. There comes a point at which delivering more cost savings is counter-productive, and a more integrated, value-focused approach with new measures of success becomes imperative.

We believe this is a growing reality for many, and that CRE teams must start to look more closely at broader behaviors and strategies in order to support their business.

Our respondents recognize this too. Half of them regard building and sustaining strong relationships as a key elevator. Nearly half of the respondents emphasize an enhanced ability to analyze real estate options and scenarios (48 percent) or the generation of insights to improve business performance (37 percent) as positive step changes for the CRE function. The CRE community is not short of suggestions as to how it can elevate its contribution.

So where’s the blockage? Figure 2 summarizes what CRE leaders regard as the key constraints that hold them back. It is significant that respondents do not see finance as the primary constraint. Similarly, structural constraints derived from a lack of C-suite commitment or a decentralized team are acknowledged, but fall somewhat down the list. Instead, two interesting primary constraints emerge.

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The first of these constraints – a lack of data and analytics to either measure value or create value-enhancing insights – aligns with the sentiment expressed in our recent series of white papers on data and analytics in CRE1. In these papers, we argue that CRE teams need to collect data and apply predictive analytical techniques to guide their real estate decisionmaking and generate insights that support the broader business. For many, comprehensive CRE data and the advanced technical capabilities to analyze it are still in their infancy. We strongly believe that a new science of real estate – in which strategies are formulated and decisions are made on the basis of accurate data and analysis – must emerge.

As one respondent noted, the ability to “determine and predict market trends and insights” represents a key requirement for CRE teams going forward, as is the ability to “produce and present robust business cases that provide a compelling case for a recommendation, as well as the ability to do accurate financial analysis to support these case studies”.

The second-ranked inhibitor (lack of integration with the wider business) is consistent with many other findings – excellence in CRE is as much about people as it is about property. Internal CRE teams need to rebalance their skill sets to prioritize interpersonal skills, which, in many cases, are ahead of technical property skills. The lack of integration of CRE teams into the wider business in many cases is restricting effectiveness according to 45 percent of global respondents, rising to three in every five respondents from the United States. Without stronger integration and interaction with business stakeholders, the value-add of CRE teams will always be compromised.

INMOBILIARE-92-295The “Great Traits” of Corporate Real Estate

Teams Elevating CRE teams to excellence will require further adjustments to the structure of CRE teams in order to deliver the same tasks with a more efficient and business-aligned approach. It also means challenging and enabling those within the CRE team to adopt a new style of operation that prioritizes data science, insight generation, proactive leadership and predictive analytics. It requires a shift in focus from technical delivery and specialization – which can continue to be outsourced – toward powerful and regular conversations with those in the wider business that also shape and ultimately benefit from real estate decisions.

The keys to moving CRE teams up the value curve for the benefit of all are increasing opportunities for consultation with business unit leaders; establishing agreed and shared visions of CRE and business success; bringing data to the heart of the CRE decision-making process; and creating and responding to continuous stakeholder feedback.

The challenge for CRE leaders and their teams is clear. To overcome it, CRE teams must learn to:

1 Respond to a growing mandate by bringing tangible, strategic value to the organization.

2 Prioritize development of people skills ahead of technical, property-focused skill sets.

3 Create a strong data and analytics platform to bring science to day-to-day delivery and long-term strategy.

4 Create a strategy for addressing the broad sweep of activities that constitute “business as usual” without undermining the evolution to trusted advisor.

5 Leverage vendors not only for tactical execution, but also to extend strategic capabilities such as business intelligence and gain exposure to industry best practices.

6 Reach clarity and agreement around what excellence looks like for a modern CRE function and chart progress and position relative to peers using a benchmarking tool such as JLL´s “Great Traits” of CRE diagnostic tool.

INMOBILIARE-92-296What’s next? Recognizing and adopting the “Great Traits” of CRE organizations

CRE organizations routinely compare their performance against peers and against industry standards to assess strengths and opportunities for improvement.

The peer group and comparison criteria vary from company to company depending on growth rate, age and industry dynamics.

JLL first published thought leadership around the most compelling traits of a highperformance CRE function 10 years ago. Since then, JLL has continuously evolved this framework through extensive industry experience and research, as well as discussions and polls of strategic clients. These include analyzing the strengths and weaknesses of organizational platforms, changing roles and industry dynamics. We made further modifications and enhancements on the basis of the findings emerging from this survey. As a result of this ongoing research and client service experience, the following 11 key traits of high-performing organizations have emerged.

JLL continues to evolve this signature research around the top attributes of highperforming CRE organizations, customizing benchmarking services for organizations and evaluating results against goals for financial performance, employee engagement and environmental sustainability. Further insights and strategies may be found in the upcoming report, What are the “great traits” of a corporate real estate organization?, to be published by JLL in the second half of 2015.

INMOBILIARE-92-297About the survey

This report summarizes the aggregated global findings of JLL’s third Global Corporate Real Estate Survey.

The research collection phase was concluded in December 2014. Through a combination of online and telephone fieldwork, we received 544 responses from CRE executives spread across 36 countries. The respondent pool also reflects a broad cross section of the corporate community. Our base sample, as used within this report, represents 491 respondents and covers more than 350 companies, each employing more than 1,000 people worldwide.

About JLL JLL

(NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of US$4.7 billion and gross revenue of US$5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries, and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed US$118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has US$55.3 billion of real estate assets under management.

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Latin America’s shining Luxury Retail Sector: interview to Carlos Jereissati Filho

Latin America is a frustrating region for the luxury industry” said Rob Walker a Consulting Analyst in Euromonitor’s blog last year. And this is truer in 2015. “Brazilians, for example, are among the biggest spenders in the world when it comes to fashion and beauty care; yet, demand for luxury goods is subdued by comparison, at least on home soil” Walker added. It is a similar story across the region.

Currently, Mexico is definitely ranked the number one fashion market among Latin Americans. The Mexican market has indeed played second fiddle to Brazil’s for quite some time. Mexico is Latin America’s second largest economy, its second most populated country and the market with the second highest number of millionaires and billionaires to boot.

To put things in global context, Brazil’s luxury market totaled less than US$5.0 billion 2013 compared with more than US$75.0 billion in the US. In the same year 2013 Brazil and Mexico ranked fifth and sixth in the world, respectively, in terms of the size of their social class “A” populations. The global luxury market reached US$245 billion in 2014, still being Asia the region with the highest growth rates.

