Office Snapshot Q4 2015

Transcription

1 São Paulo SÃO PAULO OFFICE Economic Indicators GDP % -1.7% Inflation Rate 6..4% 10.7% Unemployment Rate 6.5% 7.5% Economics Stagflation. High inflation combined with increased unemployment rates and economic downturn all that made 2014 a worrisome year came true in In an attempt to rebalance the country s economy in one year, the government undersized the negative impacts which necessary adjustments would do to an already weak economy. Market Indicators Net Absorption/ Asking Rent AVERAGE Class AA+ Vacancy Vacancy 22.8% 26.3% Net Absorption 20K 35K Under Construction 202K 81k Average Asking Rent R$110.6 R$ ,000 80,000 50,000 20,000-10,000 Net Absorption Average Asking Rent R$ 154 R$ 134 R$ 114 R$ 94 R$ 74 R$ 54 R$ 34 R$ 14 Thus, what was supposed to be one year of economic recovery turned into three; and uncertainties - and risks - skyrocketed. GDP projections indicate that 2016 will be similar to the previous year: a volatile exchange rate, inflation rates expectations are deteriorating and a disbelief in fiscal adjustments hovers Brazil. The country need a credible and consistent medium-term plan that is impervious to the lava-jato political and legal unravels. While this does not occur, today's scenario tends to perpetuate. For now, our situation depicts growth and activity recovery starting in mid Market Overview The vacancy rate in São Paulo Class A CBD closed 2015 at 26.3%, rising 0.9 percentage points to the previous quarter and 3.5 percentage points higher than its annual comparison. The rise in the vacancy rate is directly connected with new deliveries, which are waiting for adjustments to be absorbed. In turn, net absorption closed 2015 at 122 thousand sqm, 35,000 sqm of which occurred during the last quarter. Leasing activity for the Class AA+ market remains solid: 268 thousand sqm were absorbed last quarter, which is above the 5-year average of 209 thousand sqm. 29.0% 25.5% 22.0% 18.5% 15.0% The JK Submarket has experienced the most new occupancies. Its vacancy rate fell 5.5 percentage points over the first three quarters of 2015, and closed the fourth quarter out at 24.6%. Other instances of high tenant activity occurred in the Faria Lima and Berrini regions. The Chucri Zaidan region, on the other hand, was hit hard by the increased vacancy rate of 10.6 percentage points, and reached 43.7% of vacant spaces. It is worth mentioning that 53 thousand of this sqm are pre-leased, what will certainly reduce drastically this indicator.

2 QoQ % Change (.000) sqm MARKETBEAT São Paulo Accordingly, it was still possible to observe the flight-to-quality movement in São Paulo during fourth quarter Class AA+ market witnessed 35 thousand sqm of absorption a reflex, of the real estate market cycle, where the prices of new assets has been lowered, and as a result, has created more opportunities for tenants to be able to get larger and more efficient spaces. WE EXPECT 190 THOUSAND SQUARE METERS OF NEW HIGH CLASS INVETORY IN SÃO PAULO New Supply NEW SUPPLY IS EXPECTED TO BE 29,3% BELLOW THE HISTORICAL AVAREGE The average asking rent remained stable in relation to the previous quarter (R$ 106.4/sqm), thus representing a reduction of 3.8% in comparison to the annual analysis. This movement is in line with the higher vacancy rate within the period. The highest average asking rent in São Paulo s CBD Class AA+ market was observed in the Faria Lima submarket, which reached R$ 153.4/sqm. Such values are justified by the high quality of its availabilities, which includes iconic buildings such as Pátio Malzoni. The Santo Amaro region presented the lowest average asking rent among the CBD class AA+ submarkets in São Paulo, and closed the year at R$58.3/sqm. The 2016 pipeline for upscale buildings is 190 thousand sqm, divided among the Chucri Zaidan, Vila Olímpia, JK, Pinheiros and Paulista regions. It is worth mentioning that this increase in inventory is already below the average growth rate of 260 thousand sqm/year observed over the past five years for the city of São Paulo. Developers continue to postpone a significant number of deliveries, and, whenever possible, combine it with preleases that eliminate their assets financial burdens. As a result, vacancy rates will keep showing a slight uptrend over the next few quarters. In turn, average asking rents,, should remain at the current level, considering that negotiation terms seem to have already reached their limit, and that a significant share of the new inventory delivered has already been absorbed. Class AA+ Asking Rent Trend 50% 25% 0% -25% Outlook CBD NCBD The current scenario shows that economic recovery will start in 2017 Average asking rent should remain at current levels negotiation terms are at the limit We expect that 190 thousand square meters will be delivered in 2016

