Rental prices for commercial property in next summer’s football World Cup host Brazil will fall in 2014 due to excess supply and declining occupancy rates, according to analysts.
Sao Paulo
Prices in Sao Paulo, the country’s biggest office market, have dropped by 8.8 per cent in the first nine months of the year, compared with an average annual growth rate of 12 per cent in the previous five years.The slowdown in pricing is expected to continue into 2014 as supply continues to rise.
In the fourth quarter of this year, a further 205,000 square meters of office space will come onto the market in the city’s central business districts.
This amount of available space is approximately 2.3 times higher than the average amount of the last four years during the same quarter, according to estimates provided by Cushman & Wakefield.
This has led to real estate firms having to renegotiate rents to reduce the pressure on vacancy rates in the city.
These types of incongruities between supply and demand are not uncommon in the real estate industry, where new developments can take several years to complete.
The sector is typically driven by alternate periods of over and undersupply. Credit Suissse Securities analysts indicated in the report that Sao Paulo could be entering a decline in the cycle now.
Cushman & Wakefield estimates that almost half of new buildings delivered between 2013 and 2015 will account for available corporate office stock in the city in 2015, putting it ahead of other urban centres in the region.
Vacany rates in Sao Paulo are expected to close the year at 17.5 per cent, and will increase to 21.3 per cent in 2014 before continuing to rise to 23.8 per cent in 2015.
Meanwhile Brazilian businesses are set to cash in on the World Cup with huge price hikes on hotel accommodation – forecast to be as much as 20 times higher than normal in some places.
