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São Paulo Offices Take Around 9 Quarters to Reach Their Lowest Vacancy After Delivery

Data from SiiLA shows that CBD areas set the standard, but also indicates that less central regions are developing as well.

Leonardo Galvão, CEO and Chairman of Mover Participações, a conglomerate formerly known as Grupo Camargo Correa. The company is part of the holding Morro Vermelho Participações, owners of the São Paulo Corporate Towers.

By: SiiLA News

09/17/2024

Today, São Paulo is the largest office market in the country, with 8.8 million square meters, representing 62.5% of the entire Brazilian stock of Class A+, A, and B assets. A study by SiiLA shows that over the last eight years, 17.3% of the total national stock was delivered in São Paulo alone.

The analysis conducted by SiiLA's intelligence team revealed that 1.6 million square meters were delivered since 2016 and that, on average, it took around nine quarters for the delivered properties to reach their lowest vacancy.

The methodology applied considered deliveries from 2016 to 2022. The analysis tracked the performance of newly delivered assets until the first tenant departure, at which point they lose their "new" status.

In addition to calculating the average time for absorption to reach its lowest vacancy, the analysis identified the delivery pace of these assets, with peaks in 2016 and 2018, and the lowest delivery in 2019. See the chart:

Source: Martket Analytics

In 2016, 380,000 square meters of Class A+, A, and B offices were delivered in São Paulo. For the assets delivered that year, it took 12 quarters to reach their lowest vacancy, which was 8.07%, with an annual absorption of 116,000 square meters until achieving their best performance, with 349,000 square meters of new stock occupied.

Delivery rhythm

According to the data, corporate property deliveries fluctuated since 2016, reaching a stable plateau from 2021 onward. In 2016, 380,000 square meters were delivered; in 2017, this number dropped to 183,000 square meters, rising again in 2018 to 360,000 square meters, but falling to just 78,000 square meters in 2019.

The year 2016 was marked by major deliveries, such as São Paulo Corporate Towers in the JK area, tower B of EZ Towers, and wing B of WTorre Morumbi, both in Chucri Zaidan. These three developments added 138,000 square meters of new stock.

In 2018, another peak in deliveries, developments like Parque da Cidade in Chucri Zaidan and the two towers of 17007 Nações in the Chácara Santo Antônio area added 133,000 square meters to the market.

CBDs vs. General Market

Source: Market Analytics

CBDs (Central Business Districts) set the standards when it comes to offices. In these regions, the average number of quarters to reach the lowest vacancy is nine, while outside CBDs it takes 10 quarters. The delivery trend also differs, essentially the inverse of the CBD trend.

While 2017 was the year with the highest deliveries for assets outside CBDs, the same period saw one of the lowest deliveries within CBD areas. For example, in 2023, 81,000 square meters were delivered outside CBDs, while 47,000 square meters were delivered within them.

Overall, deliveries in CBD regions represent 67.5% of all new stock in São Paulo. Their absorption corresponds to 71.1% of all new stock absorption in São Paulo, demonstrating that these regions are currently the most sought-after in the market.

Source: Market Analytics

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