SÃO PAULO HAS THE LOWEST QUARTERLY ABSORPTION RATE OF THE LAST 3 YEARS.

Transcription

1 OFFICE SÃO PAULO OFFICE MARKET REPORT RESEARCH REPORT FOR A+ AND A OFFICES SÃO PAULO HAS THE LOWEST QUARTERLY ABSORPTION RATE OF THE LAST 3 YEARS. ECONOMIC OVERVIEW Economic Indicators Previous Quarter Current Quarter GDP 3.2%* 2.1%* IPCA 1.0% 1.1% IGP-M 0.6% 2.5% Unemployment Rate (SP - IBGE) 6.1% 6.2% Currency Exchange Rate (R$/US$) *Market expectation Economic activity in São Paulo State presents signs of recuperation, a result of an increased retail sales and industrial production with increased exports (mainly of manufactured products) over recent months. Countries such as Argentina, United States, Mexico, Netherlands and China bought 40% of the state s exports. Data released from the Central Bank s Focus Report foresee a 2.1% GDP by the end of this year. The IGP-M index was 2.5% at the end of the quarter, 1.9% above the previous quarter. There was a fall-off in activity in the civil construction sector, with 46.4 points registered in May, 3.5 points less than March. This was the second lowest index registered by the National Confederation of Industries (CNI). Building construction and infrastructure works fell 4.5 and 1.4 points respectively, to 48.8 and 49.6 points. CORPORATE A+ AND A MARKET OVERVIEW VACANCY RATE NET ABSORPTION NEW INVENTORY PRICES The balance of corporate market came out positive after the end of first semester despite slowing signs. The fall of some economic indicators together with the possibility of new properties on the short term will change the market conditions seen in recent years. During the same quarter a year ago, the market had a vacancy rate of 0.5%, leading to price increases exceeding the inflation rate. The trend, however, is for the vacancy rate to increase gradually over next quarters. Buildings currently under construction and approved projects total 1.3 million square meters, or 90% of the current A+ and A inventory. In spite of this new variable, the absorption rate of properties built in recent years is showing signs of accomodation, partly explained by prices above market average practiced in the last buildings delivered to the market. The scenario, however isn t pessimistic. Colliers estimates that a vacancy rate between 7% and 12% is a healthy condition for supply and demand. This new market cycle will mean a consolidation of concepts such as mixed-use, renovation and green building. The trend toward mixeduse developments, for example, is due in part to zoning permits and the possibility to offer more than one type of real estate product (hotel, shopping mall, residential, corporate and offices) and the global real estate trend of creating small clusters. Another important point is the the chain of consumption created by the new floating population in these new financial centers and their demand for services. Renovation developments are also growing on current market. The first renovated corporate spaces appeared in the Paulista region, where there was no space for new developments and 70% of the inventory dates back to the 60 s and 70 s. The total cost of a renovated development is, on average, 40% lower than new construction. Recent deliveries are the Panorama Paulista Offices (Colliers listing) and Paulista 2028, where the asking lease prices post-renovation increased by 55% and 65%, respectively.

