How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

American Chamber of Commerce for Brazil - AMCHAM

International Affairs Department
Brazil, 2012/2013
 REAL ESTATE

Brazil's flourishing economic momentum and the positive growth

ACKNOWLEDGMENTS
perspectives are driving foreign companies and investors to start or
consolidate their operations in the country. Whatever their needs are, it is
important for their projects, above all, to understand all the differentiators and
specificities of the local market, thus making the access easy to the alternatives
which would better suit the specific needs of each corporation.
Colliers International presents, under the title “How to Choose your Logistical/
Industrial Facility in Brazil”, from the “How To” series, in partnership with
Amcham, the necessary information for the acquisition, sale and lease of
industrial/logistic properties in Brazil.

Sandra Ralston - Vice President, Colliers International

The American Chamber of Commerce for Brazil, being the largest Amcham
outside the United States is constantly serving its members by building
bridges for Brazilian businesses worldwide. Our foreign investment
attraction efforts have also been a key leading point for Amcham. The How To
Series is part of this initiative, with the support of some of our corporate
members we are putting together strategic information on the most various
aspects of doing business in Brazil. Over the last year the Brazilian economy
has clearly demonstrated an outstanding economic performance. The
country's business environment as well as foreign investment numbers are
also very positive. The International Monetary Fund estimates that crisis apart,
the Brazilian economy should grow on a 4.5% basis.The 2014 FIFA World
Cup has been estimated in USD 56.8 billion and the 2016 Olympics USD
19.3 billion in investment. These events have had an impact on direct
investments in the country and in infrastructure projects needed to hold these
events in Brazil. It is now more than ever, a strategic time for businesses
opportunities in Brazil, we welcome you and hope that the information you
are about to read serves you best.

Gabriel Rico - CEO, AMCHAM Brazil

How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
 REAL ESTATE

CONTENTS

INTRODUCTION ................................................................................................. ..... 6

THE MARKET OF INDUSTRIAL AND LOGISTIC PARKS IN BRAZIL:

OVERVIEW (2011 – 2016) ........................................................................................... 7

SÃO PAULO – CONSOLIDATED AND EXPANSION MARKET .....................................12

RIO DE JANEIRO – CHANGE OF ROUTE FOR INVESTMENTS IN THE STATE ...... ......17

PERNAMBUCO – SUAPE, THE LARGEST BUSINESS HUB IN THE

NORTHEAST REGION ..........................................................................................
.......21

BUILD-TO-SUIT..................................................................................................... ......25

AVOIDING COMMON ERRORS OF THE INDUSTRIAL REAL

ESTATE MARKET ........................................................................................................ 29

PROCESS OF COMMERCIAL REAL ESTATE LEASING ................................................ 30

ABOUT OUR SPONSOR ........................................................................................... 36

6 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
INTRODUCTION
The economic growth of Brazil in the last few
years has boosted the increase of both
internal and external investments. The
positive conditions referring to tax
performance and controlled inflation have
generated an increase in income and easier
access to credit, creating possibilities for the
emergency of a new middle class, the major
responsible for the increase of consumption
in the country.
The Brazilian production capacity must
respond to the increase of consumption, and
therefore logistics is fundamental to improve
the convenience for the companies that aim
to obtain competitive advantages. An
integrated logistics service will certainly
contribute for the increase of national
production capacity.
Among the major public and private
investments are those oriented to the ports.
Up to 2015, seventeen ports will receive
investments to improve their infrastructure
and increase the logistic capacity.
In the Northeast region, the Transnordestina
Railroad has the main objective of leveraging
the sustainable and economic development
of the region, connecting the Northeast and
Middle West regions, with focus on
agribusiness and mining industries.
The following analysis, based on A class
classification of logistic / industrial parks,
providing a general overview of current and
future markets in the country, with more
details on particular important markets, such
as São Paulo, Rio de Janeiro, and also the
region with the highest growth potential of
all, the State of Pernambuco, facilitates the
understanding of opportunities in the
industrial segment in Brazil.

Source: Colliers International Brazil
THE MARKET OF INDUSTRIAL AND LOGISTIC PARKS IN BRAZIL:
OVERVIEW (2011 – 2016)
The segment of industrial and logistic
condominiums in Brazil is relatively recent
(less than 15 years) and it has shown an
increased growth after 2005. Economic
factors have contributed for the increase of
the industrial activity in the country,
consequently stimulating the operations
related to logistics and distribution.
REAL ESTATE 7
Initially, the industrial and storage areas used
for logistic were mainly occupied by specific
industries, such as automotive, consumer
goods, retail, among others, concentrating in
the same property the production,
administrative, financial and commercial
areas. These properties were located in the
metropolitan and suburban regions of large
8 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

cities, where the transportation and logistics with larger number of docks, sprinkler
costs would be significantly lower. system, and large parking and maneuvering
patios. In summary, logistic and industrial
With the increase of population density in parks have been offering some differentiators,
urban centers and the new residential which include:
developments near industrial areas, the so-
called industrial exodus began. The flow of • Modules above 5,000 sqm;
trucks, the pollution from factories, and the
increase of taxes (such as IPTU - urban
• Clear height above 11 meters;
property tax), have caused a migration of
entrepreneurs and their industrial plants to
• Minimum floor capacity of 5 ton/sqm;
smaller cities, away capital cities.

This scenario was reinforced by the increase • Two docks for every 1,000 sqm of storage
of the purchasing power along the last 15 area;
years, which generated an increase of
demand for storage and distribution areas, • Wide patios for maneuvers and larger
thus attracting new players for the logistics numbers of semi-trailers parking spaces;
and distribution parks’ developments all
around the country. The building standards • Sprinkler system;
have also improved to better serve large
logistic operations, which have been
• 24/7 security with TV cameras;
requiring sustainable and efficient
properties, with storage areas equivalent to
85% of the gross leasable area (or higher), • LEED or Acqua certification.
 REAL ESTATE 9

Classification Table – Logistic Parks and Stand Alone

Source: Colliers International Brazil

Notes: LEED and Acqua Certifications are assigned to sustainable developments, i.e., those
with reduced use of energy and water, eco-friendly use, preservation of green areas, etc.

It is always recommended that developers and
investors carry out a thorough prior study,
contemplating a mapping of competing
projects/developments in the region of
interest with their respective stages of delivery,
potential demand in the region of interest,
accessibility of the development (roads,
railways, ports and airports), among others.
Another important factor, which often is a
decisive one when selecting a location to
build a logistic park, is the municipality and
state tax incentives, which usually vary from
one location to another, due to the
development policies in each region.
10 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

Summary of the Logistic Parks Market in Brazil

Existing Inventory, Net Absorption, Vacancy Rate and Average
Asking Lease Price per State

Source: Colliers International Brazil (data referring to the 1st quarter of 2012).
*Exchange Rate: USD 1 = R$ 1.82 - 1 square meter = 10.7639 square feet

In early 2012, the existing logistic/industrial
park inventory in the market was 5.9 MM
sqm, of which 6.4% is vacant. The heat of the
market in 2011 was evidenced by the total
absorption of more than 1.0 MM sqm all over
the country.
The location, access to main roads, local
demand, region vacancy rate, building
quality and land price are some of the reason
for the lease price variation from US$ 6 to
US$ 16/sqm/month in Brazil.
 REAL ESTATE 11

Minimum and Maximum Asking Lease Per Capita Logistic Inventory (sqm)
Prices per State in Class A
Industrial/Logistic Parks (R$/sqm/month)

1 square meter = 10.7639 square feet

Source: Colliers International Brazil

Note: the City of Chicago has a Per Capital Logistic

Inventory higher than the entire territory of Brazil,
with 5,6 square meters per inhabitants.

*Exchange Rate: USD 1 = R$ 1.82 Trends for 2012 in Brazil

Source: Colliers International Brazil

Studies relating to the logistic inventory per

capita in some major world markets indicate
that Brazil is one of the countries with the
highest growth potential compared to
traditional locations such as Japan,
Singapore and the United States.
12 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
SÃO PAULO – CONSOLIDATED AND EXPANSION MARKET
Most industrial and logistic condominiums
in the State of São Paulo are located in a 150
km radius from the Capital City.
Major regions are:
• ABCDM (Santo André, São Bernardo do
Campo, São Caetano do Sul, Diadema, Mauá
and Ribeirão Pires);
•Atibaia (Atibaia, Bragança Paulista, Jarinu
and Morungaba);
• Baixada Santista (Santos, São Vicente,
Guarujá and Cubatão);
• Barueri (Barueri, Santana de Parnaíba,
Jandira, Itapevi and Araçariguama);
• Ca m p in a s (Campinas, Sumaré,
Hortolândia, Indaiatuba, Santa Bárbara
d´Oeste, Valinhos, Nova Odessa, Santo
Antônio de Posse, Jaguariúna, Americana,
Itatiba, Monte Mor, Paulínia andVinhedo);
•Embu (Embu, Itapecerica da Serra, Taboão
da Serra and Cotia);
• Guarulhos(Guarulhos, Arujá, Santa Isabel,
Itaquaquecetuba, Mogi das Cruzes and
Suzano);
•Jundiaí (Jundiaí, Cabreúva, Itupeva, Várzea
Paulista, Campo Limpo Paulista, Louveira
and Cajamar);
•Piracicaba (Piracicaba, Rio Claro, Leme,
Limeira, Araras, São Carlos and
Cordeirópolis);
•Ribeirão Preto (Ribeirão Preto, Franca and
Araraquara);
•São Paulo Metropolitan Region (SãoPaulo,
Osasco and Carapicuíba);
• Sorocaba (Sorocaba, Votorantim,
Araçoiaba da Serra and Alumínio);
• Vale do Paraíba (São José dos Campos,
C a ç a p a v a , J a c a r e í , Ta u b a t é a n d
Pindamonhangaba).
 REAL ESTATE 13

Regions

Source: Colliers International Brazil

14 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

Characteristics of Major Regions with Industrial and Logistic

st
Parks in the State: 1 Quarter of 2012

CAMPINAS • New Inventory for 2012 – 483 K sqm (34%

• Total Existing Inventory – 1.0MM sqm;
• New Inventory for 2012 – 365 K sqm
(participation of 27% in the inventory
projections for the State);
• Major concentration of parks;
• Excellent access to major roads of the State,
such as Anhanguera, Bandeirantes, Dom
in the inventory projections for the State);
• Predominant industrial sectors: food,
beverages, ceramics, auto parts, pulp and
paper.
GUARULHOS
• Total Existing Inventory – 198 K sqm;
• New Inventory for 2012 – more than 118 K

Pedro I and Santos Dumont; sqm. For next 4 years the delivery of 672 K
sqm is estimated;
• Occupation Profile: Segments of
• Low offer of areas for rent;
technology, automotive/auto parts, logistics
and distribution;
• Predominance of transportationand logistic
companies;
• Local market in expansion.

• The city will have access to the future north

JUNDIAÍ
and east parts of Rodoanel Mário Covas (a
beltway developed by the State Government
• Total Existing Inventory – 836 K sqm;
connecting all major State highways).

VALE DO PARAÍBA
• Total Existing Inventory – 245 K sqm;
• New Inventory for 2012 – 151 K sqm,
distributed between the cities of Caçapava
and São José dos Campos;
• Automotive, electronics and technology
sectors are predominant in the market;
• City of São José dos Campos – one of the
largest technologic parks in the country.
Between the years of 2010 and 2011, the
inventory of Industrial and Logistic Parks in
the State had an increase by 17%. In the first
quarter of 2012, the existing inventory was
3.5 MM sqm – 59% of total inventory in the
country – and the vacancy rate was 7.6%. In
REAL ESTATE 15
2011, more than 550 K sqm were absorbed,
the highest national index historically.
In 2012, the delivery of 1.3 MM sqm is
projected, distributed particularly among the
cities of Cajamar, Jundiaí and Campinas,
with 20%, 14% and 7%, respectively. As of
2016, the State of São Paulo may have a total
inventory of 11.1 MM sqm, more than three
times the current inventory.
The highest asking lease prices charged in the
State are seen in the regions of Barueri and
Guarulhos, both at USD 16/sqm/month – the
second highest asking price in the country.
The Campinas Region is also characterized
by developments with lower asking lease
price, USD 7/sqm/month, in the cities of
Jaguariúna and Santo Antônio de Posse.
16 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

Minimum and Maximum Prices per Rent per Region (USD/sqm/month)

16 16
15
14
14
13 13
12
10
12 10
9 11 9
10
9 9
9 9
8 8
7 8
7
Atibaia

Vale do Paraíba
Jundiaí

São Paulo MR
ABCDM
Guarulhos

Ribeirão Preto
Barueri

Embu

Sorocaba
Piracicaba
Campinas

*Exchange Rate: USD 1 = R$ 1.82

Source: Colliers International Brazil

Some Advantages offered by • Skilled labor;

the State of São Paulo:
• Excellent road infrastructure and ongoing
improvement projects (Rodoanel Mário
• Higher offer of new developments to lease;
Covas beltway);
• Strategically located industrial regions; • Most important airports and ports in the
country.

RIO DE JANEIRO – CHANGE OF ROUTE FOR INVESTMENTS IN THE STATE
As the most important oil producer in the
country, the State of Rio de Janeiro attracts an
increasingly higher number of foreign
METROPOLITAN ARCH OF RIO DE JANEIRO
Existing part: BR-465 (Rio-Magé) = BR-465 (Rio-Magé)
Existing part: BR-116 Norte (Rio-Teresópolis) =
BR-116 North (Rio-Teresópolis)
The Metropolitan Arch, the major road
construction project in the State, is boosting
the logistic and industrial market of Itaboraí,
Duque de Caxias, Magé, Nova Iguaçu and
Seropédica, increasing the accessibility to
the Ports of Itaguaí and Rio de Janeiro.
REAL ESTATE 17
investments. In 2011, the sector received 3.5
billion dollars, and may be responsible in
2020 for 20% of national GDP.
Source: Colliers International Brazil
Part under construction: BR-140 (Caxias do Sul) a BR-101 (Porto de Itaguaí) =
BR-140 (Caxias do Sul) to BR-101 (Itaguaí Port)
Existing part: BR-101 (Rio-Santos) = BR-101 (Rio-Santos)
The low number of industrial and logistic
parks in the region has forced large
companies to look for a logistic solution in
build-to-suit operations (more information
on Chapter "Build-to-Suit”).
18 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

The key industrial regions in the State are:
• Campos dos Goytacazes: Campos de
Goytacazes and Itaperuna
• Dutra: Pavuna, Queimados, Nova Iguaçu,
São João de Meriti, Belford Roxo, Mesquita
and Nilópolis
• Macaé: Macaé
• Niterói: Niterói, São Gonçalo, Itaboraí,
Magé, Cabo Frio and Cachoeiras de Macacau
• Seropédica: Seropédica, Itaguaí and Angra
dos Reis
• Serrana: Serrana, Teresópolis, Petrópolis,
Cantagalo, Cordeiro and Nova Friburgo
• Vale do Paraíba Fluminense: Volta
Redonda, Barra Mansa, Resende, Porto Real,
Itatiaia, Piraí and Quatis
• Washington Luiz Highway: Duque de
Caxias

• Rio de Janeiro: Rio de Janeiro, Campo

Grande, Santa Cruz and St. Brasil

Regions

Source: Colliers International Brazil


Characteristics of Major Cities with Industrial and Logistic
st
Parks in the State: 1 Quarter of 2012
RIO DE JANEIRO
• Total Existing Inventory – 465 K sqm;
• New Inventory for 2012 – 23 K sqm
(between 2013 and 2016 a delivery of 131 K
sqm is projected);
• Easy access to the port;
• High asking lease prices;
• Concentration of companies in the
pharmaceutical, cosmetics/personal hygiene
and logistic sectors.
DUQUE DE CAXIAS
• Total Existing Inventory – 116 K sqm;
• No new logistic parks forecasted;
• The largest Gas-Chemical Center of Brazil;
• Easy access through Linha Amarela, Linha
Vermelha, Av. Brasil, Rodovia Presidente
Dutra and Washington Luiz Highway
(BR-040).
REAL ESTATE 19
QUEIMADOS
• New Inventory for 2012 – 28 K sqm;
• Up to 2016 the delivery of 159 K sqm is
estimated;
• Close to the Ports of Rio de Janeiro and
Itaguaí;
• Industrial District with a total of 2.3 MM
sqm warehouse area;
• Proximity and easy access to the
Metropolitan Arch.
In early 2012, the existing inventory of
logistic parks in the State reached 804 K sqm
(13% of national inventory), of which 4% is
vacant.
The higher asking lease price in the State is
USD 16/sqm/month in the cities of Rio de
Janeiro, Duque de Caxias and Pavuna, and
the lowest is USD 7/sqm/month in Campos
de Goytacazes.
The offer of areas for storage has not followed
the strong demand, resulting in asking lease
prices higher than in other States.
20 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

Minimum and Maximum Prices per Rent per Region (USD/sqm/month)

16
16 16

14
13
14 14 12
12
12
8 10
9

Rio de Janeiro
Belford Roxo

Goytacazes

Duque de Caxias
Campos dos

Queimados
Itaboraí

Pavuna
*Exchange Rate: USD 1 = R$ 1.82
Source: Colliers International Brazil

Some Advantages offered by the State

of Rio de Janeiro:
• Good access to state and federal roads;
• Excellent infrastructure of
telecommunications and technology; • Policies for Local and State tax incentives.
 REAL ESTATE 21

PERNAMBUCO – SUAPE, THE LARGEST BUSINESS HUB

IN THE NORTHEAST REGION

The Industrial and Port Complex of Suape
has received more than R$ 769 million of
public investments in the year 2010 (76%
higher than in previous year). Considered
the best industrial business hub in the
Northeast region, the complex has some
factors that determine the decision of an
entrepreneur to install a company in the
region, such as: efficient infrastructure and
labor training programs.
The key industrial regions in the State of
Pernambuco are:
• Caruaru (Caruaru and Gravatá);
• Garanhuns (Garanhuns);
•Grande Recife (Recife, São Lourenço da
Mata, Olinda, Abreu e Lima, Itapissuma,
Paulista, Igarassu and Itamaracá);

The area of influence of the Suape Port (up to

• Mata Norte (Goiana);
800 km radius), allied to the conclusion of
works of Transnordestina Railroad, is
• Mata Sul (Escada, Sirinhaém and Vitória de
creating a strengthened industrial cluster in
Santo Antão);
the region.
• Petrolina (Petrolina);
The industrial and logistic parks are located
in the vicinity of the Port of Suape. The
storage areas built are to be occupied by • Sertão Central (Salgueiro, Cedro and
macro users, in buildings with a total area Verdejantes);
ranging between 10,000 sqm and 30,000
sqm, predominantly occupied as distribution • Suape (Cabo de Santo Agostinho,
Jaboatão
centers and logistic activities. dos Guararapes, Ipojuca and Moreno).
22 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

Source: Colliers International Brazil

Characteristics of Major Cities with Industrial and Logistic

st
Parks in the State: 1 Quarter of 2012

JABOATÃO DOS GUARARAPES • Predominance of productive activities

• Total Existing Inventory – 164 K sqm;
•New Inventory for the years 2013 to 2016 –
more than 490 K sqm;
(industries) and logistic companies.
CABO DE SANTO AGOSTINHO
• Total Existing Inventory – 120 K sqm;

• Low vacancy; • New Inventory for 2012 – more than 220

K sqm;
• Holds the most important industries of
the State; • Close to ports and airports.

Note: There are speculations and projects
under development for Logistic Parks to be
built in the regions of Caruaru and Mata
Norte in the next three years.
With the vacancy rate of 6% and current
existing inventory of 292 K sqm, Pernambuco
is a State in full development. In 2011 more
than 165 K sqm were delivered, of which
95% were pre-leased.
Minimum and Maximum Prices per Rent per Region (USD/sqm/month)
9 9
8 8
Cabo de Santo Caruaru
Agostinho
*Exchange Rate: USD 1 = R$ 1.82
Source: Colliers International Brazil
REAL ESTATE 23
For 2012, the delivery of 240 K sqm (10% of
the inventory projected for the country) is
projected, distributed in the cities of Cabo de
Santo Agostinho (94%), Jaboatão dos
Guararapes (3%) and Caruaru (3%). Up to
2016, the existing inventory of the State may
be four times higher, representing more than
1.3 MM sqm.
The average asking lease price in the State of
Pernambuco is USD 8.85/sqm/month.
9
8
Jaboatão dos
Guararapes
24 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
Some Advantages offered by the State
of Pernambuco:
• Suape Port is considered the best Port of
Brazil operationally, by its users;
• Recife will be one of the hosting cities of
the World Cup 2014, attracting more
investments and investors to the State;
• Good accessibility to Transnordestina
Railroad;
• Future Arena Pernambuco – a soccer
stadium with more than 1.3 M sqm, will be
built in a Regions which will also hold a
housing complex for C and D classes, a
Commercial Center and a hotel;
• Great investment opportunities;
• Low volatility of lease prices;
•Delimitation of Producing Arrangements in
every City, prepared by the State
Government;
• Policies of Municipal and State tax
incentives.
 REAL ESTATE 25

BUILD-TO-SUIT

The operation known as build-to-suit is a type predetermined period, guaranteeing the

of operation where a real estate development return of investment and the remuneration
is made according to the specific needs of a for the use of property.
future user, who will occupy it for a

FII – Real Estate Investment Fund

Developer Company
R$ OR SPE – Special Purpose Company Build-to-Suit
Agreement
Definite Rent
Granting Receivables

Payment
Securitization Agent of rent

Rent CRI – Real Estate

Receivables Lease Receivables
Securitization Certificates

R$ CRI

Investors
26 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

When selecting this type of building modality • Estimated budget of future property.
the following points are also important: Determine which investment is feasible;

• Consideration of the need for future • Study of project directives: technical

expansion; specifications;

•Selection of a single point of coordination • Analysis of economic and financial

and development of project; feasibility;

• Negotiate price and term for delivery of

• Understanding the ideal spaces to be
property;
used (storage and production areas, offices,
utilities, maneuver patio, parking spaces,
• Select the developer/investor;
for example);
• Supervise the implementation;
• Perform a Market Survey – with values in
the region, land prices, recent industrial lease • Management of occupation and delivery of
and sale deals, etc; final product.

Major build-to-suit operations in Brazil:

Procter & Gamble

Itatiaia – RJ Land Area: 201,600 sqm
Total Built Area: 39,000 sqm LEED Certification
 REAL ESTATE 27

Excel/Unilever
Louveira – SP
Total Built Area: 120,000 sqm Land Area: 230,000 sqm

Excel/Kraft
Araucária – PR
Total Built Area: 42,697 sqm Land Area: 2,223,355 sqm

Excel/Unilever
Rio de Janeiro - RJ
Total Built Area: 17,500 sqm Land Area: 40,048 sqm

Natura
São Paulo-SP Land Area: 111,732 sqm
Total Built Area: 51,000 sqm LEED Certification
Cases: Colliers International Brazil
28 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
Due Dilligence
After all technical assumptions and possible
locations defined, the properties that may
fulfill the needs are selected through a
preliminary search. To do so, it is advisable to
have a legal, environmental and technical
process in place (due dilligence), ensuring
that a defined property will comply with
the established requirements. Generally,
an acquisition process includes the
following steps:
• Planialtimetric Survey: Determination of
the perimeter of the property, with contour
lines and identification of any possible
natural interference, such as sources, streams
and specific vegetation that may affect the
implementation of desired operation.
• Analysis of Title: Documents inherent to the
area and current situation of the owners and
the property.
• Environmental Analysis: Performed to
guarantee that there are no environmental
liabilities, such as contamination of soil and
hydrographic analysis (rivers,streams,
preservation areas, etc.), analysis of the
impacts to the soil, and the permanent
preservation areas.
• Analysis of Technical Feasibility:
Checking of the use and occupation of soil,
local zoning, directive plan, approvals with
local, state and federal bodies, as well as
permitted uses and possible restrictions,
besides the studies for the implementation of
selected lands with earth movement and
construction cost estimates.
• Analysis of Urban Infrastructure: Survey of
physical aspects in the property surroundings,
analysis of urban infrastructure, checking costs
associated to accesses (public transportation
and street paving), utilities (electric energy,
water and sewage, piped natural gas, etc.),
commerce and services, among others.

AVOIDING COMMON ERRORS OF THE INDUSTRIAL
REAL ESTATE MARKET
• Lack of knowledge of local market
practices: It is suggested that a previous study
of basic assumptions and real estate practices
is conducted for the new market, avoiding
precipitated decisions. It is important to
understand the laws, the market, the economy
and all other factors that will guide the
decision making process.
• Strategic Plan: To study, consult, evaluate
the opportunities that best suit current and
future needs, avoiding considering only the
costs. These may be quite higher if an
expansion is require, or a change of location
is made within a short period of time.
• Project Analysis: verification of all technical
issues of the new industry/ development.
• Infrastructure Analysis: study of local
infrastructure inherent to the property and
vicinity, such as roads, public transportation,
toll stations, residential developments,
which are important factors for the success of
logistics of future workers.
• Process management: preparation of a
schedule of actions, allowing required time
REAL ESTATE 29
to perform each different step of the project,
from search of location to the installation of a
new plant or logistic unit. This planning must
include the necessary terms for internal
approvals of the company. As to the process
of property search, longer periods must be
estimated, since it is probable that a higher
number of options will be identified.
• Definition of location: accesses, availability
of skilled labor, geographic location of clients
and vendors, possible tax incentives,
operating costs, availability of infrastructure,
possibility of future expansion, and others.
• Feasibility study: financial feasibility of the
project, based on the assumptions and
objectives of the company.
• Legal, environmental and technical due
diligences: Evaluation, through specialized
consulting companies, of documents,
environmental aspects and feasibility for the
acquisition or lease of a property. This item
will include checking project feasibility
(approvals) with public bodies (City Hall, Fire
Department, Environmental Agency, etc).
30 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

PROCESS OF COMMERCIAL REAL ESTATE LEASING

 REAL ESTATE 31

THE DEVELOPMENT PROCESS OF A LOGISTIC PARK

Note: HABITE-SE is a certificate authorizing the beginning of the effective use of a property after its
completion, which is issued by public departments where the property is located.
32 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
About Leasing
Source: Colliers International Brazil
• Typical lease term - The lease term can be
any length. The most common term is 3 to 5
years. If you have a lease agreement with a
term of more than 3 years, the parties are
entitled by law to request a lease review. Any
lease agreement for commercial purposes
that has a term of at least five years may be
renewed for an equal period of time at the
discretion of the tenant.
• About renewals - The term of the lease is
finite and ends on the last day of the term.
The tenant can secure an option to renew.
The renewal rights are stated in the lease
agreement in the “term” clause. The tenant
must notify the landlord in advance of their
intention to renew, otherwise, the lease will
be terminated on the last day of the term as
stated in the lease. The notice period is
typically established in the lease agreement,
but if not, the common notification period is
30 days prior to the expiration. In order to
exercise this right the tenant must take legal
actions between six months and twelve
months before the expiration of the
contractual term, and observe other related
legal requirements. The rent amount during
the renewal term is negotiable by both
parties.
• Terminate Options and penalty fee - By
law, the tenant has the right to terminate the
lease before its final date (early termination)
providing the landlord with prior written
notification (usually 30 days, but negotiable)
and the payment of an early termination
penalty fee. The standard termination fee is
equivalent to 3 months’ rent proportional to
the lease remaining term, but it may be
higher according to specific clause
negotiated in the lease agreement. Using a 3
year lease with a 3-month early termination
fee as an example, if the lease is terminated at
the end of the first year, the termination
penalty fee would be equivalent to 2-month’s
rent. If the early termination occurs at the end
of the 2nd year, the penalty fee would be
equivalent to 1-month’s rent.

• Tenant obligations - The common practice
is to return the space to the landlord in its
original layout, bare shell condition, with
normal wear and tear. Such condition can be
negotiated by the parties.
• Second Hand - space with tenant
improvements included - It is rare to find
second generation space to lease because
tenants are obligated to return their
space to its original condition. If second
generation space is found, the lease must be
agreed to by the landlord (typically the
previous tenant has left the space and there is
another company interested in leasing the
space with the improvements included).
• Regulations - The parties may negotiate
subleasing and assignment clauses. If not
expressly provided in the lease agreement,
the sublease and assignment are only
permitted with the landlord´s prior approval.
The rent paid by the sub-tenant cannot be
higher or lower than the rent paid by
the tenant.
• Lease guarantees - Most commonly the
landlord asks for a bank guarantee, letter of
credit or lease insurance. A deposit is
sometimes accepted, usually equivalent to 3-
REAL ESTATE 33
month’s rent. The guarantee or letter of credit
covers one years´ costs including rent,
condominium expenses and taxes. It must be
renewed every year. It is also common for
the bank guarantee, letter of credit or
insurance covers the costs for the entire term
of the lease. The law also allows for a
personal guarantee, the guarantor shall be
responsible for the tenant´s obligations
during the term of the lease.
• What regulations cover holding over of
the current premises? If the tenant does not
notify the landlord of their intention to renew
and the tenant remains in the premises for
more than 30 days without the landlord
opposing, the lease shall be considered
renewed in a monthly basis. In such event,
the landlord has the right to ask the tenant to
leave at any time, with a 30-day previous
notice.
• About space - the tenant has the right to
make alterations/ customizations in the
space but the all them must be formally
approved by the landlord and municipality (if
required). It is uncommon for the tenant
to use the landlord´s architect or project
manager for any alterations.
34 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
About Costs
Source: Colliers International Brazil
• Rent units - R$/ sqm/ month. R$ represents
the Brazilian currency, the real. Note: When
a number is written, the “.” is used to separate
thousands and the “,” separates the decimals.
For example the number one thousand
dollars and eighteen cents is written
$1.000,18.
• Definitions - Rent - “Rent” is basic rent, as
defined in the lease agreement.
• Condominium fees* - considered as
additional costs, these fees have a wide
variation, which from USD 0.16/ sqm/ month
up to USD 2.47/ sqm/ month, or even higher.
* Amonts refering to the 1st Quarter of 2012
These fees may vary from time to time as it
includes water, lights, cleaning costs, security
personnel, gardening, and others, for all the
common areas. The landlord can only
request the tenant to pay ordinary
condominium expenses.
• Taxes* - property taxes vary from city to city,
usually within USD 0.08 – USD 0.98 per sqm
per month range.
• Additional charges - the additional costs
include all expenses related to the tenant
operation such as telecommunications,
internal security, insurances (stored goods,
equipment, building, etc.)
• Lease price adjustments - the lease price is
adjusted annually and the most used indexes
are one of the following:
(1) IGPM: based on the general market prices
for items including, but not limited to, the
dollar exchange rate, foods and clothes.
(2) IPCA: based on the consumer prices’
variation, such as service providers, retail
stores and public services.
Both indexes are also used to measure
inflation rate and either can be used to
determine the annual lease adjustment.
 REAL ESTATE 35

In addition to the annual adjustment, all About Facilities

leases may be renegotiated by landlord and
tenant every 3rd year of the lease agreement,
usually agreed upon market prices.

• Payment - the rent is paid monthly in local

currency (Real).

• Concessions/allowances - always subject

to negotiation, the landlord may offer free
rent periods, as an incentive, also depending
on market conditions. Leasehold
improvement allowances are not common
practice and it is uncommon for the tenant to
use the landlord´s architect or project
manager for any leasehold improvements.
• Costs - The tenant is responsible for all costs
until the property is returned to its original
condition (unless agreed otherwise) and
with the acceptance of the property by
the landlord.
Deposits are not standard in the market, but if
the landlord accepts such guarantee, the
common practice is the amount equivalent to
3 months’ rent, which is either retuned after
lease expiration or used to cover the last 3
months’ lease.
Source: Colliers International Brazil
• Floor space measurement - for stand-alone
warehouse/industrial facilities, built area is
usually the leasable area. In industrial/
logistic parks, the common areas are
usually included in the leasable area,
respecting the proportionality;
Note:
- 1 square meter = 10.7639 square feet – To
convert from R$/sqf/month to
US$/sqf/annum multiply the given rate by
approximately 0.66 (estimated exchange
rate of 1 USD = R$ 1.82).
• Building delivery - new industrial/logistic
buildings are usually delivered for use.
Landlords usually do not include rack storage
system, equipment, office fit out / furniture,
and other removable items.
36 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL

ABOUT OUR SPONSOR

Colliers is a real estate consulting firm present
in more than 62 countries, for the following
segments: Industrial, Offices, Retail, Land
lots for Incorporation, Rural Areas, Hotels,
Hospitals, Teaching Institutions, among
others. In Brazil, it has offices in São Paulo,
Rio de Janeiro, Recife and Fortaleza, with
approximately 100 professionals offering
services such as:
• Real Estate Investments
•Consulting and disposals of Assets and or
Real Estate Portfolios
• Build-to-Suit and Sale & Leaseback
operations
•Property Management and Lease Contract
Management
• Assessment of Real EstateProperties for
Purchase, Sale, Guaranty and Lease

• Vocation, Market, and Economic Feasibility

• Representation of Owners, Tenants – Lease,
Purchase and Sale Studies (EVE)
 REAL ESTATE 37

• Assessment, consulting and advice for the
acquisition/disposals of assets for Investment
Funds.
•Green Consulting for Obtaining the LEED®
Certification
Our expertise in offices coupled with the
knowledge of the Market Intelligence and
Research team allows us to offer the best
solutions to speed up the successs of
customers in the real estate market.

Colliers International Brazil São Paulo

R. Olimpíadas, 205 - 1° andar
Ricardo E. Betancourt CEP 04551-000 - São Paulo - SP
T. +55 11 3323 0000
President Director
Rio de Janeiro
Sandra Ralston Av. Almirante Barroso, 63
Vice-President Director CEP 20031-003 - Rio de Janeiro – RJ
T. +55 21 2524 4242
Paula Casarini
Recife
Consultancy Appraisal and Advisory
Av. Gov. Agamenom Magalhães, 4.575
Services Division
CEP 50070-160 – Recife – PE
T. +55 81 3037 2222
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Industrial Division Fortaleza
Av. Dom Luis, 807 – 20º andar
CEP 60160-230 – Fortaleza – CE
T. +55 85 8171 2727

Web-site: www.colliers.com
E-mail: relacionamento@colliers.com.br
38 How to CHOOSE YOUR LOGISTICAL/INDUSTRIAL FACILITY in BRAZIL
REAL ESTATE 39