Economy In the third quarter of 2018, the electoral race caused strong oscillations in the dollar market and in the stock exchange. Specialists believe that once the political result is decided, these economy indicators will stabilize and it will reach better levels. The annual GDP projection for 2018 decreased from 1.99% in July to 1.5% in September. Part of this review was due to the strong fall in industry and in investment that occurred in this period. Therefore, Brazil is showing a slow recovery of the economy. The annual projection of the IPCA increased. It went from 3.99% in July to 4.42% in September. This acceleration of IPCA raises the risk of inflation falling above the target set by the Central Bank, whose core is 4.5% (with a margin of tolerance of 1.5 p.p.). This result is mainly due to higher projection of administered prices. Specialists project the unemployment rate for September at 11.7%, the lowest rate of the year so far. In August, this indicator reached 12.1%. Therefore, the tendency of the unemployment rate for 2018 is to end the year at 12.08% - better result when compared to 2017 (12.74%). In July, this projection was 12.29%. As the unemployment indicator directly affects the real estate and the office market, this improvement in the labor market can influence the demand for offices, warehouses and shopping centers. Economic Indicators 2017 2018 (F) 12-Month Forecast Gross Domestic Product 0.99% 1.52% Inflation Rate 2.95% 4.42% Unemployment 12.74% 12.08% (Source: IBGE and LCA) Real Estate Indicators 3Q17 3Q18 12-Month Forecast Vacancy 24.1% 24.8% Net Absorption (,000) 53.4 120.6 New Deliveries (,000) 68.0 125.8 Avg. Asking Rent (R$) 19.42 19.57 The American dollar average for September was at R$ 4.12 and projections indicate that it will end the year at R$ 3.70, when the political result will be known. It is important to keep in mind that the exchange rate was severely impacted by internal and external factors - such as the increase in the American interest rate by the Fed and trade negotiations between US, China, Turkey and economic recession in Argentina. The data observed up to the third quarter of 2018 indicate a small economic recovery. The possibility of the country's growth will depend, above all, on the results of the second round election, in which the proposals of the new president-elect will be known. Thus, the dollar and the stock exchange will tend to stabilize by the end of 2018. Cushman & Wakefield 1
(.000 sqm) Industrial Q3 2018 Market Overview In the third quarter of 2018, the Brazilian logistics market expanded once more. Even with the economic stagnation and the political scenario full of uncertainties, there were new deliveries and a high volume of net absorption. In addition, the vacancy rate fell slightly, and the average asking price increased once again, but in a more restrained way. For the rest of the year we should see very few transactions and the stabilization of the prices and the vacancy rate. Brazil The class A and A+ logistics markets in Brazil registered a total net absorption of 120.6Ksqm in the third quarter of 2018. The absorptions were mainly concentrated in the South region with 68.2Ksqm, and in the Southeast region with 43.5Ksqm. All these factors pushed the class A and A+ the vacancy rate down from 25.1% to 24.8% - a drop of 0.3 p.p. (QoQ). However, the decrease in the vacancy rate would have been larger if we only take into account net absorption, but the high amount of new construction this quarter held the vacancy rate at a slightly higher level. As demand returns and vacant space declines, the average asking price reacted tepidly, ending the quarter at R$ 19.57/sqm, or an increase of 0.3% in comparison to the previous quarter (R$ 19.51/sqm). By the end of the year, the market is expected to deliver 570Ksqm, however, there is a considerable probability that some of the planned projects will be postponed for 2019. Net Absorption/New Inventory/Vacancy Source: Cushman & Wakefield The net absorption value during this period was 78.1% higher than the same period in 2017, which demonstrates that Brazil is already going through a much more productive year than the previous one. Another important factor to measure logistic market activity is the volume of new deliveries. The delivery of 125.8Ksqm of class A and A+ buildings during the last 3 months reflects the fact that the demand is increasing once again. Cushman & Wakefield 400 300 200 100 0-100 -200 30% 25% 20% 15% 10% 5% 0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2017 2018 Net Absorption New Inventory Vacancy 02
