IGP-M at 30% leads to office contracts reviews

Proprietários e inquilinos negociam mudanças de indicador para reajustes de contratos, muitos já adotando o IPCA./ Landlords and tenants negotiate contract readjustments index changes in which many are already adopting the IPCA..

By: SiiLA News

03/16/2021

The surge in the General Price Index - Market (IGP-M) led owners of commercial offices and tenants to sit down to discuss new indexing possibilities for rental contracts or the partial application of the primary reference indicator for rent correction. The sector shows that 30% of landlords have already accepted the indicator change. Real estate fund managers reinforce the trend and say that owners have agreed to change the IGP-M for the Broad Consumer Price Index (IPCA), but it depends on each contract. Economists warn that, in the long run, the two indicators will be similar. However, as we are facing a weak economy in the country, the IGP-M took off and accumulated an increase of 29.83% in 12 months.

According to consultants heard by Valour, lessors and tenants negotiate on a case-by-case basis, and there is no predominant trend. The IGP-M appreciated 1.95% in the first preview of March, according to the Fundação Getulio Vargas (FGV).

Giancarlo Nicastro, president of the SiiLA consultancy, informs that, in several cases, the correction is being made by half of the IGP-M variation, and the remainder becomes a delicate balance to be paid if the tenant devolves the property before the end of the contract.

The volume of new inventory is expected to fall sharply in 2023 and 2024. The market is decreasing the start of new ventures, according to the SiiLA president, waiting for most of the office’s activities to resume after a wider vaccination.

Although the consultants’ recurring assessment is that most of the areas’ returns in 2020, Nicastro says that he has seen some cases of tenants disposing of occupied areas in search of “holding cash”.

Read full story (in Portuguese).

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