Br properties brazil real estate market

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  • 1. Commercial Property Market
  • 2. -10.000.00020.000.00030.000.00040.000.00050.000.00060.000.00070.000.00080.000.00090.000.000100.000.000Tokyo London Manhattan Paris Munich Toronto Madrid São Paulo Rio de JaneiroTotal Stock PopulationOffice: Principal Business Centers in the World2Source: CB Richard Ellis BrazilDespite its accelerated growth in recent years, the office market remains underpenetrated inBrazil compared with other major global markets
  • 3. Office: Total Stock – São Paulo3AAA6% A11%Other w/ CAC*39%W/out CAC*44%15% 22%41%7%23%50% 40%44%40%77%35% 38%15%53%Downtown Paulista Jardins Marginal OtherA + AAA Other w/ CAC Other w/out CACQuality Weight GLA m² GLA sfAAA 6% 689.274 7.419.284A 11% 1.263.669 13.602.020Other w/ CAC* 39% 4.480.281 48.225.343W/out CAC* 44% 5.054.676 54.408.080Good Quality Properties 17% 1.952.943 21.021.303* Central Air conditioningQuality by RegionSource: CB Richard Ellis BrazilSão Paulo’s stock lacks good quality properties, with the highest technical specifications, despitebeing one of the most important business centers in the globe
  • 4. 4Quality by Region54% 60%89%40%68%80%46% 40%11%60%32%20%Downtown Flamengo Botafogo South Zone Barra da Tijuca OtherWith CAC Without CACQuality Weight GLA m² GLA sfAAA 2% 119.506 1.286.352A 14% 836.542 9.004.463B 13% 776.789 8.361.287Other w/ CAC* 28% 1.673.084 18.008.926W/out CAC* 43% 2.569.379 27.656.565Good Quality Properties 16% 956.048 10.290.815* Central Air conditioningAAA2%A14%B13%Other w/CAC*28%W/out CAC*43%Office: Total Stock – Rio de JaneiroSource: CB Richard Ellis BrazilRio de Janeiro remains a tight market, driven by the oil and gas industry boom, scarcity of goodquality space, geographic barriers to entry and lack of adequate mass transportationinfrastructure
  • 5. Office: Total Stock – São Paulo and Rio de Janeiro5Source: CB Richard Ellis BrazilOver the last 5 years, total stock in both markets has grown at approximately the same pace(3% annually), constrained by the lack of infrastructure5.110.8005.291.4005.530.9005.681.3005.853.1006.022.6002.460.100 2.517.300 2.609.300 2.711.700 2.780.400 2.892.500-1.000.0002.000.0003.000.0004.000.0005.000.0006.000.0007.000.0002006 2007 2008 2009 2010 3Q11São Paulo Rio de Janeiro
  • 6. 6Office: Vacancy Rates – São Paulo and Rio de JaneiroSource: CB Richard Ellis BrazilGrowing demand for quality space and restrictions in new supply have led to historically lowvacancy rates, with better quality properties presenting better performance in both bull and bearmarkets3,1% 3,1%N/A N/A0,8%0,0%2,0%4,0%6,0%8,0%10,0%12,0%14,0%2006 2007 2008 2009 2010 3Q11São Paulo Rio de Janeiro BRPR (SP &RJ)
  • 7. 7Office: Average Rent/ m²/ Month - A and AAA PropertiesSource: Jones Lang La Salle Brazil and Cushman & WakefieldAverage price/m² has increased since the mid 2000’s after many years of stagnant growth, whichhas brought Brazilian prices closer to those of the developed world6977 738495758390107120N/A N/A201247266N/A N/A115 117 120N/A N/A N/A52 57-501001502002503002007 2008 2009 2010 3Q11São Paulo Rio de Janeiro West End - London Midtown Manhattan BR Properties
  • 8. Industrial: São Paulo Inland8Source: CB Richard Ellis BrazilVacancy RatesTotal StockThe industrial market remains strong, driven by faster consumption growth and increaseddemand for distribution facilities3.377.100 3.511.000 3.724.900 3.848.3004.120.900 4.167.300 4.290.7004.528.6004.817.300-1.000.0002.000.0003.000.0004.000.0005.000.0006.000.0003Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Stock6,2%0,1%0,0%2,0%4,0%6,0%8,0%10,0%12,0%3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Vacancy BRPR
  • 9. Industrial: São Paulo Inland9Average Asking Rents in São Paulo Inland (R$/ m²/ month)Average Asking Rents in Other Markets (R$/ m²/ month – 2Q11)Source: CB Richard Ellis Global and Jones Lang La Salle USA.36322420 1910Tokyo London Singapore São Paulo Inland Sydney Los AngelesLease prices have stabilized, and are expected to remain at these levels because of the difficultiesin obtaining environmental approvals. Sluggish economic growth is not expected to affect leaseprices in the mid-term1719 19 20 19 19 19 2023-5101520253Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Asking Rents
  • 10. Fragmented Industry10Addressable Market1: 36.3 mm m²BRProperties10 OrganizedCompaniesOrganizedCompanies9%Non-OrganizedMarket91%35%65%Fragmented Industry (in terms of GLA – m²) Brazil: Owned vs Leased – Large CompaniesUSA: Owned vs Leased – Large CompaniesThe large majority of the companies in Brazil still own their real estateIn the USA, only 20% of the companies own their real estate assetsOwnBuildings20%Leased80%OwnBuildings80%Leased20%Source: Internal Estimates and Itaú SecuritiesHighly fragmented and non-institutionalized market creates an attractive environment for theindustry in the coming years
  • 11. Takeaways11 Industry dynamics still present very attractive growth opportunities; Infrastructure constraints will keep both office and warehouse markets tight in the mid-term; In the short run, slower economic growth may have a slight impact in vacancy rates, leading tostabilization of lease prices; Players with better quality portfolio’s and below-market lease prices should be more resilient thandevelopers; Lower interest rate environment with greater access to credit and urban redevelopment of existingareas (i.e.: Porto Maravilha project in RJ) will drive the industry’s growth in the long run.