By Georgia Grimond, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The high price of rents and the worsening economy has led to the closure of 1,280 commercial establishments in Rio de Janeiro between January and May this year, a survey by the Research Center of Rio de Janeiro’s Shop Owner Association based on data from JUCERJA, Rio’s Board of Trade has shown.
The CDL Rio (Club of Directors of Shopkeepers of Rio), showed a 33 percent rise in shop closures compared to the same period last year. Across the state 3,290 shops have closed in the same five-month period, a 31 percent increase on 2014.
Zona Norte (North Zone) saw the most closures, with 449 shops shut. There were 363 closures in the Zona Oeste (West Zone), 239 in Zona Sul (South Zone) and 233 in Centro.
On Rua da Carioca in Centro, traditionally one of Rio’s busiest shopping streets, 33 of 60 shops ceased trading after less than a year citing rent increases, building work, changes to traffic and a lack of parking as reasons for the closures.
The high price of rents, and particularly renewal contracts, coupled with falling sales, low economic activity, high inflation and unemployment are all said to contribute to the closures. Consumers are also turning to shopping malls for the ease of parking and because they are thought to be safer.
Aldo Gonçalves, President of CDL Rio, says the country’s economic situation is affecting consumer behavior. “At this time of uncertainty, with inflation and unemployment on the rise, and when we do not know the actual size of the crisis and the time it will take for the country to resume growth, the first response of the consumer is to reduce spending, including shopping,” he said.
“With this, shopkeepers, who are already massacred by the weight of bureaucracy and high taxes, find no alternative but to cease trading.”
In the past year thirty shops in the high-end neighborhoods of Leblon and Ipanema have closed, twice as many as in previous years. Works on the long-awaited Line 4 of the metro are said to have affected trade. Roads have been closed and many shops have restricted access due to the construction.
However, realtors point to the market beginning to level out after inflation caused by the World Cup, when landlords upped prices ahead of the event. Commercial rent prices have begun to fall since 2014. From April to April, they fell almost four percent in Ipanema, over twelve percent in Leblon, and almost ten percent in Centro.
“You can not expect these prices go there to the ground,” realtor Wagner Figueiredo told G1. “It will not happen, this is illusion. What will happen is that the owners will give way to a limited extent. It is the market imposing it, the old law of supply and demand that will end up prevailing.”