INMOBILIARE-92-285The expansion on the luxury retail sector in the continent has produced some of the best examples of luxury shopping malls in the World: Antara Polanco, the mixed use center developed by Javier Sordo Madaleno in Mexico City ten years ago set a standard in the Mexican market, perhaps only disputed GICSA’s La Isla in Cancun. Five years ago, FVI’s Luis Emilio Velutini developed Blue Mall Santo Domingo, which had a bumpy start but now is the leading luxury-shopping destination in the Caribbean region. In Panama, Multiplaza Pacific, developed by Grupo Roble, was the dominant player until this year that Soho Panama, the new luxury mall developed by Grupo Wisa’s Abdul Waked opened in April. In Chile CorpGroup is developing Casa Costanera, which is expected to join this selected group of luxury malls. And recently, Maison Boggiani, Belén Vierci’s new enterprise opened in Asuncion, Paraguay, a small luxury shopping center in this South American country.

But if there’s a group that epitomizes Luxury Retail in our continent that is Brazil’s Iguatemi, the owners of Iguatemi São Paulo one of the oldest Brazilian malls in operation located in the Jardins neighborhood in São Paulo and of JK Iguatemi, their latest luxury mall creation inaugurated in 2012, featuring more than 200 shops on 36,000m2 of GLA. JK Iguatemi is the culmination of two decades of tirelessly working to bring the best luxury brands from around the world to Brazil.

In this issue I had the opportunity to interview Iguatemi’s CEO Carlos Jereissati Filho, dubbed on a recent article as “the Man Who Brought Luxury to Brazil”, Carlos shared with us some insights on his company, the retail and luxury sectors in Brazil and his future plans.

Jorge Lizán (JL): Carlos, what makes Iguatemi different from other luxury companies?

Carlos Jereissati Filho (CJF): Brazilian shopping malls are considered powerful institutions that can lead consumers by the hand and redefine their attitude toward luxury. The mall is where people shop, dine, socialize and go to fulfill a variety of daily needs. Iguatemi malls offer all the conveniences of security, comfort, and integration of stores in one place, with plenty of outdoor spaces, green areas and interaction with the city and the community. JK Iguatemi is our latest outpost in São Paulo, and welcomed the first locations in the continent of very important brands, including Goyard, Lanvin, Top Shop, Sephora and Miu Miu. This makes it JK Iguatemi a pioneer in the country. At JK Iguatemi, we brought the latest technologies to a multiple, diverse space with integration of the city and its community. We also launched a very successful, large-scale public art program within JK Iguatemi for the first time, displaying select works by renowned international and Brazilian artists in the mall.

JL: Carlos, why does someone travel to Brazil to find luxury goods?

CJF: Tourists visiting Brazil can reconcile tourism with activities like culture, cuisine, arts and exhibitions at Iguatemi. They are drawn to all the experience the shopping malls have to offer and of course Brazil’s nature and geography. Latin Americans are seductive by nature; they have constant energy and an intense love for life. We value beauty and sensuality. South Americans are very creative, always on the lookout for fresh ideas and ways to express themselves, These are qualities that businesses pay attention to when entering the South American Market. When tourists shop in Brazil they may find luxury brands that are outside of Brazil, but he will have unique shopping experience.

INMOBILIARE-92-283JL: Carlos, how do brands become part of Iguatemi?

CJF: Iguatemi is the only shopping center in Brazil that has an entire team dedicated to the
tenant’s mix. We pride ourselves for our knowledge of our Market and our customers, and we have a team of people looking at trends, identifying opportunities, establishing relationships with brands, both local and international, to make sure our mix is the best in Brazil.

We provide a 360 degree platform for brands, helping to connect them with local resources if needed or acting as an incubator for them if necessary. Brazil is a complicated country to get into due to import taxes, a complex tax system and difficult labor laws. But the luxury customer base is getting bigger each day with the growth of the middle class and there is increasing demand. Every luxury brand wants to be here but it is very expensive and complicated to operate, so we created the I-Retail division to help soften the landing of the brands into the country, to forge real relationships and act as a bridge between them and Iguatemi. Large companies such as Louis Vuitton, Prada, Tiffany & Co, for example, have entered the market directly but they can afford the learning curve.

It is important to find a good partner when making the decision to enter a country: your image and brand DNA must be protected and properly communicated, and your products must be presented with the same standards you would apply in your best flagships around the world. Dozens of brands have contacted Iguatemi and told us that they could not open stores in our malls because they did not have a suitable partner in Brazil. I-Retail’s mission is to help operating, provide guidance and help preserving a brand’s identity and productivity, remaining faithful to the DNA of each one. We want to work as partners with brands to help them grow.

JL: Carlos, what are the plans for this year?

CJF: Iguatemi group that is expanding and will have 17 centers by end of 2015. We continue to grow and improve our centers. We recently underwent expansion in Campinas and Porto Alegre, and this will allows us to welcome more luxury brands. We also entered the Outlet segment in some regions of the country, making premium brands available lower price points. We currently have one shopping center and two additional outlets in development.

Brazil is still undergoing a process of maturation. The robust growth of the middle class, creates the perfect environment for consumers who want to access what is different and allow themselves a moment of shopping outside their usual range. The luxury market still has much room to grow in the country and different countries to win over.

INMOBILIARE-92-282JL: Carlos, what trends do you think are coming for the luxury industry?

CJF: Due to the Internet, consumers have access to everything worldwide and are much more informed of the world’s trends. The Internet has spread quickly but the offline world is becoming very sophisticated and it is our duty to constantly improve upon a very high level of service.

The luxury consumer market changed and evolved dramatically. In recent years, there has been an exponential growth in demand for luxury, which has allowed us to introduce the world’s most important brands to the country. Brazilians are still discovering the pleasures of consumption that other countries had long ago. It took a while for the economy to evolve in Brazil before the recent emergence of a middle class. Twenty years ago, we bought everything outside the country. Now – Brazilians not only shop closer to home.

During the month of March, I spoke about future scene at the Luxury Lab Summit in Sao Paulo –originally happening in Mexico City, which took place in Brazil for the first time.

JL: Carlos, please share with us some seminal moments and achievements and what was the biggest setbacks & challenges.

CJF: As CEO of Iguatemi one of my proudest accomplishments was in 2007 when Iguatemi debuted its shares on the São Paulo Stock Exchange (Bovespa). We are proud to be ranked the most valuable trading location in Latin America by Cushman & Wakefield and the highest sales per square meter in Brazil.

