The region of Faria Lima, an avenue that crosses the neighborhoods of Pinheiros, Itaim Bibi and Vila Olímpia, in the city of São Paulo, is a kind of object of desire for the corporate market.
More than an area that concentrates the buildings of banks, finance companies, startups and large companies, the road carries the symbolism of being a circulation zone for important figures.
For companies with this type of aspiration, the time is favorable to start negotiations. The price per square meter has not dropped, but new deliveries scheduled for this year will raise the vacancy rate in the region, amid uncertainties about the speed of vaccination against Covid-19 and the resumption of office occupations.
Faria Lima Plaza, for example, should place 40 thousand square meters of high-end slabs on the market. Fernando Didziakas, managing partner of Buildings, says that expectations are high with the building’s rental performance.
A differential of the project is the location. It is located in Largo da Batata, on the so-called “Faria Lima with subway”, close to the station of the same name.
For Yara Matsuyama, director of transactions at JLL, with the increase in vacancy this year, property owners are likely to be more inclined to make concessions and provide incentives to make contracts viable.
“What is expected is that these incentives are more linked to commercial conditions, such as discounts and grace periods, and not so much the reduction in the base rent value”, he says.
Raquel Miralles, director of operations at Cushman & Wakefield in São Paulo, also considers the time favorable for those intending to lease, especially in the case of companies that had been planning a flight to the region.
According to the consultant, the contract cycle is long, which makes this type of business demand study. However, for those who intend to be in the region, conditions will hardly get any better.
“I would say that, for anyone looking for some occupation in the Faria Lima region, 2021 is a great opportunity. There will be an interesting window of opportunity,” says Yara, from JLL.
The consultancy calculates that the Faria Lima region will reach, by the middle of the year, an availability rate of 15%, which the market considers a neutral scenario for negotiations, when it does not affect neither the lessors nor the lessees. .
Today, this rate is at 11%, considered favorable to owners – and investors with money invested in real estate funds with buildings in the region in the portfolio.
According to Didziakas, from Buildings, there are few projects in the region in the structure of real estate funds. Because they are very expensive, the return is low. The expectation in relation to Faria Lima Plaza is also high because of this: an XP real estate fund bought 40% of the building.
According to Newmark, the vacancy rate in the prime regions, of which Faria Lima is part, was 18% in the first quarter.
Buildings calculates that this rate among corporate buildings in Faria Lima is at 8.32%. In the first quarter of last year, it was at 4.18%, according to the consultancy.
Despite the increase compared to the previous interval, Newmark points out that Faria Lima, Itaim, JK, Jardins and Alphaville had more occupations than returns, closing the period from January to March with positive net absorption.
The window for negotiation in the most coveted region should not last long.
Part of this is due to the fact that the region does not have many deliveries planned for the coming years. By 2025, a maximum of three projects should be placed on the market. Part of this is due to the saturation of the area, as there is a shortage of land. There were also no new auctions of Cepacs, the titles for construction in the region – the last, of 93,000 titles, was in 2019.
In a release last week, the director of market research at Cushman, Jadson Andrade, said that new stocks delivered to Faria Lima reached asking prices above R$ 200 per square meter.
For Newmark, the price in the region is practically stable compared to the end of 2020. While the average in São Paulo is R$ 81.80 per square meter, in Faria Lima companies paid an average of R$ 190, 95, pulled mainly by Birmann 32.
The transactions director at JLL recalls that Faria Lima was the last of the prime regions —which also include Chucri Zaidan, Juscelino Kubitschek and Berrini— to feel the impact of slab returns.
When 2020 began, the region had only about 5% high-end office availability. With the dispute for space, prices began to rise.
In 2020, the region had the delivery of important AAA buildings, the “triple A”, such as Birmann 32 and Seculum II, both already with high pre-leases, between 60% and 80%. The first for Facebook, and the second for Machado Meyer Advogados.
For Didziakas, from Buildings, the pre-lease rate for these buildings demonstrates that high-quality and well-located projects are in demand. Currently, as many companies have their offices closed, there may be a feeling, according to him, that the region is empty. However, many chose to wait.
“In most lease contracts, the company has to return it in the format it rented. No wall, no furniture, white paint. The cost of returning, demobilizing, is very high. And depending on the time of the contract, the company pays a fine, and it can be quite high”, he says.
For this reason, says Didziakas, the group that has already defined a hybrid work model for the future ends up choosing to keep the structure and avoid the need for a new lease in up to two years. “[A empresa] don’t know if you’ll find [espaço] in that same building. At the height of the pandemic, the vacancy rate is 8%. There’s no space left.”
The perception is different for those in the region of Berrini or even Chucri Zaidan, where new buildings were delivered in late 2020 and early 2021 and increased the percentage of vacant spaces. “The vacancy is so big that they know that if they return it today, in two years they will have space available for rent. Faria Lima does not allow this type of bet.”