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Market Bulletin 4th Quarter 2012 - São Paulo / Rio de Janeiro / ABCD and Alphaville

Brady – Industrial Land Acquisition Brady Corporation is an international manufacturer that develops and markets specialized solutions that identify and protect premises, products and people. Brady targets manufacturers, distribution channels, printing systems and precision engineering, and as a result is a supplier to a diversity of segments, namely: general manufacturing, safety and maintenance, processed industry, construction, electrical, telecommunications, electronic, laboratory/health, transport/aviation sectors, military, brand protection, education, government, public interest, among others. Brady operates worldwide – in the Americas, Europe and Asia-Pacific regions – headquartered in Milwaukee, Wisconsin - U.S.A., employing over 6500 employees. The company has two plants in the State of São Paulo, incurring in high maintenance costs, including rental costs. The initial proposition was to consolidate both plants into one facility; however, rental values were similar or even higher than current values. Moreover, the new site would have to allow for future expansion expected in the forthcoming years, which would in turn generate added rental costs for space which would only come into use after this future expansion came into place. We carried out market research for properties readily available for lease, but as the work progressed it became clear that the asking rental values

would not lead to cost savings on current values. We then proposed to the customer that instead of leasing a readily available site, a better alternative would be to purchase a site and build an industrial facility within their required dimensions and characteristics (build-to-suit), and taking into consideration future expansion requirements. After an in-depth survey, based on an initial radius of 60 km from the Tamboré plant, more than eighty sites available on the market were identified. This number was then reduced to just over 20 properties in suitable conditions to meet the customer’s requirements. As this number was also considered too high, all the available sites were tabulated and compared in order to establish priorities and the decision taken was narrow down to a 30 Km radius from the Tamboré plant and the price per square meter would have to be under R$ 200.00. After additional field research, a site which met perfectly all the required profiles set by the customer was identified and the transaction was concluded in accordance to the customer’s standards. The greatest challenge was to locate a suitable site within the 30km radius of the current facility avoiding employee loss, establishing an excellent location, easy access, and especially an optimum price per square meter to keep investment as low as possible.

Land for Brady’s new factory

For offices, industries or retail, our services are:

• Valuations

• Relocations

• Divestments

• Rent Reviews and Lease Renewals

• Build-to-Suit

• Lease Terminations

• Sale & Leaseback

• Management of Opportunities and Critical Dates

• Project Management

SÃO PAULO RIO DE JANEIRO BELO HORIZONTE GOIÂNIA

SALVADOR RECIFE ARACAJU FLORIANÓPOLIS

www.ocupantes.com Rua Fernandes Moreira, 1.166, 4º andar 04716-003, São Paulo - SP, Brazil Tel. +55 11 5182.3455


São Paulo Net absorption drops considerably in São Paulo and vacancy levels rise Vacancy Rate

Net Absorption

New Stock

Construction Activity

Market Indicators

The 4 th quarter 2012 was not the most eventful for the São Paulo corporate market. Likewise as Rio de Janeiro, the market activity was significantly lower when compared to the other quarters of 2012. The net absorption in Class A*, for example, was not that high, standing at around 11,000 m². The vacancy rate in the 4 th quarter reached 5.69% in total and 12.03% in Class A. The market trend in São Paulo is that the rate should continue to rise, not for lack of demand, but as a result of the sheer amount of buildings being delivered (new stock). These are developments that had their construction initiated between 2010 and 2011, at which time the vacancy rate reached its lowest level. Total deliveries in the 4 th quarter were 91,000 m², consisting of 74,000 m² in Class A buildings. Although this number is significant, it represents merely 53% of what was delivered in the previous quarter. Construction activity in São Paulo is at an all time high Despite the large number of deliveries, there are a great number of developments still under construction. In the 4th quarter 2012, construction activity stood at 1.5 million m2, of which 950 thousand m2 in Class A, an all time high in the São Paulo capital. The delivery forecast for the coming 3 months stands at 390 thousand m2, of which 260 thousand m2 in Class A buildings. The notable highlights here are the WTorre Nações Unidas – III, to be occupied by Allianz Insurance; the Atrium Faria Lima – Atrium X, which is set to receive the Bunge headquarters, the Tower Bridge Corporate – CENU IV, the two towers of the Panamérica II, the Sky Corporate, in addition to the two JK towers of WTorre. **

Net Absorption and Vacancy Rate 165.000

(sqm)

Net Absorption (SqM) - Others Net Absorption (SqM) - Class A

Vacancy Rate - Others Vacancy Rate - Class A

140.000

Vacancy Rates by District 25%

32%

25%

50%

20% 20%

115.000

15%

90.000

15% Forecast

65.000 40.000

10% 5%

15.000 0%

-10.000

10%

5%

0%

Ot h

er s

-35.000

New Stock

1.600.000

(sqm)

Others

Class A

350.000

1.400.000

300.000

1.200.000

250.000

1.000.000 800.000 600.000 400.000

(sqm)

Others

Class A

Forecast

Construction Activity

200.000 150.000 100.000

200.000

50.000

0

0

* Class A: Buildings delivered after 1991, with a leasable area of 700 m² per floor-plate, and high technical standards.

** Ocupantes works with information supplied by constructors and developers.

Market Bulletin is a quarterly publication about the office markets in São Paulo, ABCD region and Rio de Janeiro, prepared by Ocupantes’ departments of Research and Marketing. All rights reserved. Reproduction of this material in part or in its entirety is permitted as long the source is cited.


