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São paulo

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4th QUARTER 2013 | OFFICE

MARKET REPORT OFFICECLASSES A+, A AND B OFFICE MARKET REPORT

ExistingInventory:

3.95 million sqm

underConstructionInventory:

950 thousand sqm

under projectInventory:

224 thousand sqm

Deliveredin the Quarter:

55 thousand sqmavailability:

13.1%Net absorption:

43 thousand sqm

averageasked lease price:R$ 108/sqm/month:

GeneralR$ 121/sqm/month:

a+ a

CORPORATE MARKET MORE FAVORABLE FOR TENANT IN 2013

ECoNoMIC aND MaRKET oVERVIEW The year of 2013 was characterized by a warm economy, lower growthstaying below the estimated on the previous years.

Inflation rate, for example, ended the year at 5.91% according to IBGE (Brazilian Institute of Geography and Statistics). About the monetary policy, COPOM (Monetary Policy Committee) raised Selic (interest rate) to 10%, after closing 2012 at 7.25%. With respect to the exchange rate, was announced by the Central Bank at the end of 2013 that intervention policies should prevail in 2014, however, in a smaller scale. The price of US Dolar ended the year at R$ 2.36.

In the opposite direction, the employment generation remains increas-ing. The unemployment rate reached the minimum historical in Decem-ber with 4.3%. The average of real income increased by 0.7% in Novem-ber compared to the previous month.

Despite the economy brake in Brazil, the demand for corporate real estate market remained stable compared to previous year. The supply generated in the period resulted in an availability increase and led the market for what is being considered the ‘’tenant moment”, where asked prices show signs of decrease and commercial conditions tend to be more flexible.

The current situation should prevail until the mid-2016 when the deliv-ery forecast for corporate areas will decrease, considering a slight in-crease of demand. The net absorption should be higher in class A +, due to the profile of current real estate cycle delivery. However, class B corporate buildings should be focus of attention once are occurring mi-gration of companies that are usually installed on this properties profile.

About the developer side, 2014 may be a year of opportunities for new developments. Those that starts the development cycle on 2014 will enter in a moment with few deliveries and decreasing availability rate.

EXISTING INVENToRYThe office market of São Paulo ended 2013 with 3.95 million existing square meters considering A +, A and B buildings and received approximately 300,000 sqm in the year. The number, however, should be reached a level next to the recorded in 2012 (377,000 sqm) if the delivery schedule of all constructions have been completed.

HISTORICAL EXISTING INVENTORY (THOUSAND SQM) CLASSES A+, A AND B

1,317

2010 2011 2012 2013

1,809

1,439

1,839

1,797

1,858

2,064

1,889

Classes A+ and A Class B

3,126 3,2783,655

3,953

The current market s composition has the highest percentage in the sub-market of Vila Olímpia, followed by Brooklin and now Roque Petroni that, due to the delivery of the largest share of new annual new inventory surpassed the submarkets of Paulista, Itaim and Faria in market size.

CollIERS INTERNaTIoNal | p. 2

MARKET REPORT OFFICE | 4Th QUARTER 2013

NEW INVENTORY BY YEAR (THOUSAND SQM) CLASSES A+ A AND B

DISTRIBUTION OF EXISTING INVENTORY (% BY SUBMARKET)

Vila Olimpia16%

Brooklin14%

Roque Petroni10%

Faria Lima9%Itaim

8%

Paulista8%

Pinheiros7%

Santo Amaro7%

Chácara SantoAntonio

6%

Jardins6%

Morumbi3%

Cidade Jardim3% Barra Funda

3%

Considering the deliveries realized only in Q4, were added to inventory the building Torre Z, located in Roque Petroni and Vila Olimpia Corporate Tower in Vila Olimpia submarket.

Comparing the average amount delivered in the period 2010/2011 and the projected between 2012/2015 there is a difference of 291%, which ex-plains the current market condition.

2010

106

150

377

300

365

448

127

2011 2012 2013 2014 2015 2016

Oversupply

aVaIlaBIlITY RaTEThe availability rate calculated considering A + and A classes was 18.7% and 6.9% for class B generating a percentage of 13.1% for the market.

HISTORICAL AVAILABILITY RATE (%)

2010

3.22.3

8.6

13.1

2011 2012 2013

It was verified that A + properties ended 2013 with 27.7% of availability, contributing massively to the increase of market rate. It is important to mention that this class is the profile of the new current inventory and features the largest share of net absorption in the year.

p. 3 | CollIERS INTERNaTIoNal


AVAILABILITY RATE BY CLASS (%)

EXISTING INVENTORY (THOUSAND SQM) X AVAILABILITY RATE (%)

22.2%

A+ A B Market

22.0%

26.3%27.7%

5.0%

9.0% 9.7% 9.3%

4.8% 5.7%7.4% 6.9%

9.0%10.5%

12.8% 13.1%

Q1 Q2 Q3 Q4

Vila Olímpia submarket, as well during the course of the year stays with the largest amount of available square meters, a fact that intensified in the second semester.

558

240

108

369

334

216

125

330283

379

274

625

107

5.7%

9.0%

18.2%

14.1%

17.2%

7.3%6.2%

29.9%

7.7% 6.8%

18.6%

7.5%

20.6%

Barra F

unda

Brooklin

Chác

ara San

to Anto

nio

Cidad

e Jard

im

Faria

Lima

Itaim

Jardi

ns

Morumbi

Paulist

a

Pinheir

os

Roqu

e Petr

oni

Santo

Amaro

Vila O

límpia

Inventory Availability



A+ A B MarketQ1 Q2 Q3 Q4

43

8

2620

0

-6

50

-4

-31

12

64

4 3

4339

pRICESFollowing the trend observed in all quarters, the average asked lease prices presented a decrease of 2.8%. However, considering the average transitio-ned price there was a difference of approximately 15%. We also must con-sider that there are many contracts signed with tiered discounts and allo-wances provided by the landlord.

Since 2009, when the corporate market felt the impact of global crisis, there wasn t a year-end with decreasing asked lease prices.

On the accumulated year s net absorption, the submarkets that had the best results were Roque Petroni, Morumbi and Cidade Jardim.

HISTORICAL NET ABSORPTION (THOUSAND SQM)

NET ABSORPTION BY CLASS (THOUSAND SQM)


Barra F

unda

Brooklin

Chác

ara San

to Anto

nio

Cidad

e Jard

im

Faria

Lima

Itaim

Jardi

ns

Morumbi

Paulist

a

Pinheir

os

Roqu

e Petr

oni

Santo

Amaro

Vila O

límpia

0

9

-1

18

-4

6

-10

23

-1

9

0

41

13

HISTORICAL AVERAGE ASKED LEASE PRICE (R$/SQM/MONTH)

107.45

123.60 125.50 121.73

62.1972.33

89.50 86.89

Classes A+ and A Class B2010 2011 2012 2013

NET aBSoRpTIoNAlthough a year of changes in the market s behavior, the demand remained stable compared to the previous year. For high standard properties (A + and A), the net absorption was 136,000 sqm compared to 138,000 sqm recorded in 2012. A reduction was verified in class B, from 14,000 sqm in 2012 to -23,000 sqm in 2013.

120

2010 2011 2012 2013

110138 136

-23

6199

14

Classes A+ and A Class B



AVERAGE ASKED LEASE PRICE BY CLASS AND SUBMARKET (R$/SQM/MONTH) – Q4 2013

Class BClasses A+ and A

134.44

94.82

63.60

52.85

120.17

73.66

130.18

84.26

159.33

120.36100.17

60.00

130.00

95.25

160.00

91.66

171.87

114.83

142.50

122.80

74.67

68.73

91.14

118.90

59.29

77.00

Barra F

unda

Brooklin

Chác

ara San

to Anto

nio

Cidad

e Jard

im

Faria

Lima

Itaim

Jardi

ns

Morumbi

Paulist

a

Pinheir

os

Roqu

e Petr

oni

Santo

Amaro

Vila O

límpia



TOTAL A+ A AND B (EXISTING MARKET)

SUBMARKET

Barra Funda

Brooklin

Chácara Santo Antonio

Cidade Jardim

Faria Lima

Itaim

Jardins

Morumbi

Paulista

Pinheiros

Roque Petroni

Santo Amaro

Vila Olímpia

Total

TOTAL AREA (sqm)

107,451

558,601

240,276

108,432

369,949

334,478

216,116

125,237

330,121

283,362

379,423

274,524

625,746

3,953,716

AVG PRICE A+ A (R$/SQM/MONTH)

