BRAZIL: An Introduction to Real Estate

Introduction – Trends in Brazil’s Property Market

The Brazilian real estate market is entering a new cycle marked by economic stability, the growth of new industries and targeted regulatory changes aimed at improving access to credit and encouraging investment.

Although some macroeconomic volatility remains – driven by global interest rate movements, fiscal discussions and political developments – the real estate market has demonstrated resilience and growing diversification. Key asset classes such as data centres, luxury hospitality, prime corporate office space and renewed urban districts have drawn increasing investor interest.

Therefore, Brazil continues to balance measures to control inflation with the need to keep economic activity moving. Interest rates are still high compared with international levels, which affects real estate financing conditions and the viability of capital-intensive projects. Even so, population growth, strong urban concentration, an improving logistics network and rising demand for infrastructure continue to support development and deal activity.

Investors’ confidence favours assets tied to long-term trends over short-term cycles. This is especially clear in the fast growth of data centre projects, renewed interest in high-end hospitality and the strengthening of São Paulo’s premium office market.

Brazil is also going through a wave of new legal and regulatory initiatives that influence market expectations. Urban-planning frameworks are being reviewed across major metropolitan areas, with municipalities reassessing zoning rules, density limits and incentives for mixed-use developments. These changes aim to update outdated urban models and support higher-quality development, but they also require investors and developers to closely monitor local legislative cycles to anticipate approval timelines and compliance risks.

Likewise, ESG factors are becoming a central part of investment decisions across real estate asset classes in Brazil. Investors increasingly look for energy efficiency, sustainable materials, better water management and low-carbon operations. Certifications like LEED and WELL play a larger role in how properties are valued and financed.

At the same time, recent changes to the housing finance rules of the Fundo de Garantia do Tempo de Serviço (FGTS), a federal welfare programme that is a significant source of funds for the Brazilian housing market, could impact residential demand over the coming year. The use of these funds being approved for properties priced up to BRL2.25 million, when the previous limit has been BRL1.5 million, could broaden access to financing for middle-income and upper-middle-income buyers, which may increase residential demand in major cities. Also, regulatory changes include efforts to expedite environmental licensing for crucial large projects, as well as ongoing revisions to municipal urban-planning rules (including zoning and density regulations) across key regions. These updates aim to modernise urban planning and encourage higher-quality, mixed-use developments. However, they also make it more important for investors to monitor local legislative processes and compliance requirements to better anticipate approval timelines and potential permitting risks.

Brazilian Real Estate Trends

Additionally, in view of the real estate business environment outlined above, some key trends and developments can be pointed out as important for the further development of the real estate market in Brazil.

Short-term rentals and urban regulatory trends

Short-term rental platforms continue to expand in major Brazilian cities, leading to new legislative and judicial regulations. Cities and condominium associations seek to create rules to balance residential neighbourhood stability with increasing tourism-driven demand, which is bringing more scrutiny to leasing structures, zoning and building-use approvals.

These changes add complexity for investors in mixed-use and hospitality-related assets and indicate that clearer governance frameworks for short-term rentals will likely continue to develop over the next year.

Data centres: digital infrastructure as real estate

Data centres are emerging as one of the most active asset classes in Brazil. Demand for cloud services, AI processing capacity and edge computing has grown significantly, making Brazil (especially São Paulo and the Northeast region) an important digital infrastructure hub, notably because of its connectivity, abundant available renewable energy and concentration of end users.

Given the well-established local legal framework, investors are attracted to the stability that comes from long-term leases and developed infrastructure. Brazil holds a strategic advantage in this regard, as it possesses large-scale renewable energy sources. The use of clean and sustainable energy sources may not only reduce operational costs but also ensure compliance with increasingly stringent installation regulations.

The establishment of a data centre requires a comprehensive legal due diligence of the intended property. A robust real estate legal audit process is essential to guarantee legal certainty and to mitigate potential risks and contingencies related to the property, including regarding ownership title and the absence of encumbrances or restrictions that could compromise the legal security of the transaction. In this context, several contractual models may be employed to enable the occupation of properties designated for the installation of data centres, each with its own legal and economic implications.

Demand is expected to stay strong as companies expand their digital capabilities, keeping data centres at the centre of Brazil’s real estate growth.

Hospitality and luxury: strong recovery and investor confidence

The hospitality sector has experienced a strong recovery after the pandemic. Domestic and international travel have increased occupancy levels and average daily rates, especially for high-end properties in São Paulo, Rio de Janeiro and resort destinations in the Northeast region. Luxury hospitality continues to attract both international brands and local developers. Development models include branded hotels, branded residences and mixed-use projects that combine hospitality, retail and high-end residential units.

Although management agreements and fee structures still require detailed negotiation, the better market conditions support continued investment and repositioning strategies.

Corporate offices: the rebound of Grade A space in São Paulo and Rio de Janeiro’s Porto Maravilha

After a period of increasing vacancy, São Paulo’s Grade A office market is improving as tenants seek better-quality buildings that offer modern infrastructure, sustainability certifications, and amenities that match today’s workplace needs.

This shift toward choosing higher-standard properties has increased absorption in core districts such as Faria Lima, Itaim and Vila Olímpia, even with hybrid work still in place. For investors, premium offices offer stable tenants, long-term leases and the possibility of appreciation, although construction costs and the need for technological upgrades remain important factors.

Rio de Janeiro’s real estate market is also showing more consistent growth, mainly because of the ongoing redevelopment of the Porto Maravilha district. The area has been significantly transformed through infrastructure upgrades, cultural projects and a growing number of mixed-use developments.

Porto Maravilha shows how large-scale urban revitalisation can attract residents, businesses and tourists. Residential projects have been gaining strength as mobility improvements (notably the light rail system) and upgraded public services support long-term urban development. Investment opportunities include early-stage projects, refurbishments of historic buildings and mixed-use developments that combine residential, office and hospitality components.

Post-pandemic office-to-residential conversions

Following the pandemic, the rise of remote work has left certain commercial buildings vacant in specific areas. One solution the Brazilian real estate market has adopted is converting office or commercial centres into residential spaces (“retrofitting”). The success of this approach highlights the growing need for housing in major cities like São Paulo and Rio de Janeiro.

Final Remarks - Opportunities and Challenges for the Coming Year

Key opportunities include growth in digital infrastructure and data centres, stronger demand for luxury hotels and premium offices, value creation through urban redevelopment projects, and taking advantage of the increased buying power of households due to FGTS reforms. The main challenges include high financing costs, rising construction expenses, and complex environmental and urban rules.

Further to the positive fundamentals of the Brazilian economy and real estate sector mentioned above, low inflation and a greater supply of credit continue to lead to positive expectations regarding the Brazilian real estate market, which may grow significantly in 2026. The search for new business opportunities in the real estate sector has been maintained; with good opportunities for local and foreign investors given the fact that the Brazilian real has depreciated in comparison to other currencies, making foreign investment even more attractive in what may be a boom period for the Brazilian real estate market.