By Tierney Plumb
Now that the flags and fanfare of the Rio Olympics are gone, what's left is a city ripe with new real estate ready to be converted into housing and commercial destinations.
But the big questions are: will the tenants and residents come? And will the projects ever get finished in the first place?
The area which housed the Olympics Village - the largest yet in the history of the Games - is being handed off to billionaire real-estate developer Carlos Carvalho. The $800 million, 31-tower blocks are prepped to become Rio's newest community. But as of last month, developers had sold just 240 of the 3,600 apartments that run between 750,000 and 3 million reais ($230,000 to $925,000).
Missing the Gold
While most sales were expected post-Games - and so have yet to be seen - a project spokesperson admitted to Reuters that activity was well below the target of 1,000 as of July.
Big post-Olympics real estate plans were crafted when things were booming in Brazil, but thank Brazil's worst recession since the 1930s for the current slow sales of luxury units.
Andrew Zimbalist, an economist at Smith College in the United States and author of "Circus Maximus," a comparative study of the economics of hosting the Olympics, told Reuters the problem is simple: "They overbuilt and they misbuilt. They built high luxury condos at a time when the market was about to go bust."
The master plan for the site, designed by U.S. engineering firm Aecom (NYSE:ACM), includes apartment blocks dotting the waterline, a park, school, hotel, offices and shopping mall.
But the delivery time lines for the five-to-seven year plan is up in the air, as Brazil's bust economy has stalled the time line. And three of the Olympic sports arenas are destined to become a training center for athletes and a public school.
Time will tell when - and if - anything ever gets built; since companies that built most of the Olympics projects are linked to the explosive scandal surrounding oil producer Petrobras (NYSE:PBR), contracts are now being investigated.
The Rio Challenges
Rio relied on public-private partnerships (PPPs) to get companies to cover the cost of new venues in return for the OK to build real estate. About 5 million square meters of land has been opened to developers.
And that means the Brazilian public could be held responsible to pick up the tab.
The Rio Olympics came in 51% over budget and The Rio Olympic Committee, which already received a $900 million bailout in June, has applied for more bailout funds, reports The Nation.
While London hopped on the chance to erect affordable housing after their Olympics, Rio is being criticized for not doing enough to help accommodate the 20% of its metropolitan area's 12 million people who reside in slums.
Instead, thousands were displaced as billions was spent on bus lines and a subway extension to boost access to Olympic developments. And another future project in a 200-year-old shanty town called Horto, next to the Botanical Gardens, has given over 600 families 90 days to vacate.
Residential Effects Could be Strong
Despite Rio house prices being down 20% in real terms over the past year, a new report hints that Rio may be in good shape when it comes to residential real estate pricing.
The host city has seen the strongest residential price growth among six Olympic host cities since 2008, according to Savills World Research. Despite the economical slowdown, the city recorded an increase of 216%, from $40 per square foot in 2008 to $130 a foot in 2016.
It is still the lowest-cost among the six Olympic host cities cited in the report (including Sydney, Athens, Beijing, London and future host Tokyo). The prices listed are a blend of prime and mainstream properties.
Sydney, the 2000 Olympics host, has seen the second highest growth of the cities with a 125% increase to $610 a foot, but is now leveling.
Not all have bounced back from the 2008 recession. Athens, for one (which hosted the Olympics in 2004), has continued to see prices dip since its host year.
A Case Study: Beijing
While Rio must wait to see what the future for its real estate holds, there's no doubt that being crowned an Olympics host city can be a tricky double-edged sword.
On one side, the years and hype leading up to the main event can mean lots of money flowing into the city via tourism dollars. But once the Olympics torch is passed on and the athletes and guests vacate, then what?
Beijing, host of the 2008 Summer Olympics, was christened with lots of new structures to house the games. To put their construction frenzy into perspective, more than all the office space in Manhattan (some 500 million square feet) was erected in Beijing in the two years leading up to the games.
Though applauded as aesthetically beautiful, much of it was doomed for being too big, expensive, and impractical.
The iconic National Stadium, dubbed the Bird's Nest, had only booked one event in the year after the Olympics. But developers have resorted to using it for alternate uses that have proved relatively successful, like converting it to a shopping and entertainment center. In 2010 it held a snow theme park.
Soon the stadium will make an Olympics comeback, and will be used for the opening and closing ceremonies of 2022 Winter Olympics. Still, some venues constructed - like the baseball stadium - were demoed to make way for a mall.
Maintenance is a big bill to keep in mind that keeps post-Olympics construction alive. The Bird's Nest, for instance, costs some $9 million to maintain per year.