2 OFFICE MARKET REPORT > DELAYED RELEASE OF OCCUPANCY PERMITS CHANGES INVENTORY PROJECTION FOR THE QUARTER The greatest problems faced by new companies setting up in the city are the costs involved and problems related to the urban traffic. The high costs of food, housing and the lack of public transportation are determining issues in regions such as Marginal, Vila Olímpia, Itaim and Faria Lima. As the real estate development in this regions generates traffic, the development and extension of new subway lines grow in importance. The first stretch of Line 17 is slated for inauguration in The line s main function is to connect the Congonhas airport with the subway system. VACANCY > VACANCY RATE RISES FOR THE THIRD CONSECUTIVE QUARTER São Paulo market showed a vacancy rate of 3.3%, a rise of 0.4% over the previous quarter. EXISTING INVENTORY (THOUSAND OF sqm) X VACANCY RATE (%) 1,000/sqm % 1, Approximately 50% of the inventory projected for the 2 nd quarter, or 246,000 sqm, are burdened with difficulties in acquiring occupancy permits. Some delays are due to non-compliance with agreements made with public agencies. The WTorre Paulista (Paulista region) and WTorre JK buildings D and E (Vila Olímpia region) are two examples of this situation. Another issue mentioned by developers is the excessive bureaucracy involved in the process of releasing the permit. This problem may be minimized with electronic occupancy permit processing system, which was recently inaugurated in São Paulo. In the other buildings expected to come onto the market this quarter such as Cidade Jardim Corporate Center, JK 1600, Bridge Tower and Pátio Malzoni, the delays were due to unmet construction deadlines. Existing Inventory 1,500 1,450 1,400 1,350 1,300 1, ,358 Q ,383 Q ,383 1,383 1, Q Q ,460 1, , , , Vacancy Rate (%) Existing Inventory Vacancy Rate (%) SUSTAINABLE BUILDINGS The Green Building Council, a non-governmental organization certifying real estate developments that meet its required criteria, has had presence in Brazil since LEED is an internationally accepted certification seal granted to developments that adopt ecological practices through sustainable methods, beginning with the construction of a building through its operation. A LEED certified building can reduce: > 70% of solid waste emissions > 40% of drinkable water consumption > 33% - 39% of CO 2 emissions > 24% - 50% of electric energy use Actually, São Paulo s main certified buildings are: > Jatobá Green Building (Berrini) > Faria Lima Square (Faria Lima) > Eco Berrini (Berrini) > Eldorado Business Tower (Marginal) > WT Nações Unidas Towers 1 and 2 (Marginal) > Rochaverá (Roque Petroni) > Morumbi Business Center (Roque Petroni) > Faria Lima 4440 (Faria Lima) > Torre Santanter (Vila Olímpia) > CYK - Comendador Yerchanik Kissajikian (Paulista) > I-Tower (Alphaville) > New Century (Itaim) The increase is due to available area from the previous quarter together with residual area from other developments. The 13,000 sqm - 39% of total space - vacated in the Infinity Tower (Itaim) greatly affected the market s vacancy rate. The building was 50% empty in the previous quarter. In the Marginal Pinheiros, the vacancy rate was 5.5%, an increase by 2.2 over the previous quarter. This region has the only building on the market whose entire area is available for lease: the Cidade Jardim Corporate Center Park Tower. In the Faria Lima region, there was a 2% drop due to the devolution of small spaces scattered among different buildings. One of the devolutions was at the Faria Lima Square building, which had no space for lease for over 3 years. There was a 1.4% increase over last quarter s rate. In Barra Funda, the 1,534 sqm vacant space represents 2.1% of total inventory. Available areas for lease were found at the Centro Empresarial Água Branca - Milano Tower (1,026 sqm) and Centro Empresarial Água Branca - New York Tower (508 sqm). The Company Freedom leave from Market Place II building explains the current 0.3% vacancy rate in Roque Petroni region. In Itaim region, spaces returned from Maria Cecilia Lara Campos, New Century and Plaza JK buildings led to a 0.2% fall in vacancy in spite of occupation of some floors in the Infinity Tower building. P. 2 COLLIERS INTERNATIONAL

3 Existing Inventory Vacancy Rate (%) OFFICE MARKET REPORT EXISTING INVENTORY X VACANCY RATE BY REGION (%) sqm % 350, , , , ,000 0 Barra Funda 128,416 Berrini Chácara Santo Antônio 222,937 Faria Lima 10.4% 307, ,613 Itaim 5.5% 100,000 72, % 66,944 50,000 42, % 0.3% 0.0% 0.0% 0.3% Marginal Paulista 232, ,563 Roque Petroni 3.4% Vila Olímpia NET ABSORPTION > NEGATIVE NET ABSORPTION SEEN FOR THE FIRST TIME SINCE 2009 Due to the increase in vacancy rate, net quarterly absorption was 9,856 sqm, the lowest since the third quarter of QUARTERLY ABSORPTION IN A AND A+ CORPORATE BUILDINGS Q ,547 Q ,939 Q ,387 15,104 49,709 27,643 15,213 70,891-9,856 Marginal Pinheiros, Faria Lima, Roque Petroni and Barra Funda were the regions that most influenced the negative number, with -6,820 sqm, sqm, -754 sqm and -507 sqm, respectively. Some of the buildings with areas turned over to the market were: Existing Inventory Vacancy Rate (%) The vacancy rate in the Vila Olímpia region was 3.4%, up 0.2% from the previous quarter. Meanwhile, vacancy in the Berrini, Chácara Santo Antônio and Paulista regions remained stable. COMPARATIVE VACANCY RATE BY REGION IN 2012 (%) FARIA LIMA FARIA LIMA FARIA LIMA Faria Lima Square Available Area: 1,656 sqm Previous Tenant: BASF Icon Available Area: 609 sqm Previous Tenant: UCI Farma Plaza Iguatemi Available Area: 333 sqm Previous Tenant: Aracruz Celulose REGION INVENTORY BARRA FUNDA 1.4 % 2.1% BERRINI 0.3% 0.3% CHÁCARA STO. ANTÔNIO 0.0% 0.0% FARIA LIMA 0.6% 2.0% ITAIM 10.6% 10.4% MARGINAL 3.3% 5.5% PAULISTA 0.0% 0.0% FARIA LIMA ROQUE PETRONI BARRA FUNDA Torre Faria Lima Ohtake Cultural Available Area: 924 sqm Previous Tenant: Mitka Market Place Tower II Available Area: 754 sqm Previous Tenant: Freeddom Centro Empresarial Água Branca (New York Tower) Available Area: 507 sqm Previous Tenant: Confidential ROQUE PETRONI 0.0% 0.3% VILA OLÍMPIA 3.8% 3.4% INVENTORY METER Itaim and Vila Olímpia both had positive absorption, with 824 sqm and 383 sqm, respectively. There was no net absorption this quarter in Berrini, Chácara Santo Antônio and Paulista regions. Less than 10,000 sqm 10,001-50,000 sqm ,000 sqm ,000 sqm More than 200,001 sqm A total 48,559 sqm of area available for lease was found in existing A and A+ corporate properties. COLLIERS INTERNATIONAL P. 3

