What Drives Construction Costs for Industrial Properties? Insights from an Expert

According to Barbosa, concrete—one of the most critical materials for constructing industrial properties—has seen a steep price increase in recent years.

“The cost of concrete has more than doubled. We’re now paying over BRL 500 per cubic meter, compared to BRL 220 to BRL 230 just three years ago. This has a direct impact since concrete is fundamental to the construction of logistics warehouses,” Barbosa explained.

Asphalt, another key material, has also become more expensive due to rising oil prices, driven by global factors like currency fluctuations and geopolitical tensions in the Middle East.

“The cost of oil directly affects asphalt prices. For some projects, we’ve opted to replace asphalt with concrete, which can sometimes be more cost-effective depending on the scope of the project,” Barbosa noted.

Barbosa highlighted that the rising U.S. dollar is one of the biggest challenges facing the sector, as many critical materials must be imported. For example, sprinkler heads—essential for warehouse safety—are exclusively manufactured in the United States.

“The exchange rate has a direct impact on imported items like sprinkler heads, which are indispensable for industrial properties. These components are made in Texas and have no domestic alternative. The strong dollar significantly drives up installation costs,” he explained.

Steel is another challenge, despite being locally sourced in Brazil. The market is heavily dependent on a single producer, Usiminas, creating supply vulnerabilities.

“When all three of Usiminas’s furnaces are operational, prices remain relatively stable. But if one furnace goes offline, the market reacts immediately, and costs rise,” Barbosa shared.

In addition to material costs, a shortage of skilled labor is creating bottlenecks in the sector.

“Recently, in Extrema (MG), we faced difficulties finding qualified machine operators to repair a slope damaged by heavy rains. Even though the equipment was readily available, the lack of skilled professionals delayed the project,” Barbosa said.

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Despite these challenges, Barbosa remains optimistic about the industrial properties sector’s resilience in 2025, buoyed by strong momentum from 2024. However, he cautioned about potential economic headwinds in subsequent years.

“The logistics market has a shorter cycle compared to other asset classes, allowing for quicker adjustments during economic downturns. In a recession, the first step is usually halting land acquisitions. For now, though, we remain active—prospecting for land and conducting feasibility studies,” Barbosa concluded.

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