The challenges we face are that Brazil is a complicated country to get into as I explained. The luxury customer base is getting bigger each day with the growth of the middle class, but although we have excelled in bringing luxury brands to the country new challenges appear and we are working every day to make sure Iguatemi and I-retail get better and better at smothing the entrance of brands in Brazil.

JL: Carlos, what can Brazil offer the world in luxury goods, that no one else can?

CJF: Culturally Brazilians tend to be thoughtful and considerate hosts, and there is a very strong emphasis on high-level service. This is a trait that is quintessentially Brazilian. We are renowned for our excellent customer service and for our intimate relationship with our clientele, which is different than many cultures around the world. Brazilians are also very social. Our shopping centers are platforms for leisure, community and family life. Treating our customers well and cultivating closeness has been paramount. In addition, our events, personal shoppers, concierges, lounges have all contributed to creating an inviting atmosphere.

JL: Carlos, what experience does Iguatemi gives to its customers?

CJF: One of our latest developments is a house we built adjacent to the Iguatemi São Paulo flagship. It is a very beautiful, private space we use to entertain and where clients can interact with designers, artists and important guests. The house displays a beautiful collection of contemporary Brazilian and international art and design. When Gucci Museo opened its first exhibition outside Italy at JK Iguatemi in 2014, we hosted a private dinner to celebrate the occasion at the house with international guests.

The Iguatemi Group also wants to give customers cultural experiences by sponsoring and supporting some of the major events in the Brazilian art world, such as the São Paulo Biennale, exhibitions at major museums, SPArte and SPArte-Foto, in addition to actively supporting the acquisitions of several national museums.

Moreover, we offer a wide range of spaces for large events and entertainment. For example, JK Iguatemi has a Cinépolis complex with 8 state-of-the-art screening rooms, including 2 3D cinemas, 1 IMAX theater and the country’s first 4D cinema. Waiters are available to tend to visitors until the end of the trailer period and there is a menu of special food dishes developed exclusively for the JK Cinema. The 4D cinema has 250 seats and introduces an array of sensorial experiences, such as wind, lights and smells.

We look to provide an experience beyond the purchase:we use technology to make the Iguatemi shopping experience more attractive and differentiated. Today it is possible to capture information about customers who come to shop at Iguatemi through Wi-Fi, I-beacons and mobile applications. We can later utilize the information captured to develop custom marketing campaigns targeted to specific groups (geofencing). We have also installed Museumlike seats with iPads and attached headphones to illuminate the story behind our Art Program. Artworks displayed throughout the mall and we built a true museum experience. Artists exhibited in the Iguatemi Collection include Rikrit Tiravanija, Rivane Neuenschwander, Sarah Morris, Lisa Oppenheim, Daniel Steegman Mangrané, Jeppe Hein, Rirkrit Tiravanija and Marepe, Chiara Banfi, Albano Afonso, Rivane Neuenschwander, Detanico & Lain and Marine Hugonnier.

JL: Carlos, where else do you see the luxury goods market opening up soon?

CJF: BRIC countries are appealing to luxury retailers due to the emergence of the middle class in these economies. I can mostly speak for Brazil, where there are currently 100m people considered in this category, up from 50m less than five years ago. By 2014, there was 120m, or 60% of the population. That’s a lot of growth, which is not happening in other parts of the world. With the expanding Brazilian economy, the world is looking to invest in Brazil and it makes sense.

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Contribution from Formal Developers to Meet the Housing Demand

Together with the business complications that the finished new housing industry has faced, particularly in the affordable entry level segments, the lack of clear guidelines in urban growth policies will continue to have a bearing on the decrease in the market share of industrial housing in the total housing stock’s growth. In the Middle, Residential, and Residential Plus segments, the scarcity of land in some consolidated cities and of construction financing will continue to limit new project starts, and thus, the offer, which should affect prices, as is already happening in Mexico City and consolidated areas of the cities nationwide.

The share of finished new housing as a percentage of total housing growth went from a record high of 69% in 2006 to an estimated 37% in 2014, and it should reach barely 31% by the end of 2020.

Nowadays, contrary to other years, used or rental housing, home improvements, expansions, and even construction on an owned lot are solutions to housing needs that offer a viable, practical, and at times more economical solution than purchasing a finished new housing unit. If the conditions of offer and sale of finished new housing do not improve significantly, the above will limit the recovery of new housing as a share of the growth of the total housing stock.

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 The total market in the country (self-built and industrialized) is estimated to have reached USD$23.2 billion in 2014.  Based on its constant monitoring of the market, Softec estimates that, in that year, formal homebuilders could collect roughly 79.4% of the total value of production and 36.2% of the volume. Softec estimates sales potential for 2015 to represent USD$19.1 billion in the formal industry, or 349.3 thousand units.

In the third quarter of 2015, in the main cities of Mexico, the following conditions are visible for the general Finished New Housing market:

From the 3,878 existing projects in the finished housing market, 47% belong to the middle and residential segments, but they only stand for 8.6% of the units under construction on the market. The bulk of the units (75%) belongs to affordable entry level projects (social and economic).

Captura de pantalla (235)In every case, the sales progress shows healthy indicators, averaging 59% of units under construction; that is, inventories represent only 41% of the offer.

The sales volume in the most important markets of the country totals 18,786 units per month. Of them, 63% belong to the affordable entry, 22% to the middle, 11% to the residential, and 4% to the residential plus segment.

The end of 2015 is expected to improve the sales figures of the Middle segment and up, which in terms of value, represent 77% of the sales value. It is worth noting that the Residential and Residential Plus segments of the country total 55% of the sales value of finished new housing.

In the Residential and Residential Plus segments, the existing projects have been decreasing, opening opportunities for projects with good planning to take up the spaces that inventory depletion has opened in the market.

Total monthly sales in these segments have remained constant, and the fact that they are not increasing as there are less projects shows that the project is still in the process of cleaning out badly positioned and incongruent projects for the markets.

However, most of the projects in the upper segments of the market have a good performance, as the indicators of months for sale and months on inventory have been on a downtrend for five consecutive quarters.

Captura de pantalla (234)Project absorptions continue to rise, albeit at slow rates, which could improve, shortly, the sales performance of projects still on the market, given the exit of projects that showed a good sales performance.

Softec’s real price index shows a significant improvement in prices per m2 in real terms, considering 2012 as the base year. As for the third quarter of 2012, the period used as the base, the price performance of Residential and Residential Plus product shows very favorable recoveries. Nowadays, prices are 7 to 12% higher than in 2012, and they have overcome the negative trend in value.

