Economy Despite the uncertainties caused by the election, an economic shock by truckers strike in May, and the trade war between the two biggest economies, Brazil continue to growth and kept the economic resumption in 2018. The economic setbacks during the year brought an intense volatility to the Brazilian economic and political scenario, which ended the year below the projection from the beginning. The GDP forecast was 3% in January, but it was revised along the year, reaching December at 1.39%. The main reason for this gap between the forecast from the beginning of the year, and the projection at the end of the year was the truckers strike, which put a halt to all activities in the country for 10 days. In addition to that, the trade war between USA and China caused a surcharge in the steel and aluminum. Despite these negative impacts, the Brazilian GDP expected to growth at 0.33 percentage points The IPCA (Inflation index) projected in the beginning of the year pointed out to a increase of 3.8% (YoY), but this value decrease to 3.6% in the last revision. Despite forecast s drop, the IPCA had an increase of 0.71 p.p. in comparison to the previous year, which is a reflex of the increase of the consumption caused by the economic recovery in 2018. The projection indicates the inflation should remain within the target established by the Central Bank, which is 4.5%, but can vary between 3% and 6%. Economic Indicators 2017 2018 (F) 12-Month Forecast Gross Domestic Product 1.06% 1.39% Inflation Rate 2.95% 3.74% Unemployment 12.74% 12.21% (Source: IBGE and LCA) Real Estate Indicators 4Q17 4Q18 12-Month Forecast Vacancy 25.6% 22.8% Net Absorption (,000) 177.5 303.0 New Deliveries (,000) 0 49.72 Avg. Asking Rent (R$) 19.71 19.43 The unemployment rate was forecasted at 12.0%, however, due to all the instability seen in the country so far, the projection for the end of the year had a slightly increase, and should reach 12.2%, though still better than the rate seen in 2017 (12.7%). The exchange rate had a high volatility and oscillated from R$3.13 in the beginning of the year to R$4.19 in September the highest value since the creation of Plano Real. The instability was mainly due to the Brazilian election that generated a high-risk environment and the fact that FED had increased the interest rate. Finally, the market expected a stronger growth in 2018, however, the truckers strike and the election process backlashed the economy. 1
(.000 sqm) Industrial Q4 2018 Market Overview The classes A and A+ logistics market end the year very optimistic. After two years of stagnation 2018 registered plain resumption. Despite the setbacks caused by the truckers strike in May and the political instability, the year registered good results with a great volume of new developments delivered, as well as a the best Net Absorption for the past 3 years. From now on, we should clearly see the resumption of the logistics market, followed by the recovery of the retail sector, which means a bigger demand for warehouses. Brazil The Brazilian Logistics Market Classes A and A+ registered good result of the main indicators this last quarter of 2018. Throughout the year, it was delivered about 387.5Ksqm of new developments, in which, most part in the Southeast region, followed by Northeast and the South region. In parallel to this increase of offer of new warehouses, the gross absorption, which can show the heat of the market, ended the year with an accumulated of 1.1Msqm absorbed in the last 12 months, 38.4% more than the previous year. The highlight was the Southeast region with a gross absorption of 782.3Ksqm, accounting for 73.8% of the total value absorbed in the country. As a reflex of this volume, the logistics market ended the year with a net absorption of 647.2Ksqm, a volume 3.6x bigger than the one seen in 2017. This more optimistic scenario caused the vacancy rate of Classes A and A+ logistics developments to decrease 2.8 p.p., going from 25.6% to 22.8% by the end of the year. The average asking rent in the Brazilian market also registered a decrease throughout the year. Starting the year at R$19.71/sqm, and ending 2018 at R$19.43/sqm, a negative variation of 1.4%. The region that contributed the most to this decrease was the South region with a -16% variation (YoY). For 2019, it is expected the strong rhythm of absorptions to continue, as well as a certain stabilization in the asking rent. Net Absorption x NewInventory x Vacancy Source: 500 400 300 200 100 0-100 -200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018 Net Absorption New Inventory Vacancy 30% 25% 20% 15% 10% 5% 0% 02
