Expansion of the Industrial Properties Market Drives Built-to-Suit Model in Brazil

The industrial properties market in Brazil recorded over 898 thousand m² of gross absorption in A+, A, and B-grade developments in the third quarter, according to SiiLA’s Market Analytics. This volume is noteworthy as vacancy rates continue to decline, and tenants begin competing for more efficient spaces to optimize their logistics operations.

One prominent trend in the logistics asset market is the built-to-suit (BTS) model. This contract type, as the name suggests, allows properties to be custom-built to meet tenant specifications.

In today’s market, with low vacancy and increasing demand for high-quality properties, BTS presents an attractive solution for both developers and investors, who benefit from a pre-leased project, and tenants, who can customize the space to fit their business needs.

Luiz Felipe, Manager of Capital Markets & Asset Disposition at Colliers, highlights the unique characteristics of BTS contracts, which often include long-term leases, penalties for early termination, exemption from the Rental Law, and no rental adjustment clauses.

“A BTS transaction involves a legal agreement in which one party (landlord) acquires land and builds a property to meet the objectives, needs, and standards specified by the other party (tenant), who leases the property for a predetermined period, guaranteeing occupancy until the contract’s end,” he explains.

According to Felipe, the contract’s atypical structure enables investment recovery. At the end of the contract, “the tenant may negotiate to continue leasing the space, as they hold the right of first refusal, or even explore a purchase option at market rates,” he adds.

For tenants, this ability to customize the property is a key benefit, allowing businesses with specific structural requirements, such as industrial or logistics centers, to operate in a space that meets their needs.