Brazil’s Commercial Real Estate Prices Fall Again in February

By Nelson Belen, Contributing Reporter

RIO DE JANEIRO, BRAZIL – According to the latest FipeZAP Commercial Index, Brazil’s commercial real estate continued to tumble from January 2017 to February 2017. Despite the decline across the country, in February, Rio de Janeiro remained the city with the most expensive commercial real estate sale prices in Brazil, while São Paulo had the most expensive commercial rent prices.

Rio’s upscale neighborhood of Leblon held the distinction of having the country’s highest commercial real estate sale prices with an average price per square meter for commercial real estate of R$34,779. This represents a slight drop from December 2016, when average commercial sale prices in Leblon were R$36,800.

The trendy neighborhood of Ipanema came in next, with an average sale price per square meter for commercial real estate in February 2017 of R$27,830. Interestingly, this figure actually represents an increase from December 2016’s figure of R$26,300.

At the other end of the spectrum, in February 2017, Belo Horizonte was the city with the cheapest commercial sale prices, averaging R$7,548 per square meter.

For commercial rentals, in February 2017, the Cidade Maravilhosa was just barely overtaken by São Paulo, which registered an average commercial lease price of R$45.39 per square meter. Rio was close behind with an average commercial lease price of R$44.81 per square meter. Porto Alegre had the lowest commercial lease prices at R$31.49 per square meter.

The neighborhoods within São Paulo with the most expensive commercial lease prices were Itaim Bibi, with an average per square meter of R$67.02, and Alto de Pinheiros, with an average per square meter of R$65.50.

Looking at the data across the country from January to February 2017, commercial sale and lease prices fell 0.23 percent and 0.20 percent, respectively. In the accumulated twelve month period, sale prices for commercial real estate tumbled 2.95 percent, while commercial lease prices plunged 7.55 percent.

Taking into account the rate inflation of 5.35 percent in February, according to the IPCA/IBGE (National Consumer Price Index/Brazilian Institute of Geography and Statistics), the real fall was 7.36 percent in commercial real estate sale prices and 11.75 percent in commercial lease prices.

The FipeZap survey also looked at the performance of Brazil commercial real estate as an investment compared to a lower risk alternative, such as the CDI (Interbank Deposit Certificates). When placed next to the CDI, which is the interest rate calculated on the basis of what banks charge other banks, those who invested in commercial real estate took substantial losses in February 2017.

While the CDI yielded fourteen percent, owners of commercial real estate who leased their property were only able to gain an average return of 2.2 percent.

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.