R$ 77.00

R$ 118.90

R$ 74.67

R$ 142.50

R$ 171.67

R$ 160.00

R$ 130.00

R$ 100.17

R$ 159.33

R$ 130.18

R$ 120.17

R$ 63.50

R$ 134.44

R$ 121.73

AVG PRICE B (R$/SQM/MONTH)

R$ 59.29

R$ 91.14

R$ 68.73

R$ 122.80

R$ 114.83

R$ 91.66

R$ 95.25

R$ 60.00

R$ 120.36

R$ 84.26

R$ 73.66

R$ 52.85

R$ 94.82

R$ 86.89

AVG MARKET (R$/SQM/MONTH)

R$ 68.14

R$ 109.64

R$ 71.70

R$ 135.93

R$ 152.72

R$ 137.22

R$ 112.63

R$ 86.78

R$ 139.85

R$ 114.87

R$ 104.66

R$ 58.17

R$ 121.23

R$ 108.73

AVAILABLE AREA (SQM)

6,145

50,343

43,670

15,258

63,583

21,533

13,473

37,454

25,311

19,374

70,673

20,543

128,939

516,873

AVAILABILITY (%)

5.7%

9.0%

18.2%

14.1%

17.2%

6.4%

6.2%

29.9%

7.7%

6.8%

18.6%

7.5%

20.6%

13.1%

Existing Inventory: 503 thousand sqm

Under Construction Inventory:

136 thousand sqm

Availability: 34.4%

Net Absorption:2.4 thousand sqm

Average Asked Lease Price:

R$ 56.64/sqm/month

ALPHAVILLE

EXISTING INVENToRY aND aVaIlaBIlITY RaTEThe year ended with existing inventory of 503,000 sqm. The availability rate had a slight increase over the previous quarter, due to inferior net absorption entered, however, during the year showed stability.

The buildings that have the largest amount of available square meters for lease are: Canopus Alphaville, iTower and Brascan Century Plaza.

AVAILABILITY RATE (%) X EXISTING INVENTORY (THOUSAND SQM)

409

32.9%

Q1 Q2 Q3 Q4

34.8%

33.2%

34.4%

490

490503

Inventory Availability

STaTISTICS TaBlE



STaTISTICS TaBlE

TOTAL A+ A AND B (EXISTING MARKET)

SUBMARKET

Alphaville

TOTAL AREA (thousand sqm)

503,240

AVG PRICE A+ A (R$/sqm/month)

R$ 65.36

AVG PRICE B (R$/sqm/month)

R$ 39.20

AVG PRICE (R$/sqm/month)

R$ 56.64

NET ABSORPTION

(thousand sqm)

2,441

ÁVAILABLE AREA (sqm)

AVAILABILITY (%)

173,139 34.4


NET aBSoRpTIoN aND pRICESThe annual net absorption of 25,000 sqm was not sufficient to prevent the increase of availability rate in the market. As observed in previous years, the absorption trend for next two years is about 20,000 sqm and 30,000 sqm.

5

0

2

8

5

1

4

0

-4

8

2

-5

6

98

2

A+ A B MarketQ1 Q2 Q3 Q4

ASKED LEASE PRICE – MARKET (CLASS A+, A AND B) (R$/M/MONTH)

Prices were relatively stable for the buildings of higher classes, despite the available percentage still be considered far from the ideal to balance the market.

Q1 Q2 Q3 Q4

58.0658.67

56.2156.64



2013 OVERVIEW

• Reclassification and revision of the existing inventory• Inclusion of class B in quarterly analysis• Change in the submarkets perimeters and new nomenclature• Inventory of 3.77 million sqm, with an availability of: A+ and A: 13.3%

and B: 4.8%.• Net absorption verified in A+ and A: 36,179 sqm / B: 357 sqm• Average asked lease price in A+ and A: R$ 120.12 / B: R$ 88.50

1st QUARTER 2013

• New inventory of 30,000 sqm - Main deliveries: 2 towers of Espaço Empresarial Nações Unidas in the submarket of Chácara Santo Antônio

• Increase of availability rate: A+ and A: 15.2% and B: 5.7%• Net absorption of A + and A: 8,076 sqm and B: - 3,677 sqm• Slight increase of average asked prices

2nd QUARTER 2013

• Tatuapé presents corporate projects under development. • Delivery of 92,000 sqm: 2 towers of Morumbi Corporate building on

Roque Petroni and Vila Olímpia Corporate Tower B.• Delay in obtaining occupancy certificate in some properties• Availability rate for A+ and A: 18.0% and B: 7.4%• Market s net absorption of 2,944 sqm, influenced by devolutions of

company Vivo: 22,000 sqm.• A+ and A classes featured 34,000 sqm of net absorption.• Decrease of asked lease price, reflection of market supply: A+ and

A: R$ 124.51 and B: R$ 86.65.

3rd QUARTER 2013

• National economy with lower increase.• Market is in oversupply cycle, with increasing availability rate and

stable demand compared to the previous year.• Period favorable to the tenants. Increased margin between asked

prices and transitioned prices• New inventory of 55,000 sqm ending the year with a total of 3.95

million square meters available• The migration process and consolidation of operations indicates a

tendency for short term• Major deliveries totaled approximately 300,000 sqm in the year• Availability rate calculated in A+ and A: 18.7% and B: 6.9%• Decrease of asked lease prices in A+ and A: R$ 121.73 and B: R$ 86.89• It s projected for next two years a net absorption of 150,000 sqm.

4th QUARTER 2013



p. 9 | CollIERS INTERNaTIoNalwww.colliers.com.br

CollIERS oppoRTuNITIES

Ed. ChicagoLeasePaulista - SPTotal Area: 2,160 sqmRef: 3145

Ed. Memorial office BuildingLeaseBarra Funda – SPTotal Area: 4,368 sqmRef: 3143

EENu (Espaço Empresarial Nações unidas)LeaseChácara Sto. Antonio - SPTotal Area: 3,500 sqmRef: 3140

Ed. Tenente NegrãoLeaseItaim Bibi – SPTotal Area: 2,488 sqmRef: 3139

DoMo Corporate aBCLeaseSão Bernardo do Campo - SPTotal Area: 308 sqm to 30.600 sqmRef: 3109

Ed. São luiz GonzagaLeasePaulista - SPTotal Area: 2,320 sqmRef: 3146

Colliers InternationalMore than 482 officesin 62 countriesin 6 continentsUSA: 140Canada: 42LATAM: 20Asia: 38ANZ: 157EMEA: 85

•US$1,95billioninannualrevenue

•Morethan104millionssqmundermanagement

•Morethan13,500profissionals

CoNTaCTS

Sao pauloR. Olimpíadas, 20504551-000 Sao Paulo SPTEL +55 11 3323 0000

Rio de JaneiroAv. Almirante Barroso, 63 20031-003 Rio de Janeiro RJTEL +55 21 2524 4242

RecifeAv.Gov. Agamenom Magalhães, 4.575 50070-160 Recife PETEL +55 81 3037 2222

FortalezaAv. Dom Luis, 80760160-230 Fortaleza CETEL +55 11 8171 2727

More information:

RESEaRCH aND MaRKET [email protected]

[email protected]

Accelerating success.

REal ESTaTE MaRKET

VoCaBulaRY

CollIERS INTERNaTIoNal Do BRaSIl

REal ESTaTE CoNSulTaNCY FoR INDuSTRIal, oFFICE, RETaIl, laND, RuRal, HoTElS, HoSpITalS aND EDuCaTIoNal INSTITuTIoNS

. Real Estate Investments

. Tenant and Landlord Representation - Leasing, Acquisition and Sale

. Advisory and Disposals for real estate assets and/or portfolios

. Build-to-Suit and Sale & Leaseback Operations

. Lease Administration and Property Management

. Real Estate Valuation for Leasing, Acquisition, Sale and Guarantee

. Market and Technical-Financial studies, Highest and Best use studies

. Advisory for Investment Funds and Private Investors

. Research and Market Intelligence

. Green Consulting for LEED® certification

. absorption: Amount of sqm occupied in the previous period

. Development Category: Real estate properties are classified as A+, A, B and C

. Stock / Inventory: Amount of usable constructed area in square meters

. availability Rate: Ratio between area available area and total area

. Ceilings Height: Space between the finished flooring and the 1st structure ceiling interference

. Build-to-Suit: Customized construction

This document was prepared by Colliers International Brazil. All information in this material may be changed without prior notice. Colliers International is a worldwide affiliation of independently owned and operated companies. This publication is the copyrighted property of Colliers International and /or its licensor(s). © 2013. All rights reserved.

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