By Giancarlo Nicastro, CEO at SiiLA

According to data monitored by the SiiLA platform, the inventory of Classes A+ and A office spaces in the CBD areas of São Paulo is currently at 3,390,976 m², with a vacancy rate of 21.37%, equivalent to 724,651 m².

The occupancy of these assets was steadily increasing until the pandemic hit. Starting in 2020, the vacancy rate began to rise, reaching its peak at the end of 2021, with nearly a quarter of the offices remaining unoccupied. Companies returned spaces to preserve cash and due to uncertainties surrounding the resumption of in-person corporate and social activities without restrictions. Since then, the vacancy rate has gradually decreased but remains significantly higher than pre-pandemic levels.

 In light of this situation, the question arises: How long will it take for offices to return to high occupancy rates?

We conducted an exercise at SiiLA to envision a scenario with a 100% occupancy rate. Analyzing a sample from the pre-pandemic period (2016-2019), when office leasing volume was high, the average annual net absorption was 154,189 m². At this pace, it would take approximately 4 and a half years to lease all the current vacant area, assuming no new office spaces enter the market.

However, when considering the pandemic years in this projection, the scenario changes. From 2020 to 2021, there was a negative net balance between new leases and exits, indicating that more companies returned office spaces than leased them. Although there was some recovery in 2022, it remained below the pre-pandemic annual average. Adding up the net absorptions from 2016 to 2022, the annual average was 98,040 m². At this rate, it would take approximately 7 years and 3 months to fully occupy the vacant stock.

Considering these figures, it can be concluded that the recovery of the office market in São Paulo will be gradual, but it is already underway. Net absorption turned positive in 2022, and in the first quarter of 2023, indicating an encouraging pace of recovery. However, the supply of new developments can impact the absorption rate of vacant office spaces.

It is important to highlight that, contrary to what was believed in 2020-2021, offices are not disappearing. The corporate environment plays a fundamental role in today's society as companies require a physical space to house their facilities, accommodate their employees, and continue serving and innovating in their respective sectors. While work models are undergoing transformations with more collaborative spaces, hybrid work, corporate messaging apps, Zoom meetings, and the like, the demand for office spaces arises to meet these transformations. The corporate market in São Paulo is constantly evolving, and the SiiLA platform continues to monitor and provide updated data to assist companies and investors in making informed decisions.