Despite sizable recent stock increases, Brazil’s property market is strengthening – helped along by a healthy dose of sports fever.
The future’s looking bright for Brazil’s commercial property markets.
Rents and total stock levels in the South American nation’s key retail, office and industrial are tipped to increase over 2012.
Key factors are driving the trend – the lowest vacancy rates recorded for A Grade office space, rents up across the country, the strongest industrial absorption on record for Sao Paulo, and a 100 percent increase in retail investment over 2011.
Brazil’s national average office vacancy rate was 9.8 percent in Q4 2011, compared to 7.8 percent the year prior. The average vacancy rate for all cities increased briefly due to late-year new supply that wasn’t fully occupied by year end, according to Cushman & Wakefield.
In 2011 average monthly rent was up in all cities surveyed for the Cushman & Wakefield MarketBeat Offices Brazil Q4 2011 report.
The report recorded the largest rent increases in Brasilia, Porto Alegre and Sao Paulo CBD and non CBD markets. The average asking monthly lease in these cities was R$80,000 per sqm (AU$40,420 per sqm).
The vacancy rate in Sao Paulo’s main business district for high-end buildings was 7.8 percent in Q4, the lowest vacancy rate recorded since 2008.
New stock in Sao Paulo, which totaled 108,000 sqm, did not meet expectations. “Delays in construction should result in record deliveries in 2012, or over 570, 000 sqm of Class A office space,” the report says.
Victor Lopez-Beltran, CBRE Latin America research director, says there will be more than 400,000 sqm of space added to the Brazil office market in 2012, and at least 250,000 for 2013.
“Rents will still be amongst the highest in the world as most new office space would be Class A or higher, though price growth rate will keep on diminishing as it did in 2011,” Lopez-Beltran says.
Brazil commercial property sales volume:
USD, deals $10 million +
Source: Real Capital Analytics
CBRE’s Latin America Industrial MarketView report for Q4 2011 says net absorption increased by 23 percent in the Sao Paulo industrial market, but new supply outpaced demand.
The report says the 7.9 percent vacancy rate can be attributed to a 95 percent increase in new supply. Oversupply attracted new tenants to expand their operations leading to the strongest net absorption since tracking began, it says.
Elevated land and construction costs will likely temper the flow of new construction at prime Sao Paulo locations, according to the report, and sustained demand will help drive above-average rent growth.
Lopez-Beltran says nationally total stock will grow close to 10 percent in 2012 and 7 to 8 percent in 2013, “in order to close the gap between the shortening supply and the major economic expansion of the last few years”.
“Rent prices will definitely be higher than other countries in the region,” he says.
Lopez-Beltran says Sao Paulo and Rio de Janeiro are Brazil’s key retail markets, adding that other major cities have drawn the attention of retailers recently as Brazil’s purchasing power parity has risen significantly. The country’s biggest 15 cities have populations of more than 1 million.
He says over 2011 Brazil saw major expansion of retail centres, with inventory growing 1 million sqm or a 20 percent increase on 2010 levels.
“Retail investment grew over 100 percent with the outlook for the FIFA world cup 2014 and the 2016 Olympic games.”
“Local brands that still represent the majority of the offering are slowly being replaced by well-known international brands,” he says.
Total stock will grow at least 15 percent in 2012 with a similar outlook for 2013, according to Lopez-Beltran. “Rent prices will continue to rise in anticipation of the major events coming to the country, but probably at slower rates than 2011.”
Ezine editorial contact: