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São Paulo Office Market Shows Signs of Post-pandemic Recovery, but Still Below 2019 Levels
- Data from SiiLA shows that vacancy rates are at their highest for Class A+, A, and B properties
By: SiiLA News
03/18/2024 The performance of the office market has fluctuated significantly in recent years, due to the Covid-19 health crisis. The occupancy of this type of asset was directly impacted by the restrictions of the time, as well as opened up space for extensive debate about occupancy models.
In an exclusive analysis obtained by the REsource editorial team with Market Analytics data, it is noticeable that over the past six years, from 2018 to 2023, the performance of São Paulo's Class A+, A, and B offices has fluctuated dramatically.
Between 2022 and 2023, years already without pandemic restrictions, the main performance indicators of the offices showed a recovery in the São Paulo market. Gross absorption totaled over 1.380 million square meters leased. Net absorption was also positive in both years, with 148,000 square meters and 130,000 square meters, respectively.
The data contrasts directly with what was seen in 2020 and 2021, both marked by negative net absorptions, with balances of -135,000 square meters and -167,000 square meters, respectively. Gross absorption in both years also remained slightly above 500,000 square meters, the worst performances of the analyzed period.
Office leasing volume was heated until 2019
An exclusive analysis of the main performance indicators of the office market shows that, although gross and net absorption show signs of recovery in the last two years compared to 2020 and 2021, the sector's performance is still well below pre-pandemic levels.
In 2018, gross absorption exceeded 930,000 square meters of leased area in São Paulo's offices. In 2019, the volume was also high: 899,000 square meters. Net absorption in both periods was positive: 366,000 square meters and 307,000 square meters in 2018 and 2019 respectively.
"The numbers for 2022 and 2023 are positive, but Market Analytics platform data indicate that we are still well below the indicators recorded in the office market until 2019," comments Giancarlo Nicastro, CEO of SiiLA.
"The new work models, which blend in-person days with remote work, have led many companies to rethink the use of their offices. We recently presented an analysis, published in an article on the Inteligência Financeira website, which shows that there is a large volume of companies leasing area, but the leasing profile has changed. Smaller areas are being leased, which directly impacts the gross absorption indicator," adds the executive.
With lower leasing volume and new deliveries, vacancy continues at high levels
The vacancy rate for São Paulo's Class A+, A, and B offices closed 2023 at 22.81%, at the same levels as 2021, where the rate was at 22.56%, and still far from the 15.26% seen at the end of 2019. There are several factors keeping the vacancy rate high, such as the performance of negative net absorption between 2020 and 2021, the still low volume of new leases, and also a large number of new property deliveries in the São Paulo capital.
In 2023 alone, 219,000 square meters of Class A+, A, and B assets were delivered. Between 2020 and 2023, the total volume was 760,000 square meters of area delivered in developments in the São Paulo capital. Offices delivered in the last six years include three towers of Parque da Cidade (Aroeira, Paineira, and Jatobá), B32, Faria Lima Plaza, and O Parque.
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Founded in 2015, SiiLA is the industry leading REsource for comprehensive commercial real estate market insights, news and events across Latin America. The SiiLA suite of innovative products drive greater accuracy, efficiency, and strategic advantages for top players in the commercial real estate industry.
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