591,000 sqm logistics project shrinks 70% in Espírito Santo

The market buzz generated by Private Log’s announcement of nearly 600,000 sqm of space in Espírito Santo has faded into a much quieter 180,000 sqm project. Following the termination of the land agreement, updates on the development have lacked the enthusiasm of the initial announcement, and amid mounting feasibility challenges, what will actually be delivered remains uncertain.

The original project comprised a 591,032 sqm logistics megacomplex divided into two phases. The first would include two larger warehouses totaling 336,636 sqm. The Contorno Mestre Álvaro highway would split the development into two sections, with two additional warehouses totaling 254,369 sqm planned on the opposite side.

The second section would also include supporting facilities such as an outlet center, gas station, convenience store, food court and hotel.

Both phases were originally scheduled for delivery in the third and fourth quarters of 2027, but the ambitious project in Espírito Santo underwent major changes. The first came with the termination of the land agreement, which had been signed in 2024 and was canceled in January 2026.

Private Log decided to continue the development on land it already owns, but the structural changes were significant.

In addition to the reduction in gross leasable area, the project has lost all of the additional infrastructure originally planned around the warehouses. The first phase will now comprise approximately 100,000 sqm and is expected to be delivered by the fourth quarter of 2027. A second phase of 80,000 sqm is also planned, although no delivery date has been set.

The development will remain in the municipality of Serra, near the same highway, but construction will now proceed more cautiously and will be tailored to companies interested in built-to-suit, or BTS, projects.

According to Mateus Oliveira, CEO of Private Log, the company still “has negotiations underway, including with tenants we had already been speaking to before [...] but the dispute [over the land initially announced for the project] weakened the process.”

The executive said, however, that the main obstacle facing the project is another one.

“What weakens the project even further for us is that interest rates are not coming down. That means we are also keeping our foot on the brake when it comes to investing. We do not currently have a clear path to make this investment viable this year,” he said.

Brazil’s benchmark Selic rate was cut by 0.25 percentage point at the Central Bank’s latest monetary policy meeting in June 2026, falling to 14.25%. It was the first reduction since September 2024, when a cycle of consecutive rate increases began.

The benchmark rate has remained in double digits since February 2022, driven mainly by efforts to contain inflation following the Covid-19 pandemic.

The challenging environment is nothing new for investors, who tend to adopt a more conservative approach toward new developments during periods of high interest rates. However, when a company proposes increasing a state’s total logistics stock by 76% and ultimately moves forward with less than 24% of the originally announced area, the initial plan begins to appear almost unrealistic.   

Private Log considered creating a real estate investment fund, or FII, to finance and absorb the development. Oliveira said, however, that the company found little appetite among investment funds for speculative projects, prompting it to shift its strategy toward BTS developments.

Oliveira said he remains hopeful that lower interest rates could allow the company to proceed with the BTS model, although he acknowledged that the current project still faces significant risks.

“We are somewhat optimistic that next year Brazil will have lower interest rates. But if that does not happen, I believe our project will not be viable. We will not be able to get it off the ground unless interest rates fall,” he said.

The executive added that Espírito Santo is ready to accommodate large-scale developments, but acknowledged that the timing was not ideal for such an ambitious plan.

“We believe there was a certain degree of optimism, largely tied to what we were seeing in terms of demand in Espírito Santo, because you look at the figures and the data. Espírito Santo has vacancy close to zero, and there are many tenants looking to establish operations here. But I think it was the right project, in the right place, at the wrong time,” Oliveira said.