4 OFFICE MARKET REPORT NET ABSORPTION BY REGION EVOLUTION OF AVERAGE ASKING LEASE PRICES (R$/sqm/month) sqm 70,000 Q Q Q ,000 50,000 40,000 The increase of asking prices is clear if compared with prices in the same buildings this quarter with the prices from last quarter. 30,000 20,000 10, , ,982 Barra Funda Berrini Chácara Santo Antônio Faria Lima Itaim -6,820 Marginal Paulista -754 Roque Petroni 824 Vila Olímpia BUILDING REGION R$/sqm/ month R$/sqm/ month Centro Empresarial Água Branca Barra Funda Torre Sul (CENU) Berrini Faria Lima Square Faria Lima Some transactions occured during the second quarter: Torre Faria Lima - Ohtake Cultural Faria Lima BUILDING REGION TOTAL LEASED AREA TENANTS Spazio Faria Lima Itaim Market Place Torre II Marginal San Paolo Faria Lima 540 Confidential* E-Tower Vila Olímpia Infinity Tower Itaim 19,930 Cidade Jardim Corporate Center (Capital Building) Facebook, SAS Institute Brazil, Credit Suisse and Goldman Marginal 2,058 Confidential* COMPARISON OF AVERAGE ASKING LEASE PRICES BY REGION IN CLASS A+ AND A CORPORATE BUILDINGS (R$/sqm/month) REGION Alpha Tower Vila Olímpia 1,069 Confidential* Barra Funda Cardoso de Melo 1308 Vila Olímpia 222 Angra Partners Berrini Chácara Santo Antônio TOTAL 23,819 *Confidential: company name may not be uncovered. PRICES > PRICES INCREASE 2.1% IN THE SECOND QUARTER Asking lease prices increased again in the second quarter. The average reached R$ /sqm/month, a 2.1% rise over the previous quarter. It is due to new inventory and a 3.3% vacancy rate, a situation favorable for higher prices. Faria Lima Itaim Marginal Paulista Roque Petroni Vila Olímpia SÃO PAULO P. 4 COLLIERS INTERNATIONAL

