Future Cities

Emerging Industrial Markets: Sao Paulo

September 16, 2024 4 Minute Read

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Expert Perspective

“As Brazil’s biggest consumer market, Sao Paulo has rapidly growing demand for warehouse and distribution space. Its total multi-tenant logistics inventory increased by 20% over the past four years to 212 million sq. ft., making it comparable in size to the largest markets in the U.S. for such space. E-commerce and third-party logistics companies were the main drivers of annual net absorption, averaging 6% of total inventory over the same period.”

Fernando Terra

Industrial & Logistics Director, CBRE Latin America

Demographics

Sao Paulo has a population of just over 11 million, the largest in South America and nearly 3 million more than New York City. Nearly one-quarter of the greater metropolitan area’s residents are aged 18 to 34—the biggest users of e-commerce that drives demand for warehouse and distribution space.

Figure 1: Sao Paulo Population Analysis

Source: CBRE Location Intelligence, 2024.

Location Incentives

According to CBRE’s Location Incentives Group, the Sao Paulo state government offers various cash incentives and tax abatements to qualifying businesses. The state government can also provide support in the following areas:

  • Facilitating public and private partnerships to attract business investment.
  • Resolution of any after-transaction problems, including issues with infrastructure, safety and labor.

Figure 2: Top Incentive Programs

Source: CBRE Location Incentives Group.

Logistics Drivers

The state of Sao Paulo is the world’s 22nd largest economy with a GDP of $664 billion in 2023—nearly 30% of total Brazilian GDP and more than double that of the next biggest contributor (Rio de Janeiro).

In December 2023, the Brazilian government approved the consolidation of five state- and federal-level taxes on consumption into two value-added taxes starting in 2026 to improve the country’s business environment.

Sao Paulo’s GRU Airport includes an expansive air cargo operation that serves various industries, including electronics, pharmaceuticals, textiles, food & beverage, automotive parts and accessories. Covering 2 million sq. ft., the airport has convenient access to major highways that span the entire country.

GRU Airport is currently undergoing a US$8 million expansion and improvement of its cargo-handling infrastructure.

Supply & Demand

With 212 million sq. ft. of multi-tenant logistics space, Sao Paulo is Brazil’s largest industrial market. Most of this inventory is in blocks of between 50,000 and 99,999 sq. ft. Strong demand from a diverse tenant base lowered the vacancy rate to 10.0% at midyear, which in turn increased annual rental rates to US$5.52 per sq. ft.

Despite lower vacancy rates, construction completions in H1 2024 totaled only 4.5 million sq. ft. vs. 14.4 million sq. ft. in H1 2023. With only 6.2 million sq. ft. of completions scheduled for the rest of this year, the overall vacancy rate should continue to fall and rents should rise amid strong demand from e-commerce and third-party logistics occupiers.

Figure 3: Sao Paulo Historical Data*

* Sao Paulo's data consists of only multi-tenant logistics inventory.
Source: CBRE Research, 2024.

Figure 4: Sao Paulo Size Range Comparison*

* Sao Paulo's data consists of only multi-tenant logistics inventory.
Source: CBRE Research, 2024.

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