São Paulo Vacancy Rate The state had a decrease in the vacancy rate which reached 22.7% in the end of 2018 Every recovery of the logistics market in Brazil necessarily happens before in São Paulo. Production and consumption hub, the logistics market of São Paulo registered a bigger resumption in 2018. More than 221Ksqm of new developments were added to its inventory throughout the year. A high volume of net absorption caused a decrease of 2.5 p.p. in the vacancy rate, that ended 2017 at 25.2% and reached in December of 2018 22.7%. The Grande ABC was the region with the highest drop, going from 28.9% to 15.1% (YoY), a decrease of 13.8 p.p.. Cajamar had a decrease of its vacancy rate of 8.8%, reaching 16.2% by the end of the year. SUBTITLE Capital - SP Guarulhos Grande ABC Barueri Cajamar Jundiaí Campinas Atibaia Vale do Paraíba Ribeirão Preto The decrease in prices during the year helped to construct this scenario. The average asking rent dropped 2.9%, between January and December, going from R$19.59 to R$ 19.03. It is not likely that this indicator continues to decrease as the market is already recovering, and the volume of lease is increasing as well as the delivery of new developments should continue to happen. Embu Sorocaba Piracicaba 03
Market Bubble Net Absorption The net absorption closed the year with a positive result of 368.5Ksqm, led by regions already well developed in the logistics classes A and A+ market of the state, such as Cajamar with 106Ksqm and Guarulhos with 77.6Ksqm, as we can see above on the bubble map. Another highlight was the Grande ABC region, with 65.6Ksqm absorbed. The logistics market from Ribeirão Preto (-4.9Ksqm) and Atibaia (-3.8Ksqm) were the only two markets which registered negative results. 04
Rio de Janeiro SUBTITLE Avenida Brasil Pavuna Duque de Caxias Belford Roxo / Nova Iguaçu Campos Santa Cruz / Campo Grande Vale do Paraíba Fluminense Queimados / Seropédica Niterói Average Asking Price The average asking price closed the year 2.8% lower than 2017 Following an opposite path of São Paulo, Rio de Janeiro is still struggling with the recession that the country had been through, mainly because of an internal crisis in the state, which have been keeping investments away. The average asking rent for Classes A and A+ developments in Rio de Janeiro dropped throughout 2018. The price dropped 2.8% going from R$21.60/sqm to R$20.99/sqm by the end of the year. The prices in Rio de Janeiro tends to continue to decrease giving the high vacancy rate and the still low demand in the market. The vacancy rate for Classes A and A+ still struggles to decrease due to the high volume delivered during the year, as well as the net absorption which was negative in the third quarter of 2018. In this way, the rate that was 28.4% last year closed this one at 31.6%, and increase of 3.2 p.p.
Metropolitan Region Absorption Net Absorption Tough shy, the logistics market Classes A and A+ in Rio de Janeiro showed better results than the ones seen in 2017. The state received 116.5Kqm of new developments, all delivered during the first half of the year. This delivery surpass the volume seen in 2017 by 48.5Ksqm The net absorption also shows signs of the recovery of the logistics market, with 26.4Ksqm absorbed in 2018 against the -34.6Ksqm volume seen in the previous year. The regions that contributed the most to the absorption was Duque de Caxias with a net absorption of 34.8KSqm and Santa Cruz/Campo Grande with 17.6Ksqm. On the other hand, a big departure of a company in the Queimados/Seropédica region caused a net absorption of -22.8Ksqm in 2018.