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GM Capital: youth with inherited values

GM Capital is a company created by three members of the Garza Mercado family: Marco Antonio, Valentina and Benjamin; whose father, architect Eudelio Garza Lozano, taught them the importance of building quality developments. Backed by their talent, vision and faithful to the values instilled in them by their father, the Garza Mercado siblings have honored their father by converting 45 years of family experience into an institution.

The teamwork of the three siblings has made GM Capital a benchmark in northern Mexico, which thanks to their knowledge of the real estate market, and only two years after starting the company, is catching the attention of businesspeople, investors and clients in Nuevo Leon, because of their projects, innovative architectonic designs and service proposals to improve the quality of life of local residents.

Thanks to their team, GM Capital has developed world class residential, mixed use, and commercial properties. Aware of the evolution in the real estate industry, GM Capital is committed to developing comprehensive urban complexes, where people can live, work, study, and play all in the same place.

Both the size and the location of their land bank is one of principal strengths of GM Capital, which means the value added is guaranteed for those clients and investors who want to get involved with this young, but experienced, company, determined to putting a modern face on both Monterrey and San Pedro Garza Garcia.

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Insar will conquer new cities

Founded in 2001, over the years, Insar has worked to become a quality property developer that generates value for its projects and, above all, particularly focuses on the human capital that forms its team, transmitting values and ethical principles that are reflected in how Insar treats its customers, vendors, and investors.

Inside Insar, every collaborator plays an important role in the process, the organizational culture focuses on the wellbeing of the team and their families. A clear example that their policies have led to good results is the certifications Insar has received as a “Great Place to Work”, and also a “Family Responsible Company”.

In addition, some of their projects have received “International Property Awards” recognizing outstanding developments in different sectors of the real estate industry.

The decision to start a project takes time. Insar analyzes the market perfectly, evaluates the opportunities, and focuses not only on the profitability of the development, but also considers the impacts this will have on the community, listening carefully to the needs of the consumer to determine the type of brands and services that will form part of the commercial component, and the types of amenities that are appropriate for the market segment.

These residential, mixed use, and commercial developments carry the Insar seal of quality, with professional workmanship, exceeding the expectations of investors and also innovating property development with fresh ideas, committed to a modern lifestyle, offering avant-garde designs and properties with low-cost maintenance.

Insar started operations in Nuevo Leon, but thanks to their constant search for opportunities in areas with great potential, one of Insar’s diversification strategies has been to look at cities in growth, starting to conceptualize and develop projects in states such as Baja California, Veracruz and Queretaro.

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Cushman & Wakefield getting stronger globally

The real estate market is at its height, not only in terms of square feet of construction, but also creating jobs and attracting investment. Real estate service companies play a very important role in the growth of companies and countries, and one of these players is Cushman & Wakefield, who recently announced the acquisition of DTZ representing a strategic step in both growth and service coverage.

With the merger of both companies, the new Cushman & Wakefield brings together the best of both organizations to earn a combined total revenue of 5.00 billion, manage more than 4.3 million square feet, and operate US$191 billion in transactions each year; all under the leadership of Brett White.

Captura de pantalla (193)In a recent interview, Victor Manuel Lachica Bravo, President & CEO for Mexico and America, was happy to comment that “this merger strengthens our presence as a leader in all markets; before now, most of our business has been in Canada, Mexico, the US and South America, but less so in Europe and Asia. Today, by joining DTZ, which has seen positive growth in the markets we’ve been missing.  We’ll be stronger to be able to participate in those markets. The merger also strengthens our services –management, appraisal and brokerage-, as well as our geographical coverage. We’re doubling our number of professionals and our revenue to create scale economies that will allow us to reinvest large sums of money in the company’s growth; this merger will make us more efficient and we’ll cover more of the market”, he noted.

Victor Lachica shared that the merger was officially announced on September 2 and that since then, more resources have been invested and they’ve started to have interactions with the US and Europe. He mentioned that the organizational structure will change from a pyramid model to a central office model, with heads of specific services and regions to ensure better attention to each product.

Although Cushman & Wakefield are active in the tourism, commercial, residential, and office niches, it is the latter where they have a greater number of international users. “Corporate office partners expect the same level of quality, but not only in terms of the product, the physical office, but also throughout the process -from the analysis, comparison, and close to the use of a space. In this process we provide a complete service, from when our clients start to think about changing premises, we support them in selling the idea in terms of the corporate concept, and then we help them find the right building, we deliver the keys and we manage the property moving forward”, the President & CEO of Mexico and America explained.

In addition, real estate is a fundamental part of everyone’s life, and that is why the slogan has changed. “What does Cushman & Wakefield want now? To change how people buy, how people live, and how people work”; if people have a better space in which to buy, live and work, their lives will be better.

A real estate market expert, Victor Lachica added that people today are looking for real and active partners, which is why he has people working in his clients’ offices full time. In the US, these are known as implants, which means having someone from the Cushman & Wakefield team onsite all the time to manage a region or country, depending on the complexity and number of properties the client operates.

We can explain the support that Cushman & W  akefield offers with examples like a company that needs a property appraised for Colombia; to sell a plant in Guadalajara and find a new plant somewhere else; and also, for growth in other countries, they need to locate new offices. In cases like this, it is not only the client that grows, but both, as partners.

“After labor, the greatest cost a company incurs is the operating cost for their property –leasing or buying offices, warehouses or commercial premises. With the new Cushman, we bring a highly significant investment in terms of systems, technology, and information handling globally, so that now you’ll see the same comparative format for buildings in all the countries where we have presence”, said Victor Lachica, President & CEO of Cushman & Wakefield.Captura de pantalla (195)

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Chapultepec Ave. : Cultural corridor or urban scar?

How long has it been since there was enough public money to build infrastructure and maintain public spaces in good condition? In nearly every city, the budget is barely sufficient to sustain the bureaucracy and what’s left is used primarily to maintain the social programs that politicians use to secure the votes that will guarantee their continuity.

Despite the official comment, the down-turn in the quality of life of city residents is clear: safety, mobility, urban services, and the environment -to mention only a few areas- are on the edge of collapse, and this condition of abandonment and chaos is seen clearly in the decline of our public spaces.