3 São Paulo SUBMARKET TOTAL BLDGS INVENTORY DIRECT VACANT VACANCY RATE CURRENT NET YTD NET UNDER CNSTR* AVERAGE ASKING RENT (ALL CLASSES) Paulista % 11, ,008 27,503 R$ AVERAGE ASKING RENT (CLASS A) R$ Pinheiros % 8, ,829 36,861 R$ R$ Faria Lima % 18, ,347 15,578 R$ R$ Itaim % - 5,654 - R$ R$ Vila Olimpia % - 4, ,672 15,270 R$ R$ R$ Berrini % 9, ,095 - R$ Chac. Sto. Antonio % - 2, ,741 95,802 R$ R$ Marginal Pinheiros % 1, ,120 - R$ R$ Chucri Zaidan % - 6, ,627 90,329 R$ R$ JK % 15, ,951 63,908 R$ R$ Santo Amaro % 11, ,765 - R$ R$ TOTAL CBD CLASS AA+ Class AA , % 35, , ,251 R$ *Buildings under construction with delivery dates up to 4Q 2018 Transactions 4Q 2015 BUILDING SQM TENTANT TRANSACTION SUBMARKET Módulo Rebouças 7,484 Nubank Brasil Lease Pinheiros Tower Bridge 2,213 Panalpina Lease Berrini Morumbi Coporate Diamond Tower 8,204 Cargill Lease Chucri Zaidan São Paulo Corporate Towers Torre Norte 4,984 Embraer Lease JK About Cushman & Wakefield Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit or on Twitter. Gustavo Garcia Head of Market Research & Business Intelligence South America Praça Professor José Lannes, 40 3º floor São Paulo SP ZIP: Brasil Tel: gustavo.garcia@sa.cushwake.com

4 Rio de Janeiro RIO DE JANEIRO OFFICE Economic Indicators GDP % -1.7% Inflation Rate 6..4% 10.7% Unemployment Rate 6.5% 7.5% Economy Stagflation. High inflation combined with increased unemployment rates and economic downturn all that made 2014 a worrisome year came true in In an attempt to rebalance the country s economy in a one year, the government undersized the negative impacts which necessary adjustments would do to an already weak economy. Market Indicators Vacancy 14% 22.5% Net Absorption 20k 9.5K Under Construction 7.8k 29k Average Asking Rent R$13 R$118.6 Net Absorption/ Asking Rents AVERAGE 60,000 R$150 Thus, what was supposed to be one year of economic recovery turned into three; and uncertainties - and risks - skyrocketed. GDP projections indicate that 2016 will be similar to the previous year: a volatile exchange rate, inflation rates expectations are deteriorating and a disbelief in fiscal adjustments hovers Brazil. The country need a credible and consistent medium-term plan that is impervious to the lava-jato political and legal unravels. While this does not occur, today's scenario tends to perpetuate. For now, our situation depicts growth and activity recovery starting in mid Market Overview 20,000-20,000-60,000 Net Absorption Average Asking Rent R$100 R$50 R$0 The class AA+ CBD market in Rio de Janeiro grew 14% in comparison with the previous year. Its total inventory of 1.2 million sqm represents 18% of the corporate spaces in the city's CBD market. This growth, however, has not benefited the local market. The country's current economic situation, coupled with factors such as the frustration with the Pre-salt and Petrobrás involvement in the Lava-Jato Operation, have undermined corporate employment in Rio de Janeiro. Class AA+ Vacancy 25.0% 20.0% 15.0% 10.0% 5.0% Accordingly, many new deliveries in the city were postponed. The number shown in the fourth quarter of 2015 was lower than what was expected for the third quarter - there was an increase of 29 thousand sqm compared with the 76 thousand sqm previously experienced. The same has occurred with expected deliveries over the next few years, particularly for the Porto region. The Trump Towers, and the Porto 1 Building Rio Corporate -, for instance, are on hold status for now, waiting for clearer (and better) signals from the CRE market. 0.0%