BRASIL - INDUSTRIAL PARK REGION INVENTORY (.000 sqm) VACANCY RATE 2018 LEASING ACTIVITY (.000 sqm) 2018 NEW INVENTORY (.000 sqm) 2018 NET ABSORPTION (.000 sqm) ASKING RENT (R$/sqm/month) MIN AVG MAX Amazonas 307.5 47.3% 26.0 - -2.7 R$22.00 R$22.00 R$22.00 Bahia 48.4 7.1% 3.1-3.1 R$16.00 R$16.00 R$25.00 Paraná 637.5 10.8% 169.1-142.1 R$9.00 R$15.31 R$20.00 Pernambuco 757.0 11.4% 48.9-18.6 R$15.00 R$17.53 R$18.50 Rio Grande do Sul 152.8 5.9% 3.5-3.5 R$16.00 R$16.50 R$18.00 Minas Gerais 649.8 17.1% 82.0 26.8 71.2 R$16.00 R$20.48 R$22.00 Ceará 113.4 15.8% 21.0 20.8 10.8 R$14.00 R$15.12 R$17.00 Pará 54.0 61.8% - - - R$23.00 R$23.00 R$23.00 Santa Catarina 105.4 16.1% 5.7 2.1 5.7 R$10.00 R$10.00 R$19.50 Other Regions 2825.8 17.4% 359.4 49.7 252.3 R$9.00 R$19.24 R$25.00 Campinas 1325.3 18.8% 77.5 95.5 23.5 R$12.00 R$17.65 R$30.00 Jundiaí 1507.0 22.0% 100.7-42.5 R$15.00 R$18.56 R$38.00 Cajamar 1206.5 16.2% 130.0-106.0 R$16.00 R$20.01 R$24.00 Guarulhos 1187.0 27.0% 107.1 84.5 77.6 R$17.90 R$21.77 R$27.00 Barueri 771.8 21.7% 47.0-41.4 R$18.00 R$20.01 R$27.00 Embu 740.3 17.6% 30.4-7.1 R$16.00 R$20.85 R$25.00 Capital - SP 107.1 0.0% 8.0-5.4 - - - Atibaia 347.9 22.3% 19.3 14.4-3.8 R$16.00 R$18.91 R$21.00 Vale do Paraíba 252.3 43.9% - - - R$14.50 R$15.00 R$15.00 Sorocaba 293.1 50.4% 11.2-8.1 R$12.00 R$16.95 R$23.81 Grande ABC 338.0 15.1% 69.7 26.9 65.6 R$23.00 R$23.00 R$25.00 Ribeirão Preto 138.7 36.3% 7.4 - -4.9 R$15.00 R$15.30 R$18.00 Piracicaba 143.3 48.1% - - - R$10.00 R$15.97 R$20.00 São Paulo 8358.3 22.7% 608.4 221.3 368.5 R$10.00 R$19.03 R$38.00 Duque de Caxias 801.3 41.8% 54.6 58.6 34.8 R$17.50 R$21.40 R$30.00 Pavuna 299.7 26.0% 12.2 26.1 5.0 R$20.50 R$23.28 R$30.00 Queimados / Seropédica 219.1 62.6% 0.3 14.1-22.8 R$15.50 R$19.05 R$22.00 Santa Cruz / Campo Grande 181.7-22.5 17.7 17.7 - - - Belford Roxo / Nova Iguaçu - - - - - - - Vale do Paraíba Fluminense 211.4 3.8% 1.5 - -8.1 R$13.00 R$17.00 R$18.00 Campos 24.5-1.0-1.0 - - - Avenida Brasil 34.6 5.0% - - -1.1 R$38.00 R$38.00 R$38.00 Rio de Janeiro 1772.4 31.6% 92.0 116.5 26.4 R$13.00 R$20.99 R$38.00 Brazil 12956.5 0.2 1059.7 387.5 647.2 R$9.0 R$19.43 R$38.0 7
Main Transactions 2018Q4 BUILDING SQM TENANT/BUYER TYPE OF TRANSACTION SUBMARKET GLP Duque de Caxias 100,000 Grupo Pão de Açúcar Lease Duque de Caxias One Park 82,063 FII SDI Rio Bravo Renda Logística Sale Ribeirão Pires Business Park Jundiaí 15,053 Fini Guloseimas Lease Jundiaí GLP Ribeirão Preto 9,165 Magazine Luiza Lease Ribeirão Preto Business Park Jundiaí 7,998 Portobello Lease Jundiaí GLP Campinas 7,380 Mercado Livre Lease Jundiaí About is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter. Jadson Mendes Andrade Head of Market Research & Business Intelligence South America Phone: +55 11 3513 6783 Fax: +55 11 5501 5144 jadson.andrade@sa.cushwake.com 8