Hines JV brings micro-apartment trend to Brazil

Hines is thinking small in São Paulo.

The Houston-based private real estate firm and local development partner Vitacon Incorporadora e Construtora are building a “smart” apartment building with 100 square foot units in the upscale Higienopolis neighborhood, according to an announcement this week.

The building, called Nova Higienopolis, will include common areas for co-working, laundry and kitchens, along with amenities such as a pub, gym and a car and bicycle share program.

Terms of the development were not disclosed. A spokesman for Hines, which manages about $100 billion, declined to comment, and Vitacon could not be reached for comment.

One investor in the micro-housing strategy who was not involved in the deal expressed skepticism about building small units in Latin America, where more multi-generational families live together, compared with cities in much of Europe. He also contrasted European and Asian cities' high land costs with relatively low costs in Latin America.

“A lot of the housing there is already small and efficient. It's hard to see it getting smaller and more efficient,” the source said.

In February, Hines inked a deal to invest 800 million reais ($258.2 million; €215.1 million) in projects to be developed by Vitacon, according to an announcement at the time.

Micro-housing is also gaining traction outside of Brazil. Zug, Switzerland-based private markets investment firm Partners Group said in a report last week that it is exploring the millennial-driven opportunity in micro-housing, as both rents and populations continue to rise in Europe's urban centers.

“To address rising population densities combined with higher rents and land prices, one of the concepts they are discovering is micro-housing, a way of living that Japan and other Asian countries embraced a long time ago,” Partners wrote. “We are currently evaluating potential investments in the micro-housing sector in northern Europe's larger cities.”

In July, Partners inked a deal with Stockholm-based developer SSM to build 1,700 apartments in Stockholm for €700 million, some of which will be micro-units, a spokeswoman said.

Other managers are also capitalizing on the demand for cheaper, smaller units.

In October, Corestate Capital, the Luxembourg-based private equity real estate firm, was handed a €500 million mandate by Bayerische Versorgungskammer to invest in micro-apartments in Europe, PERE previously reported. The special fund, BVK-Residential Europe-Immobilienfonds Corestate, is investing in micro-apartments in student housing properties in European university towns, with a focus on Germany and Austria.