5 QoQ % Change (.000) sqm MARKETBEAT Rio de Janeiro The vacancy rate has increased 1.1 percentage points over the past three quarters, closing the year at 22.5%. Despite the moderate increase over third quarter, this trend becomes more apparent when viewed annually (+8.4 percentage points). Such performance is also affected by the net absorption, which presented a substantially lower result (9.6 thousand sqm) in the fourth quarter. The current occupancy problems were clearly aggravated by the involvement of its main tenants in the recent corruption scandals. Accordingly, the Rio de Janeiro market, extremely dependent on the Oil & Gas sector, has been watching all-sized companies rescaling their activities and corporate headcount. New Supply NEW SUPPLY IS EXPECTED TO BE HIGHER THEN THE PREVIOUS YEAR Class AA+ Asking Rent Trend NEW HIGH QUALITY DELIVERIES EXPECTED TO TOTAL 467 THOUSAND SQUARE METERS IN 2016 AND % 25% Nevertheless, the Rio de Janeiro market somehow remained resilient when it came to its asking rents. In the high-end segment, rents remained unchanged in relation to the third quarter (R$118.6/sqm), only displaying a decline in the annual comparison (-8.8%). The Zona Sul and Orla regions held the highest average asking rents (R$ 275/sqm and R$ 188,7/sqm respectively). In turn, the lowest average asking rent among the regions analyzed was R$ 101.6/sqm, in the Porto region. There are over 476 thousand sqm of high quality office buildings expected to hit the Rio de Janeiro CBD market between 2016 and Although it is anticipated that a good share of this new inventory will be carried over to the following years, the city's pipeline should remain above its expected absorption, which will dictate a new occupancy trend in the near -term. 0% -25% Outlook CBD NCBD Although stable, asking rents were slightly lower, when compared to 2015 Net absorption rose in its quarter over quarter comparison Rio de Janeiro s new deliveries tend to be postpone, waiting for an improvement on the economic front

6 Rio de Janeiro SUBMARKET TOTAL BLDGS INVENTORY DIRECT VACANT VACANCY RATE CURRENT NET YTD NET UNDER CNSTR* AVERAGE ASKING RENT (ALL CLASSES) AVERAGE ASKING RENT (CLASS AA+) Centro % , ,037 R$ R$ Cidade Nova % - 2, ,300 R$ R$ Orla % 2,563 7, ,279 R$ R$ Zona Sul % 7,073 7, R$ R$ Porto % , ,373 R$ R$ TOTAL CBD CLASS AA+ Class AA+ 57 1, % 9,547 28, ,989 R$ *Buildings under construction with delivery dates up to Q About Cushman & Wakefield Cushman & Wakefield is a global leader in commercial real estate services, helping clients transform the way people work, shop, and live. The firm s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms in the world with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facilities services (branded C&W Services), global occupier services, investment management (branded DTZ Investors), tenant representation and valuations & advisory. To learn more, visit or on Twitter. Gustavo Garcia Head of Market Research & Business Intelligence South America Praça Professor José Lannes, 40 3º floor São Paulo SP ZIP: Brasil gustavo.garcia@sa.cushwake.com Copyright 2015 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.