São Paulo New Inventory The state received all the 125.8Ksqm that were delivered in the country during the third quarter of 2018. São Paulo s logistic market continues to be the most active region of the country with the higher demand. Throughout the year, São Paulo has been the state with the best results. The economy is more dynamic and the demand for consumption is consequently higher. Because of that, the state received all the 125.8Ksqm that were delivered in the country during the third quarter of 2018-84.5Ksqm in Guarulhos, 26.9Ksqm in the Great ABC and 14.4Ksqm in the region of Atibaia. SUBTITLE Capital - SP Guarulhos Grande ABC Embu Barueri Cajamar Jundiaí Sorocaba Campinas Atibaia Vale do Paraíba Piracicaba Ribeirão Preto Due to the large volume of deliveries, the vacancy rate of classes A and A+ buildings in the state of São Paulo increased 0.4 p.p. and ended the quarter at 24.2%. The rate should remain constant and will possibly decrease smoothly due to the lack of planned developments. The average asking rent, in turn, continues to show signs of stability and increased from R$ 19.12/sqm to R$ 19.15/sqm, which reflects the favorable situation to the tenant in the current market. Cushman & Wakefield 03
Market Bubble Net Absorption In the third quarter of 2018, it was registered a net absorption of 67.7Ksqm in the A and A+ market, which is 139% higher when compared to the previous quarter (28.3Ksqm) and very similar to the same period in 2017(68.6Ksqm). The regions that stood out the most during 2018Q3 were Guarulhos and Embu, with 34.1Ksqm and 18.5Ksqm absorbed - respectively. On the other hand, Atibaia and Sorocaba registered negative net absorptions Furthermore, a company in Campinas was bankrupted and vacated about 30Ksqm. Cushman & Wakefield 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 Negative Absorption The net absorption in the third quarter was -39.3Ksqm Unlike São Paulo, the Rio de Janeiro s Classes A and A+ logistics market still suffers a lot due to the economic recession and especially from its own local crisis. In the third quarter of the year, several large companies moved out and impacted negatively Rio de Janeiro s vacancy The net absorption in the third quarter was - 39.3Ksqm with large exits in the regions of Queimados / Seropédica (-22.8Ksqm) and Duque de Caxias (9.6Ksqm). The only region in the state that registered positive net absorption in the period was Santa Cruz / Campo Grande, with 3.2Ksqm. With these departures from tenants in the Rio market, the vacancy rate reached 34.3%, a 1.3 p.p. increase (QoQ). Considering all the year, the vacancy rate increased 6.3 p.p. (28%). There were no deliveries in the Rio de Janeiro s market during the third quarter, but a new project planned in the Santa Cruz / Campo Grande region should increase the vacancy of the state.
Metropolitan Region appreciation Average Asking Rent With the bubble map above, it is possible to see those regions that are near the metropolitan region presents higher asking rents. The higher one is Avenida Brasil, with R$38.00/sqm/month, followed by Pavuna (R$23.28) and Duque de Caxias (R$21.57). The average asking price of Rio de Janeiro continues to fall, ranging from R$21.13/sqm in the second quarter to R$21.11/sqm in the current one. During the third quarter of 2018, the current scenario of the market in Rio de Janeiro still favors the tenant - who are requesting large discounts and incentives in relation to the price asked by the owners.
