Opportunities create demand in Brazil’s industrial warehousing segment

Leitura de 6min

Population concentration and the ensuing growth in consumption prompt businessmen to invest in new space.

Not even the effects of the global economic crisis could derail Brazil’s warehousing sector. Facing challenges in highways, ports and airports infrastructure, the country offers a scenario of opportunities for increasing development of the warehousing segment, seen as a viable alternative for the distribution of goods and products. Another factor is current tax policy, which is crucial to making decisions about the choice of new construction sites. Experts in JLL’s research area see the warehouse market expanding by roughly 60% through 2017.

Researchers say that the main reasons for this growth relate to warehousing improvements and the increasing operational requirements of occupants, together with the development of e-commerce. This means that through the next two years Brazil’s stock of warehouse space will grow to 38.9 million square meters, including the current stock of 26.8 million square meters. Craig Meyer, global director for the Industrial area at JLL in the United States, who was in Brazil recently, said he sees this situation as offering opportunities.

The warehouse market enjoys the potential of a growing population in large cities such as São Paulo, with a substantial middle class consumer market. All investors in this segment see Brazil as a great opportunity,” Meyer said.

Fábio Maceira, president of JLL Brazil, echoed Meyer’s words:

We have a huge market to activate; it’s still in its infancy but it’s developing very well. The segment continues to attract capital despite the crisis and there are significant new funds coming in that can develop new products, so we’re very optimistic about the industrial market.

According to André Rosa, director of JLL’s Transactions area, opportunities are not restricted just to new demand. They also include relocation to higher-quality properties.“The goal is to generate greater operational efficiency,” Rosa said. “That means that it is important for companies to move, regardless of the economic situation. Most of the time, this strategy implies getting a better price, a lower cost.” What’s more, companies are aware of the situation: “We have received many requests and inquiries from companies interested in this movement.”

Rosa noted that supply chain studies – something JLL also provides, when requested – aim to identify the most promising locations for warehouse investments.“However, everything basically depends on where the consumption is, and through analysis and evaluation we can identify where is the best place for the client to invest in a distribution center to reach the greatest possible number of people more quickly and cheaply,” he said, observing that logistics (including transportation, inventory and labor) is usually responsible for 75% of the total operational cost of a distribution center.

In these cases, being able to count on the support of industrial teams – comprising experts such as those at JLL – can generate significant operating improvements for industrial and logistics clients,” Rosa said. “Not only can occupants come to JLL for guidance on how to choose the best distribution center for rental, but also investors and developers can rely on the company’s expertise and its forecasts of industrial activities.”

Maceira adds that nowadays, each region of Brazil can be served by a distribution center.

Opportunities aren’t all bunched together in one place,” he explained. “They can be found in the Southeast, the South, the Northeast and the Center-West; it all depends on the type of business. In this sense, Amazon is a great example; it’s a distributor that dispatches its products directly to the consumer without going through a bricks-and-mortar store. This is a case where demand forces the company to operate in more than one warehouse in the country, or via logistics operators who are responsible for delivering the packages.