5 OFFICE MARKET REPORT There was a low variation in the minimum and maximum asking prices during the second quarter. The minimum price was R$ 60/sqm/month in Barra Funda and Chácara Santo Antônio and the maximum was R$ 220/ sqm/month in Faria Lima. MINIMUM AND MAXIMUM ASKING LEASE PRICES (R$/sqm/month) NEW INVENTORY > NO NEW BUILDINGS ON THE MARKET DURING THE SECOND QUARTER There were no deliveries in the market during the second quarter. In spite of postponements, the expectation by the end of the year is 389,000 sqm of new properties, 67% of which could come onto the market in the third quarter. The projected inventory for 2013 is 250,000 sqm, 42% of which will be in the Roque Petroni region. PROJECTED INVENTORY ,466 sqm PROECTED INVENTORY ,590 sqm Marginal 34% Roque Petroni 42% Faria Lima 25% Faria Lima 16% Vila Olímpia 22% Berrini 13% Itaim 7% Vila Olímpia 13% Paulista 6% Marginal 10% Chácara Sto. Antônio 6% Itaim 6% The existing inventory in A and A+ corporate buildings could reach 2.5 million square meters by 2015 The trend for prices is the stabilization with occasional increases when new buildings come to the market. HIGHEST ASKING LEASE PRICES BY YEAR (R$/sqm/month) EXISTING INVENTORY X FUTURE INVENTORY 2010 TO 2012 (IN THOUSANDS OF sqm) 2,5 2, Plaza Iguatemi (R$ 95.00/sqm/month) 2007 Plaza Iguatemi (R$ 95.00/sqm/month) 2008 Plaza Iguatemi (R$ /sqm/month) 1,5 1,0 0,5 0, * 2013* 2014* 2015* Existing Inventory New Inventory 2009 San Paolo (R$ /sqm/month) 2010 Plaza Iguatemi (R$ /sqm/month) TRENDS FOR THE END OF 2012 NEW INVENTORY New buildings amounting to 389,000 sqm distributed between Marginal, Faria Lima and Vila Olímpia regions with 34%, 25% and 22%, respectively. NET ABSORPTION 2011 Plaza Iguatemi (R$ /sqm/month) 2012 Faria Lima Square (R$ /sqm/month) Projection for accumulated net absorption between 200,000 and 300,000 sqm. VACANCY RATE Variation between 7% and 12%. AVERAGE ASKING LEASE PRICE Accumulated increase of 8-10% over the year. COLLIERS INTERNATIONAL P. 5

6 OFFICE MARKET REPORT SUMMARY OF CORPORATE OFFICE MARKET IN SÃO PAULO - Q2 Existing Inventory: 222,937 sqm Net Absorption: -2,982 sqm Vacany Rate: 2.0% Average Asking Lease Price: R$187.50/sqm/month Existing Inventory: 72,690 sqm Net Absorption: -507 sqm Vacany Rate: 2.1% Average Asking Lease Price: R$70.00/sqm/month Barra Funda Existing Inventory: 66,944 sqm Net Absorption: 0 sqm Vacany Rate: 0% Average Asking Lease Price: R$132.00/sqm/month Paulista Existing Inventory: 307,057 sqm Net Absorption: sqm Vacany Rate: 5.5% Average Asking Lease Price: R$110.00/sqm/month Marginal Pinheiros Faria Lima Existing Inventory: 128,416 sqm Net Absorption: 0 sqm Vacany Rate: 0.3% Average Asking Lease Price: R$123.00/sqm/month Berrini Vila Olímpia Itaim Existing Inventory: 168,613 sqm Net Absorption: 383 sqm Vacany Rate: 10.4% Average Asking Lease Price: R$167.50/sqm/month Existing Inventory: 210,563 sqm Net Absorption: 824 sqm Vacany Rate: 3.4% Average Asking Lease Price: R$142.50/sqm/month Existing Inventory: 42,471 sqm Net Absorption: 0 sqm Vacany Rate: 0% Average Asking Lease Price: R$71.50/sqm/month Chácara Sto. Antonio Roque Petroni Existing Inventory: 232,081 sqm Net Absorption: -754 sqm Vacany Rate: 0.3% Average Asking Lease Price: R$113.50/sqm/month STATISTICS TABLE REGION # BUILDINGS EXISTING INVENTORY VACANY RATE Q (%) VACANY RATE Q (%) AVAILABLE AREA NET ABSORPTION AVERAGE ASKING LEASE PRICE (R$/sqm/month) AVERAGE ASKING LEASE PRICE (US$/sqm/month) BARRA FUNDA 1 72, % 1.4% 1, BERRINI 8 128, % 0.3% CHÁCARA 4 42, % 0.0% FARIA LIMA , % 0.6% 4,356-2, ITAIM , % 10.6% 17, MARGINAL , % 3.3% 16,878-6, PAULISTA 6 66, % 0.0% ROQUE PETRONI 7 232, % 0.0% VILA OLÍMPIA , % 3.8% 7, TOTAL , % 2.9% 48,559-9, CURRENCY EXCHANGE RATE: R$/US$: 2.01 P. 6 COLLIERS INTERNATIONAL

