Financial Sector Shrinks by 6% in Post-Pandemic Office Occupancy

The current economic instability in Brazil, along with rising interest rates, is impacting various sectors of the country's economy. During the recent earnings season, covering the first quarter of 2023, solid financial institutions in Brazil reported a decline in profits. For example, Bradesco, one of the leading banks in the country, announced a net profit of R$4.3 billion in 1Q23, a 37% decrease compared to the same quarter of the previous year. The bank has also reduced its service network, including agency branches, service posts, and business units, from just over 8,000 locations to 7,700.

Historically, financial institutions have been at the forefront of office space occupancy in Brazil. In São Paulo, the largest market, financial companies accounted for a significant portion, representing a quarter of the occupancy in A+ and A grade office spaces until mid-2019. However, recent years have witnessed a gradual decline in their market presence.

According to a survey conducted by SiiLA, the financial sector has witnessed a 6% reduction in office space occupancy from the pre-pandemic period until 1Q23.  Several financial companies, including Caixa Econômica Federal and Itaú, have scaled down their occupied areas by 35% and 25% respectively.

Data and statistics from the SiiLA Market Analytics platform reveal a 15% reduction in Bradesco's occupancy of Class A+, A, and B corporate floors in São Paulo and Rio de Janeiro, the main monitored markets, between the first quarter of 2020 and the same period in 2023.

Bradesco's leasing activity has experienced a notable downturn, shrinking from approximately 169,000 m² in a pre-pandemic period,  to 142,000 m² due to recent returns. In the first quarter of 2023 alone, the bank returned nearly 12,000 square meters of space it Torre Jauaperi at the Centro Administrativo Rio Negro, a Class A+ property situated in the Alphaville region. Additionally, 12,000 square meters became vacant in the Bradesco (formerly Banco Mercantil) property on Avenida Paulista.

Among the selected banks for analysis, Santander experienced the smallest reduction, with a 0.9% decrease during the same period.