Tax Incentive Phaseout Does Not Deter R$440 Million Investment in Extrema’s Logistics Properties
The prospect of reduced tax incentives under Brazil’s tax reform has not halted Fulwood’s expansion plans in Extrema, in southern Minas Gerais. The developer announced a R$140 million investment to expand Infinity Business Park and is considering an additional R$300 million phase. Together, the projects would represent a potential investment of R$440 million in this property alone.
The first expansion phase will add 40,000 square meters of gross leasable area (GLA) to Infinity’s existing 39,100 square meters, which are already operational. The new space will meet the development’s Class A+ standards. The existing property is occupied by logistics operator Transbuitte, which serves appliance manufacturer Midea at the site.
The expansion comes as the local market has no available space. According to SiiLA’s Market Analytics, vacancy at the logistics parks tracked in Extrema stands at 0%, supporting interest in new development in the region.
The next phase, still under consideration, could add 90,000 square meters of GLA. Fulwood intends to begin construction in 2027 and deliver the space in 2028, although the schedule could be accelerated depending on demand.
The developer’s strategy is to align new construction with inquiries from prospective tenants and monitor companies’ space requirements to avoid adding more supply than the market can absorb.
Speaking to REsource, Fulwood Commercial Director Fernando Schilis said demand for industrial properties in the region remains strong despite the challenges posed by tax reform, with clients taking a long-term approach to planning. Expanding existing distribution centers also makes projects more efficient.
“With vacancy close to zero and developments being preleased before completion, expanding established logistics parks is an efficient option because it builds on existing infrastructure and reduces the steps needed to accommodate new operations,” he said.
According to SiiLA’s survey, the market rental rate for Class A+, A and B logistics properties in Minas Gerais is R$32.30 per square meter. At Infinity Business Park in Extrema, the rate is R$30.38 per square meter.
From Tax Advantages to Operational Efficiency
About 90 kilometers from São Paulo, Extrema has established itself as an e-commerce distribution hub. Its proximity to São Paulo’s consumer market is complemented by a network of logistics operators, distribution routes and a workforce that supports logistics operations.
Tax incentives are also part of the equation. Minas Gerais offers preferential treatment under ICMS, Brazil’s state tax on goods and certain services, for qualifying operations, including e-commerce. These arrangements can substantially reduce the tax burden compared with other states. In Extrema, ICMS reductions can reach 75%, while new developments may also qualify for exemptions from ISS, the municipal services tax, and IPTU, the municipal property tax.
Eligibility depends on the requirements and conditions of each program; these benefits do not automatically apply to every industrial property tenant.
The tax advantage, however, will diminish under Brazil’s tax reform. The gradual phaseout of ICMS and ISS begins in 2029 and continues through 2032. Both taxes will be eliminated in 2033, when the new Goods and Services Tax (IBS) takes full effect. Benefits tied to the existing taxes will also be scaled back during the transition, as required by law.
The IBS uses destination-based taxation and prohibits local tax incentives except where explicitly permitted by the Constitution. As a result, for sales to consumers in other states, maintaining a distribution center in Extrema will no longer provide the ICMS advantage currently associated with the transaction’s origin.
The change is likely to give greater weight to transportation costs, delivery times, labor availability and property quality in companies’ leasing decisions. Extrema’s established logistics infrastructure could help preserve its competitiveness, although the impact will depend on the needs of each operation.
“The reform calls for a gradual rollout, with a transition period of about ten years during which the current system will coexist with the new one. In practical terms, there is no immediate change for companies already operating in the region or planning to invest there,” Schilis said.
He also described Extrema as a national benchmark for logistics and industrial parks.
“That combination is not easy to replicate elsewhere, and it is what keeps companies here and encourages them to expand,” he explained.
Expansion Across Minas Gerais
The projects in southern Minas Gerais are part of Fulwood’s broader presence in the state, where the company plans to invest another R$700 million in the coming years. Over the past decade alone, the developer has invested R$1.5 billion in logistics parks across Brazil.
In Betim, in the Belo Horizonte metropolitan area, the second phase of Betim Business Park calls for an industrial property spanning approximately 30,500 square meters, with an investment of R$150 million.
In Pouso Alegre, in southern Minas Gerais, phases two and three are under construction, representing a combined investment of R$240 million. The second phase, which is already leased, is scheduled to open in February 2027. The third phase is expected to be completed in May of the same year.
