Industry compensates for retail decline and occupies warehouses – 05/03/2023 – Market

The troubled start of the year for retail sectors and the cooling of the euphoria with the advance of ecommerce should reduce the pace of growth of logistics condominiums in Brazil, but the high-end warehouses will remain busy.

Trade leaves, industry enters, data from the sector shows. Large areas returned by companies such as Americanas, MadeiraMadeira and Grupo BIG have already been leased, keeping the vacancy rate (the percentage of free areas) at a low level and net absorption at a positive level, which is the balance between leases and returns, signs of sector resilience.

This balance in the first quarter of 2023 varies according to the consultancy. According to JLL, the total net absorption was 380 thousand square meters and, for Cushman & Wakefield, it was 498 thousand square meters in the same period. The vacancy rate is between 10.73% and 10.8%.

Andre Romano, manager of the industrial and logistics division at JLL, sees the sector settling from this year, in what he considers a return to normality after two years –2021 and 2022– outside the curve, driven by the pandemic.

The origin of demand, which during this period was more concentrated in e-commerce and retail companies that needed to reinforce their digital strategies, is also changing. “About 70% of ongoing demand comes from industry or industry-related activities,” says Romano.

For Eric Ammirati, industrial property leasing manager at Cushman & Wakefield, there is a less uniform redistribution of sectors that are leasing warehouses. “There is still strength in the number of digital retail transactions in general, but it is important to see the presence of other segments, such as auto parts, chemical industry, pharmaceuticals. It has become more varied.”

In the first quarter, the Asian Shein and Shopee were among those responsible for large leases, the first in Greater SP, in Guarulhos, and the second, in Bahia.

Binswanger’s market intelligence coordinator, Paulo Yuh Izuka, considers that the resilience of the logistics warehouses stems from the low stock of high-end condominiums and the change in the consumption pattern, which is increasingly digital.

Despite the inventory growth in the last two years, which is at 18.45 million square meters, according to Binswanger, the Brazilian portfolio of high-end condominiums is still considered small and very concentrated in the metropolitan region of São Paulo.

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Logistics warehouses in the 1st quarter of 2023

Main returns
B2W (eCommerce)
26.1 thousand square meters

BIG Group (retail, wholesale and shopping club)
45.5 thousand square meters

WoodWood
10.6 thousand square meters

SPK BPO (document management)
14.5 thousand square meters

main locations
Shein (ecommerce)
GLP Guarulhos 2 (SP)
55.3 thousand square meters

SC Group (drug distributor)
Ceteranel Cajamar (SP)
51.6 thousand square meters

Caoa (automotive industry)
WT RBR Log (SP)
25.3 thousand square meters

Shopee (ecommerce)
VBI LOG Aratu (BA)
6.1 thousand square meters

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There is, therefore, room to grow in other regions, close to consumer centers such as those in the northeast and in the metropolitan region of Belo Horizonte (MG).

“In the past, it would have been difficult to absorb 81,000 square meters [volume total devolvido pela B2W, da Americanas] in a year, but today we already reach 600 thousand in a single quarter. It is a market that is consolidated”, says Izuka.

Part of the result from the leasing of logistics condominiums is also attributed to what the sector calls the “quality fly”, when a company exchanges a lower quality property for a better and more expensive one.

Unlike what happens with large high-end condominiums, generally built by consolidated companies and investment funds, lower-end warehouses make up a more diffuse market, linked to family groups. For this reason, consultants are unable to trace exactly how much of these new leases come from this substitution.

According to Ammirati, from Cushman & Wakefield, the old sheds have an efficiency of 56%, while the A and A+ standards reach 98%. In practice, this means that from a lease of 10 thousand square meters, a company can use up to 9,000 square meters with its main activity, in what effectively generates money.

Consultancy projections for 2023 indicate a similar volume of new deliveries compared to previous years, in the range of 3 million square meters.

André Romano, from JLL, calculates, however, that only 60% to 70% of this volume is effectively completed and placed on the market.

A competitive advantage of the warehouse sector is the speed of construction. Projects are planned in stages and they can advance according to demand. According to Ammirati, there are recent cases of projects of up to 60,000 square meters delivered in eight months.

This allows developers to control supply more, preventing prices per square meter from falling.

JLL calculates that vacancy will rise by the end of the year, due to the slower pace of leases, but it should not exceed 14%. Before the pandemic, the market’s breakeven percentage was 20%.

In the state of São Paulo, consultancy SiiLA is already considering the possibility that the vacancy rate will rise if all the condominiums planned by investors are delivered, which would add 1.4 million square meters to the inventory. In the first quarter, the vacancy rate was 11.64%, a drop of 15% compared to the previous quarter.