7 OFFICE MARKET REPORT ALPHAVILLE VACANCY Alphaville corporate market is stable with a vacancy rate of 30% in for corporate spaces. Current data indicates an increase of 3.1% compared to the previous quarter. Buildings that recently entered into the market, such as Brascan Century Plaza Corporate Tower and I-Tower, are 97% and 71% available. The recent devolution of some spaces in Centro Administrativo Rio Negro (Demini and Paduari Towers) totaling sqm, also contributed to the vacancy increase. EXISTING INVENTORY (IN THOUSANDS OF sqm) X QUARTERLY VACANCY RATE (%) 1,000 % QUARTERLY NET ABSORPTION IN CLASS A AND A+ CORPORATE BUILDINGS 3,325 PRICES 3,333 11,438-1,905-6,483 Average prices dropped by 3.2% during this quarter, reaching R$ 63.00/ sqm/month. As it is a unique market and due to current availability, asking lease prices decreased in many buildings. One of them was Castelo Branco Office Park (building II), which reduced its asking price from R$ 67.50/ sqm/month to R$ 60.00/sqm/month. 220, EVOLUTION OF AVERAGE ASKING LEASE PRICE (R$/sqm/month) Inventory 200, , % 27.6% % % % Vacancy Rate (%) NEW INVENTORY , % 20.0 Canopus Alphaville buildings (Towers I and II) are expected to come onto the market in 2012, with 56,120 sqm. Q2 Q 2011 Q3 Q 2011 Q4 Q 2011 Q1 Q 2012 Evolution Corporate building is expected to come on the market in 2013, with 59,400 sqm. Existing Inventory Vacancy Rate (%) NET ABSORPTION Alphaville showed a negative net absorption rate for the second consecutive quarter. In the second quarter of 2012, absorption was -6,483 sqm. In spite of this fact, some deals were signed during the quarter: Zara occupied one floor, and others leased for Atlantic Solutions, Itau/Unibanco, Sony and RVD Empreendimentos. SUMMARY OF ALPHAVILLE CORPORATE OFFICE MARKET Alphaville Existing Inventory: 207,173 sqm Net Absorption: -6,483 sqm Vacancy Rate: 35.2% Average Asking Lease Price: R$ 63.00/sqm/month STATISTICS TABLE REGION # BUILDINGS INVENTORY VACANCY RATE Q (%) VACANCY RATE Q (%) AVAILABLE AREA NET ABSORPTION AVERAGE ASKING LEASE PRICE (R$/sqm/month) AVERAGE ASKING LEASE PRICE (US$/sqm/month) ALPHAVILLE 7 207, ,909-6, CURRENCY EXCHANGE RATE: R$/US$: 2.01 COLLIERS INTERNATIONAL P. 7

8 MARKET OFFICE REPORT MARKET OFFICES REPORT COLLIERS OPPORTUNITIES Ed. Panorama Lease Paulista SP Available Area: 5,028 sqm Ref: 3084 Ed. Itaim Business Center Lease Itaim SP Available Area: 2,058 sqm Ref: 3059 Ed. Sparta Lease Conceição - SP Available Area: 640 sqm Ref: 3078 Colliers International More than 520 offices in 62 countries in 6 continents USA: 147 Canada: 37 LATAM: 19 Asia: 36 ANZ:165 EMEA: 118 US$ 1.8 billion in annual revenue More than million sqm under management More than 12,300 profissionals Ed. NBC Sale Barueri - SP Available Area: 3,109 sqm Ref: 3063 CONTACTS São Paulo R. Olimpíadas, andar São Paulo SP TEL REAL ESTATE MARKET VOCABULARY. Absorption: Amount of sq.m occupied in the previous period. Development category: Real estate properties are classified as A+, A, B and C. Stock / Inventory: Amount of usable constructed area in square meters. Vacancy Rate: Ratio between area available area and total area. Free Ceilings Height: Space between the finished flooring and the 1st structure ceiling interference. Build-to-Suit: Customized construction COLLIERS INTERNATIONAL BRAZIL REAL ESTATE CONSULTANCY FOR INDUSTRIAL, OFFICE, RETAIL, LAND, RURAL, HOTELS, HOSPITALS AND EDUCATIONAL INSTITUTIONS Real Estate Investments Tenant and Landlord Representation - Leasing, Acquisition and Sale Advisory and Disposals for real estate assets and/or portfolios Build-to-Suit and Sale & Leaseback Operations Lease Administration and Property Management Rio de Janeiro Av. Almirante Barroso, Rio de Janeiro RJ TEL Recife Av.Gov. Agamenom Magalhães, Recife PE TEL Fortaleza Av. Dom Luis, andar Fortaleza CE TEL More information: RESEARCH AND MARKET INTELLIGENCE research@colliers.com.br OFFICE office@colliers.com.br Real Estate Valuation for Leasing, Acquisition, Sale and Guarantee Market and Technical-Financial studies, Highest and Best use studies Advisory for Investment Funds and Private Investors Green Consulting for LEED certification Accelerating success. COLLIERS INTERNATIONAL P. 8