Why hasn’t the vertical warehouse taken off in Brazil yet?

According to LOG CP’s Commercial Director, Guilherme Trotta, vertical warehouse projects have not even reached the experimental stage in the country.

“Recently, we saw a major developer present and promote in its materials that it would deliver a vertical warehouse in Greater São Paulo. In the end, the asset delivered was a traditional logistics condominium, without verticalization.

There are two major barriers. First, market uncertainty about how to finance and operate this type of product, since it is something new in Brazil. Second, the construction cost, which is truly very high.”

According to Trotta, the main obstacle to importing the model is not technical but economic.

“We are talking about extremely robust foundations, floors with very high load capacity—tons upon tons—and this significantly increases the cost per square meter. At the end of the day, the tenant would have to pay a very high rent to make the project viable.

The general conclusion from projects that did not move forward, including one we studied, is that the numbers simply didn’t add up. There are professionals passionate about the topic, including in the consulting and research segments, but from the developer’s perspective the financial factor remains the biggest obstacle for a two- or three-story warehouse to become a reality in Brazil.”

Today, the estimated rental price for warehouses delivered in Greater São Paulo ranges between R$50 and R$60 per square meter, depending on the location. This is already considered a high level, supported by limited supply and strong demand, especially from the e-commerce, pharmaceutical, and food sectors.

“The developer needs to reach this rental level to justify the high construction cost, combined with interest rates that are still high in Brazil. In addition, land close to major urban centers is extremely expensive. Landowners ask for high prices, which makes the project even more costly.

If we consider a three-story vertical warehouse, it is reasonable to imagine that the rent required could reach R$100 or R$120 per square meter. Today, that equation simply doesn’t work.”

In a hypothetical context where cost was no longer a barrier, the model could make sense, especially on small, well-located plots of land, typically within urban areas. However, this is precisely where another structural obstacle arises.

“That’s where zoning, approval processes, mobility, and truck circulation challenges begin. Even if the project is technically feasible, legalization is complex.”

These factors make the model, today, close to a utopia within the Brazilian context. Even so, Trotta acknowledges that in an ideal scenario the impact could be significant.

“In an ideal scenario—land inside the city, approved zoning, and financial feasibility—it would be excellent.

For the landowner, it’s a solution for an asset that often has little residential appeal. For the logistics operator, it’s fantastic: complete proximity to the consumer, almost immediate deliveries, reducing delivery times to just a few hours.

In the ideal world, it would be very efficient. But we are still far from that reality in Brazil.”

There are markets that have already reached a level of regulatory maturity and economic viability capable of sustaining the model.

“In Chile, for example, this product already exists. Large tenants—including those linked to e-commerce and American industry—operate in this format. There are major developers already executing vertical warehouse projects.

There, rental values are higher and the cost of capital is different. That helps make the numbers work.”

Trotta concludes with a balanced outlook for the future:

“I don’t believe the model will never reach Brazil. There are investors, landowners, and executives who dream of making this type of project viable. But at the moment, the math still doesn’t favor it.”