BRAZIL INDUSTRIAL PARK REGION INVENTORY (,000 sqm) VACANCY RATE 2018 LEASING ACTIVITY (,000 sqm) 2018 NEW 2018 NET INVENTORY ABSORPTION (,000 sqm) (,000 sqm) ASKING RENT (R$/sqn/month) MIN AVG MAX Amazonas 307.5 49.7% 18.6 - -10.2 R$16.50 R$22.00 R$25.00 Bahia 48.4 10.6% 1.4-1.4 R$12.00 R$18.00 R$28.00 Paraná 637.5 21.7% 88.0-72.8 R$12.00 R$20.50 R$30.00 Pernambuco 757.0 11.1% 39.8-21.1 R$12.00 R$19.00 R$28.33 Rio Grande do Sul 152.8 5.9% 3.5-3.5 R$12.00 R$18.00 R$30.00 Minas Gerais 623.1 21.7% 30.5-20.4 R$10.00 R$18.75 R$27.00 Ceará 92.6 8.6% 10.2 - - R$22.00 R$22.00 R$22.00 Pará 54.0 61.8% - - - R$16.00 R$16.00 R$16.00 Santa Catarina 103.3 14.4% 5.7-5.7 R$15.00 R$19.61 R$28.00 Other Regions 2,776.1 20.9% 197.8-114.7 R$18.00 R$18.00 R$18.00 Campinas 1325.3 20.7% 46.5 95.5-2.1 R$10.00 R$19.00 R$38.00 Jundiaí 1507.0 22.6% 77.4-33.7 R$8.19 R$18.25 R$26.00 Cajamar 1206.5 18.4% 90.4-79.0 R$9.00 R$19.25 R$24.00 Guarulhos 1187.0 30.7% 62.5 84.5 33.6 R$12.00 R$22.00 R$28.00 Barueri 771.8 22.1% 40.3-38.2 R$9,90 R$18.00 R$38.00 Embu 740.3 16.7% 25.2-13.5 R$15.20 R$18.18 R$26.00 Capital - SP 107.1 2.5% 5.4-2.7 R$8.19 R$19.00 R$38.00 Atibaia 347.9 21.4% 16.3 14.4-0.7 R$15.50 R$23.88 R$25.50 Vale do Paraíba 252.3 43.9% - - - R$14.00 R$18.00 R$25.00 Sorocaba 293.1 50.4% 11.2-8.1 R$17.00 R$18.00 R$26.00 Grande ABC 338.0 17.8% 56.6 26.9 56.6 R$12.50 R$20.50 R$24.80 Ribeirão Preto 138.7 41.6% - - -12.2 R$16.00 R$17.00 R$20.50 Piracicaba 143.3 48.1% - - - R$14.00 R$16.00 R$18.00 São Paulo 8,358.3 24.2% 431.9 221.3 250.2 R$8.19 R$19.00 R$38.00 Duque de Caxias 801.3 47.1% 10.3 58.6-7.9 R$10.00 R$18.00 R$25.00 Pavuna 299.7 26.0% 12.2 26.1 5.0 R$13.00 R$16.50 R$29.19 Queimados / Seropédica 219.1 62.7% - 14.1-23.0 R$15.00 R$18.50 R$27.00 Santa Cruz / Campo Grande 181.7 2.6% 17.7 17.7 12.9 R$21.00 R$24.22 R$27.43 Belford Roxo / Nova Iguaçu - - - - R$18.00 R$1.00 R$18.00 Vale do Paraíba Fluminense 211.4 3.8% 1.5 - -8.1 R$16.00 R$1.00 R$24.00 Campos 24.5-1.0-1.0 R$14.81 R$1.00 R$18.00 Avenida Brasil 34.6 3.3% - - -0.6 R$17.00 R$1.00 R$17.00 Rio de Janeiro 1,772.4 34.3% 42.6 116.5-20.7 R$10,00 R$1.00 R$29.19 Brazil 12,906.8 24.8% 672.3 337.8 344.2 R$8,19 R$18.50 R$38.00 Cushman & Wakefield 7
Main Transactions 2018Q3 BUILDING SQM TENANT TYPE OF TRANSACTION SUBMARKET Ecopark Curitiba 25,250 Expresso 3300 Lease Curitiba CL Aeroporto Guarulhos 23,301 VTCLOG Lease Guarulhos Multimodal Campinas 21,129 Affinity Petcare Lease Campinas Distribution Park Cajamar 14,230 Loggi Lease Cajamar WLC World Logistic Center 6,881 Colormix Especialidades Lease Barueri About Cushman & Wakefield Cushman & Wakefield 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. Cushman & Wakefield 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 Cushman & Wakefield 8