Brazil Commercial Real Estate Shows More Decreases in May

By Nelson Belen, Contributing Reporter

RIO DE JANEIRO, BRAZIL – According to the latest FipeZap Commercial Index, Brazil commercial real estate prices across Rio de Janeiro, São Paulo, Belo Horizonte, and Porto Alegre declined slightly in May, with commercial sale prices falling an average of 0.43 percent, and commercial rental prices decreasing 0.49 percent.

Among the four cities in May, Rio de Janeiro had the most expensive commercial real estate sale prices with an average per square meter price of R$10,937. São Paulo led the way in commercial rental prices with an average per square meter price of R$45.03.

In May, the top five Brazilian cities for commercial sale prices were all in Rio. As usual, the upscale neighborhood of Leblon topped the country with prices averaging R$33,841 per square meter. In May, Jardim Botânico passed perennial runner-up, Ipanema, at R$26,591 per square meter.

Ipanema had the third highest commercial sale prices in Brazil with listings averaging R$25,230 per square meter. Rounding out the top five were Catete and Flamengo at R$16,020 and R$15,826 respectively.

Not much changed on the rental side as the Cidade Maravilhosa had the top four cities with the most expensive commercial rental listings. Again, Leblon easily sat atop the list at R$137.72 per square meter. Ipanema was next at R$80.06, followed closely by Botafogo at R$78.27 per square meter.

Jardim Botânico had the fourth highest commercial real estate rental prices in May at R$75.96. Finally, closing out the top five was Chácara das Pedras in Porto Alegre with prices at R$66.83 per square meter. Despite having the the highest overall commercial rental prices in the FipeZap Index, São Paulo did not have a city in the top five.

Taking into account the last twelve months, commercial sale and rental prices fell 4.17 percent and 5.82 percent respectively across Brazil.

Considering the accumulated inflation rate during the twelve-month period of 3.60 percent, as calculated by the IPCA/IBGE (National Consumer Price Index/Brazilian Institute of Geography and Statistics), the actual decline in commercial real estate sale prices was 7.50 percent and in commercial lease prices, 9.09 percent.

The latest FipeZap Commercial Index also compared Brazil commercial real estate as an investment vehicle compared to a lower risk alternative, such as the CDI (Certificado de Deposito Interbancário, in English, Interbank Certificate of Deposit).

When compared to the CDI, a daily average rate of overnight interbank loans, those who have invested in Brazil commercial real estate have taken losses.

Based on data up to and including May 2017, the CDI has yielded a return of 13.5 percent. However, according to FipeZap, owners of commercial real estate who leased their property were only able to gain an average return of 1.3 percent during that period.

The FipeZap Index is prepared by the Economic Research Institute Foundation (Fipe) using data from the Brazilian Institute of Geography and Statistics (IBGE), in partnership with the Brazilian real estate website, Zap Properties.