Brazil’s tax reform — set to be implemented gradually from 2026 — was among the first topics addressed. The change is expected to reshape the dynamics of regions that traditionally rely on tax breaks to attract businesses.

Ramon Castro, of Grupo DPSP, emphasized that choosing a distribution center goes far beyond tax perks, requiring a deep understanding of logistics networks and real operational needs.

“When we plan expansions, we start by studying the logistics network to see what really makes sense for the business. One key question is whether it’s worth investing in a large distribution center solely for tax benefits, especially with reform on the horizon,” he explained.

One region directly affected by this is Extrema, Minas Gerais, which has long relied on tax incentives to attract companies. Marino Mario of Retha, however, criticized the practice.

“I’ve never been a fan of tax breaks. In the industrial sector, the real game-changer is the availability of skilled labor — not incentives. No manufacturer will settle in a place without qualified people. Just look at Mercedes in Limeira, or the labor issues in Extrema,” he said, adding that there are rare exceptions like Manaus’ Free Trade Zone, which has a strategic justification.

Abiner Oliveira agreed, noting that Extrema has never been a “safe bet” and predicted that many companies would leave once the tax reform takes effect.

“We’ve had two projects in Extrema, but sold them off. Today, we’d only consider returning under a build-to-suit deal. Extrema has already surpassed Belo Horizonte’s metro area in market size, which is almost absurd. Once the area hits its limit, companies will naturally shift back to Guarulhos,” he commented.

The future of the industrial market also stirred debate, particularly the growing competition for land in urban centers. Mario noted that in São Paulo, the logistics segment is directly competing with residential developers.

“Take Vila Anastácio, for example. Once a purely industrial area filled with warehouses, it’s now transforming into a residential and mixed-use neighborhood. This shift forces logistics operators to rethink their projects. We recently carried out a retrofit on a warehouse in Pari, where we leased the space to two tenants, and we’re currently working on another retrofit project in Tremembé,” he saiduch as multi-level warehouses — are popular abroad, they face economic hurdles in Brazil.

“In the studies we’ve conducted, the price needed for these types of assets to break even would be around R$50 per square meter, which is currently unfeasible,” he said.

For comparison, SiiLA’s Market Analytics reports that the average market rent for Class A+, A and B industrial properties stands at R$22.8/m².

The panel also covered the growing cost of outfitting distribution centers. Castro noted that for the pharmaceutical sector, adapting a 10,000 m² space with cooling and containment systems typically costs around R$30 million.

“Automation can help lower costs, but sometimes moving to a new facility is actually more viable than retrofitting,” he pointed out.

He emphasized the importance of choosing properties offered in core & shell condition, allowing companies to customize installations to meet strict operational standards, especially regarding temperature control and containment.

The conversation wrapped up with concerns about land scarcity. Mario highlighted the difficulty of finding suitable plots for new projects.

“High-quality land has already been snapped up. Developers now need massive plots to comply with environmental setbacks and allow for things like cross-docking. In one case, we even had to purchase a mountain just to access a small buildable plateau,” he said.

Oliveira also addressed the financial side, noting that while there is still capital available for projects, the bar is high.

“Today, for a project to move forward, the expected cap rate usually needs to be above 10.5%. There is money in the market, but only for the right projects,” he added, while also pointing out that markets outside São Paulo face even bigger challenges.
“In many regions, the price gap between what developers need and what tenants are willing to pay makes it very difficult to get projects off the ground,” he concluded.