Decline in Pre-leasing Volume in Brazilian Industrial Properties Reflects Economic Pessimism

The peak in pre-leasing volume occurred in 2020, with 65.8% of all new inventory delivered that year already under lease contracts

Renato Franklin, CEO of Grupo Casas Bahia, one of the companies that pre-leased industrial area in 2024

By: SiiLA News

07/17/2024

Currently, the combined inventory of Brazilian industrial properties classified as A+, A, and B totals 26 million m². SiiLA data indicates that by 2024, 1 million m² of new industrial properties have already been delivered. However, despite the influx of new properties, pre-leasing rates continue to decline. As of July this year, only 44.4% of delivered properties had active lease agreements.

In 2021, 2022, and 2023, pre-leasings accounted for 64.7%, 60.7%, and 53.8% of all new inventory delivered. Giancarlo Nicastro, CEO of SiiLA, noted, "In addition to the substantial pre-leasing volumes of the past three years, it's noteworthy that the amount of new inventory was also record-breaking. In 2021, 2.3 million square meters were delivered, peaking at 2.7 million square meters in 2022, and totaling 1.6 million square meters in 2023."

Volume of new inventory and pre-leases in Brazilian logistics properties, classes A+, A and B

In 2024, the largest pre-leasing transaction was 69 thousand m² at GLP Bandeirantes by Shopee, as reported by REsource in early June. Another significant transaction occurred at Cone Multimodal – Phase II, fully occupied upon delivery by Casas Bahia, Mercado Livre, and Grupo Pão de Açúcar.

The Impact of New Stock

Over the next six months, an additional 2 million m² of industrial area is scheduled for delivery. Of this total, SiiLA's intelligence team has already mapped 253 thousand m² in pre-leasings.

The slowdown in pre-leasing rates may reflect industry pessimism about the Brazilian economy. Data from the National Confederation of Industry (CNI) shows a decline in confidence among industrial sector entrepreneurs, dropping to 50.1 points in July, down 1.3 points from the previous month.

An analysis of market performance data alongside the ICEI - Industrial Entrepreneur Confidence Index reveals a pattern in the trends over the past 4 years. Since 2021, the confidence index has been declining, mirroring the slowdown in pre-leasing volume, as illustrated in the graph below.

Analysis of the performance of the new stock in industrial real estate in Brazil, Classes A+, A and B, and the Industrial Entrepreneur Confidence Index (ICEI).

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