The proposal laid out by the Mexico City Government to rescue Chapultepec Avenue has created intense controversy in recent weeks, which we should take advantage of to propose and discuss new urban plans and economic mechanisms to make the development of the city viable, sustainably. In this case, the diagnostic is simple: what decades ago was an important, historical avenue in an area of great vitality and progress, is today only an unfortunate urban scar where the crime rates and general decline, along with traffic chaos, put the lives of pedestrians in danger, preventing the physical and social integration of the urban weave that surrounds it.

Captura de pantalla (186)The presentation of the Corredor Cultural Chapultepec (Chapultepec Cultural Corridor) project has generated opinions both in favor and against, and also various alternative proposals. Although there is absolute agreement across the board that Chapultepec Avenue  needs improvement, the controversy surrounding the project goes to the heart and nature itself of one of the most prized topics and assets of the city: The treatment and management of public spaces, which by definition are: “Those that are declared, frequented, known, or seen by all, and which belong to the community as a common asset of the people.”

To find the right way out of the differences in this conflict, we need to understand its nature and pay special attention to the three areas at the core of the discussion: 1) The importance of community participation in decisions involving the image and future of the city; 2) The physical characteristics of the improvement project chosen, and 3) The economic model adopted to finance the project.

1) In the discussion on community participation, the elected officials in the area and some prestigious figures with professional credibility have headed meetings with local residents who oppose the project, whose central argument is very simple: a project of this size and importance cannot be undertaken without first consulting the community, particularly because this is a public space that belongs to everyone.

2) Regarding the project proposed, most of the expert opinions published in various media agree that the improvement project must be local. I like the analogy of the Urban Scar, as a scar heals when it is cleaned and the tissue (or urban weave in this case) steps in, to give back its continuity, its vitality, and its beauty. Inserting a structure onto Chapultepec Avenue that has two levels of stores and businesses, with the existing roads, and a shopping mall beside the Insurgentes subway station roundabout, as proposed to integrate and give vitality to the avenue and its surrounding area, would be like trying to heal a scar with a prosthetic whose urban function is completely different.

3) I think, however, that it is in the economic model adopted where we find the root of the problem and also the opportunity to reformulate the project. As mentioned in the first paragraph, the city’s government doesn’t have enough money to rescue spaces of this size and dimension; this is, in fact, the argument given to justify the presence of the commercial spaces and the 40-year concession model to finance the Corredor Cultural Chapultepec. The idea of including businesses in the project is to pay for the works and make it attractive for investors, resulting in a multi-level structure to locate the businesses that pay for it. If the city had resources, I’m sure we’d be seeing a project for a public space without businesses.

From “scar” to “example” of urban regeneration

What is the lesson we’ve learned from this controversy regarding the improvement of Chapultepec Avenue?Captura de pantalla (187)

What good will it do to insist that Chapultepec Avenue must maintain its character as a Public Space and that it must be rescued for the use and enjoyment of the pedestrian, the local residents, and society as a whole, if at the end of the day we inevitably come back to the argument of lack of resources? Should we not propose a better alternative for getting those resources?

The worst thing that can happen is… that nothing happens.

We must recognize and take advantage that the City Government has put a fundamental discussion on the table: We need to ensure that the economic development of the city can finance its social development, as there will not be sufficient resources to solve the city’s big picture problems and needs. This controversial case demonstrates that if we want our cities to be viable and to have a future, we need to revise and discuss all the economic mechanisms that could be applied to achieve these goals, without compromising the public character of the space. This, without doubt, must be one of the key focal points on the agenda of the new local legislature.

Capturing Value: A tool for urban improvement

For the rescue of Chapultepec Avenue and many other areas that have fallen in to decline, there are alternatives, both physical and financial, and also Captura de Valor (Capturing Value), an innovative planning and economic management initiative that is already being applied in other cities. Captura de Valor is also a transparent and effective mechanism coordinated by the authorities, which helps to fight real estate speculation and favors the equitable distribution of the city’s value, generating resources for the construction of public furnishings and fittings, and infrastructure, modernizing transportation, and of course, improving public spaces.

In one of my pieces at the beginning of this year (Inmobiliare Magazine, issue 86) I discussed this mechanism under the title “Renacimiento Urbano” (Urban Rebirth), explaining that there is virtuous circle that uses the value added that the city itself generates by driving the development that an urban improvement project will attract naturally and intentionally, to finance environmental improvement projects, even for other spaces in the city, in areas that don’t have the attraction and potential of broad avenues, but that do have the same need for improvement.

What we cannot do is get it wrong

Facing increasing opposition, the reaction of the City Government has evolved favorably. From the initial position where the government only sought to “enrich” the project, we are now seeing forums and meetings to talk about the project and listen to other alternatives, postponing the start of the project originally scheduled for the beginning of September. It would seem that the importance of community participation is being recognized and the need to link the result of a real and transparent public consultation to the final characteristics of the project.

This openness is positive, as the discussion on the improvement of Chapultepec Avenue is, in reality, an urgent and much needed debate on the use and management of the public spaces in the city, the huge importance of community participation in their determination and design, and the correct use and distribution of the city’s value to benefit everyone.

The end result of this debate will set a precedent we can either be proud of or we can regret in the next 40 years, and as in all discussions there will be winners, hopefully it will be the city and its residents who will win this time.

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Latin American retailers expanding globally

Today, Latin America is one of retailers’ main destinations, but something few people have reported is the fact that Latin America is also the source of innovative retail concepts, which are expanding internationally, becoming some of them, leaders in their specific sector.

Some examples worth mentioning: Kidzania, the world’s leading theme park for children and has a presence in 16 countries of 3 continents, they just opened its latest park in the famous Westfield London shopping mall; Cinépolis, the fourth largest cinema chain in the world and the largest chain with presence in most of Latin America, USA, India and recently closed an operation to buy Spain’s Yelmo; Juan Valdez Café, the retail brand owned by the National Federation of Coffee Growers of Colombia, with 300 units in 13 countries they have presence in Latin America, USA, Europe and the Middle East; Pollo Campero, Guatemala’s fried chicken brand founded by Dionisio Gutierrez, currently has about 300 stores in Latin America, Europe, Middle East, Asia and about 50 in USA. Likewise, there are some Latin American brands that have become almost cult brands in international markets, as the Brazilian sandals brand Havaianas, Argentina’s polo inspired La Martina and Brazil’s plastic shoes brand Melissa. Likewise, other Latin American concepts have been successful in global markets such as Peru’s Tanta, also from Peru Michèlle Belau who just opened a store in Dubai; Argentina’s Freddo which at the end of last year opened two stores in the United States; Brazil’s O’Boticario, and Colombia’s Totto who has 510 outlets in 35 countries.