Market Bulletin

Rio de Janeiro

4th Quarter 2012

Vacancy levels remain stable in the capital of Rio de Janeiro Vacancy Rate

Net Absorption

Construction Activity

New Stock

Market Indicators

In Rio de Janeiro, after a number of consecutive quarters with very low vacancy levels between 2011 and 2012, the market now signals vacancy levels up to a higher level from the 4th quarter 2012, even more notably in the Class A market. Class A net absorption in this 4th quarter 2012 was 10,500 m2, practically the same as the new stock delivered in the period. The new stock consists of the Abengoa (2,301 m²) and Blue Center - Centro Comercial (10,650 m²) buildings, both situated in the Barra da Tijuca. Delayed deliveries on developments such as CEO – Corporate Executive Office and the Centro Empresarial Senado, has caused vacancy levels in Class A to remain stable. The available space rate has risen from 8.83% in the 1st quarter 2012 to 8.62% in the 4th quarter 2012. When comparing to the previous quarter this difference was even less, as this rate stood at 8.64%. In the event that all the buildings under construction are in fact delivered in the 1st quarter 2013, the trend is for vacancy levels in Class A buildings to exceed 15%. Porto Maravilha leverages the construction of new developments After the decline of almost 200 thousand m2 in construction activity during 2012, the market has once again bet on new developments over the 4th quarter 2012, back to a construction level of 650 thousand m2. Although a major part of the current buildings under construction are located in the Barra da Tijuca, other regions now are beginning to emerge. The highlight of the moment is the Porto Maravilha project, which has gained investor preference, attracting names of prominent global expression such as millionaire Donald Trump, who will construct a new development of 320 thousand m2 on the Francisco Bicalho Avenue. **

Net Absorption and Vacancy Rate (sqm)

Net Absorption (SqM) - Others Net Absorption (SqM) - Class A

Vacancy Rate - Others Vacancy Rate - Class A

140.000

Construction Activity 18% 16%

120.000

14%

100.000

12% 10% Forecast

80.000 60.000

8% 6%

700.000

(sqm)

Others

Class A

Others

Class A

600.000 500.000 400.000 300.000

4%

40.000

2%

20.000

0%

0

200.000 100.000 0

-20.000

Construction Activity Distribuition by District

New Stock 320.000

Barra da Tijuca 41,4%

Others 33 ,0%

(sqm)

280.000 240.000

160.000 120.000

Forecast

200.000

80.000 Botafogo 0,6%

Centro 25,0%

40.000 0

Information contained in this document is a result of research undertaken by Ocupantes, with the aim of estimating trends in the corporate real estate market. It does not constitute a legal document.

OCUPANTES is the first Brazilian Real Estate consulting firm to exclusively represent corporate end users in Brazil. It is composed of highly skilled professionals with ample experience representing Brazilian and multinational companies.


ABCD and Alphaville Alphaville expects the delivery of many developments during 2013 • There were no deliveries of any particular significance in the 4th quarter 2012, except for the Beta Trade and Icon Alphaville, jointly totalling 18,340 m2.

Alphaville - Total Stock and Vacancy Rate

600.000 500.000 400.000 300.000

(sqm)

Total Stock - Others Total Stock - Class A

Vacancy Rate - Others Vacancy Rate - Class A

Forecast

700.000

50% 40% 30% 20%

200.000 100.000 0

10% 0%

• Due to successive deliveries and the current market environment in Alphaville, there has been a slight increase in the vacancy levels, reaching 24% in 4th quarter 2012. •

For the 1st quarter 2013, deliveries in Alphaville are

expected to exceed 26 thousand m2, of which 17.5 thousand m2 in Class A buildings. New deliveries around 10 thousand m2 are also expected in São Caetano do Sul. • The asking prices for Class A buildings in Alphaville are fluctuating between R$ 40.00/m² per month and R$ 100.00/m² per month. On the other hand, for the ABCD region, the highest asking prices reach R$ 75.00/m² per month.

• The forecasted deliveries for Alphaville in 2013 are approximately 160 thousand m , of which 60% refers to new stock forecasted to be classified as Class A. 2

ABCD and Alphaville

Santo André São Bernardo do Campo São Caetano do Sul Diadema Barueri - Alphaville São Paulo

Success Stories - Relocating: the necessary expertise required when changing address. The Groupe SEB, a world leader in small household equipment, underwent a common challenge confronting most companies: the relocation of their offices. Among the many challenges was the need to find a new property with a good corporate image, a good location, public transport availability and adjacent services. The company started in 1857 in Bourgogne, France, reached a total of Euros 3.9 billion in sales in 2011. International expansion of their activities (currently spread over approximately 150 countries with 24,900 employees) brought about changes on Brazilian soil as well, where local offices were located alongside the factory, in the district of Mooca, city of São Paulo. The property no longer supported the company’s growth, leading Groupe SEB to seriously consider a change of their office location, as long as this did not mean being too distant from the production plant. To meet such specific characteristics it became a focal issue to find a specialized company in Real Estate consultancy and research. Groupe SEB came into contact with Ocupantes through a strong recommendation, resulting in a mutually successful partnership. After a clear understanding of the clients’ requirements, a property research was undertaken to seek for commercial houses and buildings enabling sole use. At the same time, Ocupantes also

“The work performed by OCUPANTES, under the coordination Alan Roger, was of the highest quality. Thank you again for the high level of commitment and professionalism which has constantly guided your actions.” José Augusto P. Oliveira Vice-President Supply Chain South America

engaged in a detailed search of suitable corporate buildings. At the conclusion of this stage, Ocupantes delivered two survey reports to the customer, accompanied with a financial analysis in order to compare the best alternatives. Ocupantes Real Estate market expertise was a key factor for the success of this project. Upon consulting their up-to-date database, Ocupantes was able to carry out several site visits along with SEB Groupe. After completion of several comparative analyses a suitable property that met all the requirements set by SEB Groupe was located in the district of Perdizes, city of São Paulo.


Market Bulletin 4th Quarter 2012