Through Retrofitting, the São Paulo City Government's Program Aims to Repopulate the City Center, Says the Secretary of Urbanism

The Municipal Secretary of Urbanism and Licensing states that the Requalifica Centro Program is important for attracting investments to the region

With many historic buildings, downtown São Paulo is experiencing a rising vacancy trend in commercial properties monitored by SiiLA.

By: SiiLA News

09/15/2023

Boasting a population of 11.4 million people, São Paulo stands as a thriving economic and commercial epicenter. Districts such as Faria Lima, Vila Olímpia, and Paulista exert a magnetic pull on entrepreneurs and investors. However, the historic downtown area, once fiercely contested, now faces a growing issue of office vacancies. According to data from the Market Analytics platform, the vacancy rate in this region was 12.4% at the close of 2019. Fast forward to the end of the second quarter in 2023, and it has surged to 22.1%. These statistics pertain to top-notch Class A+, A, and B office buildings tracked by the SiiLA platform in the heart of São Paulo.

To address this phenomenon of "urban emptiness" in the central zone, the municipal government has introduced the Requalifica Centro Program. To gain deeper insights into the region's plans, the editorial team at REsource interviewed Marcos Duque Gadelho, the Municipal Secretary of Urbanism and Licensing.

The Requalifica Centro Program, also known as the Retrofit Law, aims to breathe new life into vintage developments in the central region that were built prior to 1992. It does so by offering enticing tax incentives, invigorating the real estate market in the area and drawing in investments.

A recent case in point is the Taquari Building, which remained vacant for three years but is now slated for a transformation into a mixed-use complex. This revamped structure will feature 120 residential units and commercial spaces on the ground floor and mezzanine. The construction is projected to last ten months, with the units set to be sold at market prices.

Marcos Duque Gadelho asserts that the central area, given its historical significance, boasts the requisite infrastructure to accommodate both residents and businesses. "We've found that this central region holds significant importance in terms of infrastructure, having once been home to major corporations. In essence, there's tremendous potential for high population density in the area," explains the secretary.

Evolution of the vacancy rate in the Centro region

SiiLA data shows that the vacancy rate in downtown São Paulo is increasing in the past years

Despite having sprawled across 2,089 hectares, the central area, according to the municipality, has seen many businesses that once thrived there migrate to other parts of the city, for a variety of reasons, including economic growth and Urban Consortium Operations.

The Secretary underscores that the Program is not merely an initiative to rejuvenate buildings but will also give downtown São Paulo a fresh new identity. He also notes that, thanks to its existing infrastructure, the region can comfortably accommodate up to 200,000 people.

To facilitate this revitalization, it's imperative to offer not only urban incentives but also fiscal incentives. One such incentive outlined by the program is a three-year exemption from the Urban Property and Territorial Tax (IPTU) after completing renovations.

According to the secretary, there are currently 25 retrofit projects in progress, with six of them already granted licenses and 19 in the evaluation phase.

Historic Preservation

In addition to retrofitting, heritage-listed developments benefit from the constructive potential. The Alexandre Mackenzie, better known as the Shopping Light, is an example. It was inaugurated in 1929 and served as an office for the electricity distribution company The São Paulo Tramway, Light and Power Company.

The shopping mall, which now occupies the asset, has been in the area since 1999. Beyond to preserving history, the development has 180 shops, hosted a rooftop nightclub, features a convention center, and has a permanent exhibition on its history.

"Besides being beautiful, it's sustainable"

For architect and urban planner Fernando Consoni, despite not being a widely popular movement, retrofitting is essential for the city, especially from an environmental perspective. "It's a practice that we strongly encourage. It's a way to give longevity to a building. The longer it lasts, the more sustainable it is. So, applying retrofit to a building is much more ecologically friendly than demolishing it and constructing a new one. This applies to both waste generation and carbon emissions. Therefore, retrofitting, renovation itself, is always the better option. It's that famous saying, 'Besides being beautiful, it's sustainable'", he explains.

According to the United Nations Environment Programme (UNEP), the construction sector was responsible for over 34% of energy demand and about 37% of CO2 emissions during 2021.

"So, what is more sustainable? A building that lasts for 200, 300 years, but may not have a very sustainable construction process at its core, or is it better to have a shorter-lasting building, but with a more sustainable construction process? So, there are two lines of thinking regarding sustainability in the construction industry that I think, in the very near future, will find common ground", says the urban planner.

According to Market Analytics data, the average asking price for commercial developments in downtown São Paulo is R$ 57.69 per square meter (US$ 11.83*), which is slightly above the price for areas around Marginal Tietê (R$ 49.68 per sqm - US$ 10.19*) and roughly equivalent to Chácara Santo Antônio (R$ 57.62 per sqm - US$ 11.82*) and Paraíso (R$ 57.88 per sqm – US$ 11.87*).

*Real to dollar exchange rate as of September 14, 2023, at 6 p.m.

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