We recently had the opportunity to talk with some of the executives who have been reached this positioning, who shared information such as the countries where they currently operates, the markets they are aiming to conquer, the company’s starting, their successful key, their franchise system, their challenges and opportunities, and what they are looking ahead. This is what they told us:

CINÉPOLIS

Arturo López Martín

 Arturo López Martín

Chief Investment Officer

Ciudad de México / Mexico City

A passionate person in work, who believes in the power of education as an agent of change. A believer in teamwork to achieve goals and multiply results.

Cinépolis operates in 13 countries, Mexico, United States, Guatemala, Honduras, El Salvador, Costa Rica, Panama, Peru, Colombia, Chile, Brazil, Spain and India. We want to consolidate the markets in which we currently operate, and continually look for new business opportunities.

Cinépolis is a company that started in 1971 in the city of Morelia, Michoacán, México, founded by Mr. Enrique Ramírez Miguel and his son, Enrique Ramírez Villalón, who managed to evolve from being a family business to a multinational company and now has become the fourth largest movie theater chain worldwide.

Cinépolis is a company that has learned to adapt its concept to different countries, a company that is constantly innovating and a company keen on customer service. Cinépolis does not operate under the franchise scheme. He owns half of the property and the rest operate under the lease format.

Today, going to Spain gives us the opportunity to enter the European market, starting in a relevant country to Mexico. The challenges are similar to those we have faced in the past when we enter a new market regulations, tariffs, culture, competition, differences in tastes of films, different schedules, differences in consumption habits, etc.

Cinépolis continue to grow at the forefront of new content, projection and sound technologies, we continue our growth strategy facing mature markets and market saturation. Surely in 2025 growth in screens outside Mexico will be higher than in our country. Currently we grow at par in and out of Mexico, at a rate of 200 screens in Mexico and the same number in the rest of our markets. We will continue growing both organically and through acquisitions.

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KIDZANIA

fotoinmob91

Xavier López Ancona

Presidente y Fundador / President and Founder

Ciudad de México /Mexico City

Mexican and passionate about Mexico. If KidZania were to be remembered in the future, he would like it because it is an idea of Mexicans born in Mexico and proudly bears the name of Mexico to everyone.

Today, there are 19 KidZania parks opened in 16 countries in the World: Mexico, Japan, Indonesia, Portugal, United Arab Emirates, South Korea, Malaysia, Chile, Thailand, Kuwait, India, Egypt, Turkey, Saudi Arabia, Brazil and UK. There are 7 more in various stages of development in cities like Manila, Moscow, Singapore, Busan, New Delhi, Doha and Johannesburg. Manila KidZania will become the 20th KidZania park this July 2015. We are in negotiations with a large group in China and exploring opportunities in France, Canada, New Zealand, Australia, Germany and the Benelux region (Belgium, Netherlands and Luxembourg).

KidZania is one of those ideas that evolve on their own. Everyone thinks that people will one day wake up with a great idea, a focus of unexpected turns. In the case of KidZania, it was not. Almost 18 years ago, a close friend of mine, which imported US toy came with the idea of doing a similar small nursery to one he had seen in North Carolina, where they had a supermarket and a children’s hospital. They were not more than 200 m2. At that time I was in charge of the area of venture capital at GE Capital and the idea did not call my attention. But my friend was so insistent, so every time we talked about it the idea was evolving. That was how he planned to make “The City of Children” in a much larger space (4,500 m2 of space on two levels, with a total construction of almost 8,000 m2), we invited brands to participate, did activities for children the closest to reality as possible. With the growth and international expansion we had to find another name for our brand, because although “The City of Children” explains our concept perfectly, does not say much in Japan or Saudi. We had to find an international name and was well as “KidZania” which means “Land of cool children” (Kid comes from the German Kindergarten, which means children; Ania comes from Latin and means land or place; the Z was taken from the Anglo-Saxon word Zany, which means crazy, amazing, cool).

The concept of KidZania is based on role-play, to play at being adults. This is the oldest form of gambling known and is fully universal and timeless. What KidZania did it was to take this idea and taking it a step ahead. To do this, we build a whole city to the scale of children, with different areas and all the elements that enable children to role-play very in a very sophisticated way and the closest to reality as possible.

Our franchise system is a traditional model. We select only one licensee / franchisee by country or territory. They pay a Territorial Fee and a Park Fee. The royalties are 5% of total sales (including sales of tickets, food and drinks, merchandising, photography, special events, school groups and sponsorship revenue of brands involved in the project). In Mexico, all KidZania centers are fully developed and operated by us. United States is a special market, it has a sophisticated and demanding consumer, it is a highly competitive market, where we could open up to 14 parks, with a 30 million dollars investment for each, so we decided not to franchise in the United States nor go ourselves, but rather through a partnership or joint venture.

Our mission is to KidZania to serve the largest possible number of children worldwide. China and the US are the two most important markets that we still have to attack. We are also working to find ways to monetize virtual KidZania in which we can extend the experience in the virtual world of the park and back. This would allow us to reach more children in small cities or remote areas. Finally, we are evaluating several proposals to bring KidZania to other means, such as educational toys, TV shows, comics, animated series and movies

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CINEMEX

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Jaime Rionda Marin-Foucher

COO & CDO

Ciudad de México / Mexico City

He is an entrepreneur, highly focused on results oriented with a long-term vision in the industry. He believes in teamwork and in giving his people the ability to make decisions and take responsibility for results.

Today we only operates in Mexico, but we already have signed contracts in the United States and we are starting our expansion in Central and South America. Our main focus is on the American continent but if an opportunity arises in Southern Europe we could consider it.

The first Cinemex opened in 1995 in the Altavista Shopping Mall south of Mexico City. Later, in 2002 the company was sold to the Canadian ONEX and in 2004 was again sold to Carlyle Group. In early 2009 Entretenimiento GM its current owner acquired Cinemex.

The service we provide in our multiplexes is the key factor for our success. We have developed virtual training programs in each of our theaters and have standardized processes that allow us to better serve our guests. Another important competitive advantage is the quality of our food, which are by far the best in the industry in terms of quality.

The opportunities are in the VIP segment, in which sector we have a competitive advantage in Mexico by operating this concept for more than 8 years. In this sense, we see a neglected market in the US for a population that has a high purchasing power. The challenge is to replicate our quality standards in other markets and at the same time adapting to the customers’ preferences in those markets.

