With Low Vacancy Rates, São Paulo Shows Signs of Industrial Space Shortage

Vacancy Rate in Brazil's Largest Industrial Warehouse Market Drops to 9.97%; Balance Achieved at 12%, Favoring Neither Tenants Nor Landlords

Daniel Costardi, CEO at Viktoria Cargas

By: SiiLA News

08/08/2024

According to Market Analytics data from SiiLA for the second quarter of this year, the vacancy rate in São Paulo's industrial properties fell to 9.97%, down from 11.77% in the previous quarter. Industry experts suggest that low vacancy rates are not always a positive sign for the market, as an equilibrium rate is considered to be around 12%.

Read more: Industrial Properties Within a 30 Km Radius of São Paulo are Newer, Show Better Performance, and Have Quick Liquidity Experts Say

When the occupancy rate is approximately 88% of the available assets in the region, or a 12% vacancy rate, it indicates that the sector is balanced, offering no significant advantages to either tenants or landlords. With the current vacancy rate at 9.97%, there might be competition among companies to occupy the properties, benefiting the industrial condominium management companies.

SiiLA's data also shows that the total stock of industrial warehouse in São Paulo at the end of the second quarter was 14.1 million square meters. The average asking price was R$ 25.82 per square meter.

Among the 13 regions mapped by SiiLA in São Paulo, only two (Embu and Vale do Paraíba) have vacancy rates above 12%. Embu has a rate of 18.4%, while Vale do Paraíba stands at 18.3%.

All other regions have vacancy rates similar to or below 12%, the equilibrium rate.

Source: Market Analytics

According to the chart, the region with the lowest vacancy rate in São Paulo is Grande ABC, with an occupancy rate above 95%. Ribeirão Preto follows with an occupancy rate of 94.8%, and Sorocaba comes next with 93.9% of spaces occupied.

E-commerce Boom Impacts the Sector

Mercado Livre is the company occupying the most industrial space in São Paulo, with 1.071 million square meters. Amazon follows with 239.1 thousand square meters, and Shein occupies 215.5 thousand square meters.

The Top 10 continues with Shopee, Luft Logistics, Magalu, Assaí Atacadista, Solística, Loghis Logística, and Lojas Riachuelo.

According to Daniel Costardi, CEO of Viktoria Cargas, the rise of e-commerce, which dominates the occupancy of industrial warehouses as highlighted by SiiLA's analysis, is the primary driver behind the declining vacancy rates and the shortage of new spaces.

"The market is indeed heating up, mainly due to the rapid expansion of e-commerce companies that require large spaces. This narrows the margin for negotiating rental prices, leading to increased activity among companies searching for suitable spaces," Corstardi comments.

Costardi acknowledges that the vacancy rate is below the equilibrium level but emphasizes that opportunities are always available. He notes that construction industry players are aware of this trend and are expected to accelerate projects for new industrial warehouses in the São Paulo region.

Illustrating the growth of e-commerce companies, Mercado Livre recently became the most valuable company in Latin America, with a market value of $90 billion, according to Einar Rivero, co-founder of Elos Ayta Consultoria.

According to the Brazilian Association of E-commerce (ABComm), total sales from online stores operating in the Brazilian market reached R$ 44.2 billion in the first quarter of this year, marking a 9.7% increase compared to the same period in 2023.

Additionally, the organization reports that the average ticket per consumer during this period was R$ 492, up from R$ 470 in 2023, using the same comparative base.

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