Looking ahead, we see us as one of the top 3 operators worldwide. We’re also developing other concepts that allow us to offer our services to more people who are looking for different leisure options.

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COOL DE SAC

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José Luis Bueno

President & CEO

Miami, EUA / Miami, USA

Marketer with wide experience en companies such as Procter & Gamble, Kimberly Clark, Mabe and General Electric. Moving to Miami to do his MBA, he developed this brand and established an entertainment and hospitality holding.

We are currently in United States, Mexico, Panama, Colombia and Singapore, and have currently under construction unites in Qatar (opens 08/01/2015) Venezuela (09/15) and Dubai (04/16). We look forward to continuing growth in Asia as we have the platform of Singapore as a hub in the region. In Latin America we are interested in Brazil, Chile and Argentina as next steps.

Cool de Sac was born in Miami in 2004, when I identify the lack of retail concepts which could cover both the children and their parents’ needs. Our competitive advantage is that there are very few similar concepts out there.

Francorp in Chicago developed our franchise system, it is the standard system of American franchise with a franchise fee and a royalty on going.

As we arrived to Singapore, we had to make many adaptations on the menu and habits of the breast, mainly on the issue of mommy and me and birthday parties.

Looking ahead, I see Cool de Sac with a network of 100 stores in 15 countries.

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LOLITA

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Michel Cohen

CEO

Montevideo, Uruguay

Since 2001, Lolita has started its expansion process which led to the opening of 84 boutiques in 14 countries: Uruguay, Bolivia, Brasil, Chile, Costa Rica, Dubai, Ecuador, Guatemala, Nicaragua, Paraguay, Peru, Puerto Rico, Southafrica and Venezuela. Our franchise system has been crucial for our growth. While in 2003 we had 24 boutiques, the number grew to 84 in 2014. Currently, 550 people work at Lolita. We have our headquarters in Montevideo and two logistic centers in Uruguay. Our goal is to continue growing in the GCC countries and North Africa as well as to consolidate our presence in Central and South America.

Lolita is an international fashion company devoted to the design, production and commercialization of women clothing. It was founded in 1960 by my mother Greta Engelman and her sister Lolita. Our first shop was a small boutique in Punta del Este. Our mision is to accompany women in their social growth designing collections, which adapt to their modern and versatile personalities with a preference for the international trends. We made it posible through our “local strategy”: even though we are a global company, we meet the local markets’ needs creating collections specially designed to satisfy each market’s requests. Unlike other retailers, we are a medium company which gives us flexibility and allows us to provide our franchisees with a personalized attention. At Lolita decions are made when they have to: they do not need to be analyzed by a comettee. This allows us to respond efficiently and immediately to the markets’ needs.

Our success is based in three pillars: quality, design and our comercial mix, that is the variety of products which is appropriate for the collections to be successful. To sum up, our strengths are the personalized attention we provide to the franchisees, our capacity to adapt to the different markets and our immediate response to the franchisees’ needs.

Our system allows the franchisees to establish our brand’s shops in the most diverse markets in the world. We design 8 collections per year so that a new mix of products arrives to the store every 45 days. Our design team, leaded by my wife Silvina Leibenberg, works nonstop in the launching of functional and elegant garnments for modern women with different lifestyles. Therefore, we offer casual, working and cocktail clothes giving women an integral solution.

On April 15th we opened our store at the Dubai Mall. Over a thousand international brands from different sectors are hoping to have a shop there. Our challenge is to be successful in such a competitive market and our opportunity is the visibility that our brand will have because Dubai is one of the most important display windows that a brand can have. Looking ahead, I see Lolita in 2025 as a consolidated company with more that 200 stores spread over the five continents.

BABYCOTTONS

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Martin Tro Gamboa

Responsable de Franquicias y Ventas Mayoristas / Head of Franchise and Wholesale Sales

Buenos Aires, Argentina

 

He considers himself a very dynamic person with great adaptability to change, who feels very comfortable with new projects and greater challenges. Marketing and business development is his forte; he feels very safe.

Currently we have stores in Brazil, Argentina, Peru and USA. In addition we operate franchises in Kuwait two shops, two shops in Colombia, Mexico, Ecuador, Paraguay, Chile, the Dominican Republic, Costa Rica., and we have a distributor in Norway. The idea is to conquer those countries requiring our brand, we know that quality Pima cotton coupled with Argentinean design has a great acceptance worldwide.

Babycottons was born in 1999. The original idea belongs to Maria Paz de la Piedra, granddaughter of a diplomat who was born in Peru, she developed a worldclass concept, and carried it out in order to develop a clothing brand for babies and children, which became successful venture. In 2011 the Vierci Group acquired most of the company with the aim of expanding Babycottons globally. The success of the brand has been to be able to reach to achieve harmony from the store design, fragrance, quality and classic design of each of the garments.

Looking ahead, we see Babycottons as a very entrenched brand in the Americas working on expanding to new continents to become the global industry leader for their quality and their unique brand classic designs.

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CHILLI BEANS

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Tatiana Uribe

International Business Manager

São Paulo, Brasil

We have stores in Brazil, Portugal, United States, Colombia, Kuwait, Peru, United Arab Emirates and Mexico. With strong presence in California, in the United States, the brand opened in December 2014 the first international flagship, in Santa Monica. We are prospecting openings in Spain, Chile, Thailand and Australia.

Chilli Beans began operations at the end of the 90s, on the command of Caito Maia. After 15 years, it is now established as the largest dedicated sunglasses Latin American network, the company has 650 outlets worldwide. Taking the fast fashion as a business platform, we launch 10 models of sunglasses, 5 watches and 3 frame models weekly. Chilli Beans is worth remembering that pioneered the concept of self-optic service, which allows customers touch and test the products, Chilli Beans was also the first brand to launch a personalization machine, which allows the customer to manufacture their own glasses. Recently, the brand was elected best franchise in Brazil, by the Brazilian Franchising As sociation (ABF).

Weekly collections of products, an accessible average price for all classes, as well as ease of having as expansion option of working through kiosks and shops, make an international investment is attractive at the time of positioning the brand giving a positive financial return in a short period of time for the franchisee.

We conducted a very tight working together with our future franchisee analyzing the market, our positioning in it, strategies and action plan through the expansion sectioned by cities in each country. Once open market purchases of collections are held weekly with monthly shipments made from Brazil to your country, receiving support in each of the areas and bringing the spicy essence of the brand to each outlet. Our vision is to be positioned on every continent through our points of essentially single-brand sales.

DEVLYN HOLDINGS

Melanie Devlyn

Proud to lead a team that, with great responsibility, is growing the company. She seeks to take care of the company in order to pass it on to the next generations better than she received it, and following the dream of her grandparents, her father and now herself. “If the family is well, the company is well. If the company is good, the family is better”, she says.

We mainly have a big stores network in Mexico, but we also have operations in Guatemala, El Salvador and recently in the southern United States, Texas and California. We want to continue expanding our presence in the Mexican market with all our formats aimed at different market segments, but we also want to strengthen our presence in Central America and in specific cities to sell the Hispanic market in the United States.

Next year we will be fulfilling 80 years since Dr. Frank Devlyn began operating in Ciudad Juarez, Chihuahua. From the 60’s his older sons Frank and Jesse started the expansion of business activities and presence in the country. Later, they were also joined by his younger brother, Pat, who started a period of rapid national expansion. For Devlyn it has always been a central focus on making customers for life. This combined with strengthening trade relations with its suppliers, constant innovation in its marketing, and continued strengthening of its brand have made Devlyn the leader of the Mexico optical industry. We are proud to be the largest optical chain in Latin America and one of the most important in the world.

Currently we not drive our growth through franchising. Since our inception in the United States we found a significant knowledge and affinity with the Devlyn brand in the Hispanic market and our commercial proposition, especially in terms of attention and customer service has been well received. We seek to grow through mergers and acquisitions to consolidate as one of the major international players in the optical industry.

Looking ahead, we see ourselves improving our customer service promise through constant innovation and maintaining our social responsibility in Mexico and the countries where we are present.

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The Most Sustainable Airport in the World

**Óscar Hernández

 

Captura de pantalla (179)Norman+Partners and FR-EE are the architectural firms that have designed the New Mexico City International Airport (AICM). Their goal is to create the most sustainable airport in the world, under the Leadership in Energy and Environmental Design (LEED) Platinum label. The construction will take advantage of sunlight, harvest rainwater and use natural ventilation systems. Moreover, there will be no air conditioning on site because the wind will refresh the corridors and, in the passage from one area to another, travelers will find gardens and lawns with cactus plants.

The airport will be built on 550,000 cubic meters of saltpeter terrain, without a single flower. It will be one of the largest airports in the world and will receive 120 million passengers annually.

The integration of walls and ceiling in a single piece will evoke the flight of an airplane. Designed on a monumental scale and frankly inspired by Mexican architecture and symbolism, the airport will offer passengers a unique experience in terms of efficiency and flexibility, as it is planned to accommodate successive internal changes and increase its capacity over time.

THE BEST ARCHITECT

“Mexico has really taken the initiative of investing in its national airport, realizing its economic and social importance, as well as planning its future. It will be like no other airport in the world”, said Norman Foster, winner of the Pritzker Prize (an equivalent to the Nobel prize for architects).

The lightweight glass and steel structure, along with an augmented vaulted ceiling, are designed specifically for the difficult soil conditions in Mexico City. Its prefabricated system allows for rapid construction without scaffolding. The construction, under the supervision of Mexican engineers and contractors, will be a showcase for innovation.

“In both offices (FR-EE and Foster+Partners) we have conceived a space whose structure will be linked to the essence of our past and will project us into the future. The project is the result of a collective effort, and it will become the gateway to Mexico”, said Foster during his presentation speech.

Fernando Romero -leader of FR-EE, the firm that was responsible for buildings such as the one that houses the Soumaya Museum- thanked Foster for taking flight and jointly designing the airport project according to a meticulous process in which several of the leading domestic and international architects participated. “I thought about Norman Foster, the designer of the best airports in the world. Norman has received the best architectural prizes in the world, but as the most important architect of our age, he is a prize for us”.

PROJECTS BY THE ARCHITECT NORMAN FOSTER

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The Cathay Pacific Lounges in the Hong Kong International Airport (2008-2012)

The challenge was to design the new areas of the airport on the existing building, expanding the number of services and amenities, from boardrooms and bars to private cabins. The Cabin -one of the lounges located within the boarding area- houses a reception hall, a bar and various private areas. Meanwhile, The Wing is a second hall designed with exclusive spaces for business class passengers who can enjoy private spaces and five suites built with exclusive materials.

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The Queen Alia International Airport, Amman, Jordania (2005 -2012)

The airport was designed as a gateway to the city of Amman, one of the oldest in the world. It was conceived to grow 6% annually in the following twentyfive years, increasing its capacity from three to 12.8 million passengers per year by 2030. Due to high temperatures in summer, concrete was the main material used for the construction. The roof is made up of modular units with concrete that emulate the veins of a leaf, with a geometric pattern that resembles traditional Islamic forms.

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The Kuwait International Airport (2011)

The airport is strategically planned to increase its capacity significantly and to establish a new regional air hub in the Persian Gulf. Its clover shaped design is distributed in three symmetrical wings that extend towards the boarding gates. Each façade covers 1.2 kilometers and extends to a height of twenty meters from the central area.

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The Tocumen, Panama International Airport (2011)

The design of the master plan for the expansion of the airport, which projects an increase from 5.8 to 18 million passengers by 2022, is inspired to reflect the Panamanian landscape. At the center is an open garden with trees and flora of tropical forests. This garden is the starting point of two extended symmetrical wings towards the east and west, unified by one single bronze aerodynamic roof, with openings to let in the sunlight.

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The Beijing Airport, China (2003-2008)

As described by Foster+Partners, Beijing’s international terminal building is the largest and most advanced airport in the world, not only in terms of technology but also in passenger experience, operational efficiency and sustainability. It was designed as a welcoming and stimulating building. Moreover, it has become one of the symbols of the city due to its aerodynamic roof and dragon form that celebrates the emotion and poetry of flight, evoking colors and traditional Chinese symbols.

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The Chek Lap Kok Airport, Hong Kong, China (1992-1998)

By 2040 it is expected that this airport will receive eighty million passengers annually, similar to the capacity of London’s Heathrow, and New York’s JFK. The concept of this airport was inspired by the Stansted Airport in the UK, characterized by a canvas cover and windows that let in natural light and allow passengers to observe the island and watch the airplanes as they land and take off.

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The Stansted Airport, United Kingdom (1981-1991)

Here, Foster defied all the rules of design of an airport terminal. Passengers fluidly traverse the terminal through the reception hall to the passport and departure control areas. From there, a computerized transit system transports them to the satellite buildings where they will board their flights. A railway station, attached to one of the buildings, was also included in the project

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