Market Bulletin2nd Quarter 2012 - São Paulo / Rio de Janeiro / ABCD and Alphaville

www.ocupantes.comRua Fernandes Moreira, 1.166, 4º andar

04716-003, São Paulo - SP, BrazilTel. +55 11 5182.3455

SÃO PAULORIO DE JANEIROBELO HORIZONTEGOIÂNIA

SALVADOR RECIFEARACAJUFLORIANÓPOLIS

Ocupantes assists Rolls Royce expansion in Rio de Janeiro

• Valuations• Divestments• Build-to-Suit• Sale & Leaseback• Project Management

For offices, industries or retail, our services are:

• Relocations• Rent Reviews and Lease Renewals• Lease Terminations• Management of Opportunities and Critical Dates

The British company Rolls Royce man-ufactures the most luxurious cars in the world, used by presidents and other im-portant personalities. Founded 106 years ago by Charles Stewart Rolls and Henry Royce the brand is associated with tradi-tion and high quality cars.

After privatisation in 1987, Rolls Royce PLC was trans-formed and became a supplier of global power systems and equipment for marine and aviation among other transport systems.

Present in Brazil for 50 years, the company decided to expand its customer base in Rio de Janeiro building an in-dustrial plant for engine assembly in addition to a com-mercial office in Barra da Tijuca.

With the aim of assisting Rolls Royce in locating a suit-able site for their needs, Ocupantes Corporate Real Estate carried out a thorough survey encompassing all the avail-able options to meet the clients’ wishes swiftly.

To build this industrial site, Rolls Royce required a site with easy access to existing highways and close to the Port

of Itaguai, in a strickly industrial zone. The office space, on the other hand, would have to accommodate the whole team during a two year period and be ready for occupa-tion in less than a month.

By requesting build-to suit proposals and preparing qualitative reports on the potential sites to be leased, Ocupantes assisted with the investment decision for pur-chasing a self-owned site meeting the requirements es-tablished by the client.

As for the office space, the solution arose after a detailed survey in the Barra da Tijuca region, enabling the lease of a fully furnished office in the Citta América complex.

In both projects, reporting was carried out both in English and Portuguese by the Ocupantes team led by Bruce Lorimer and Thomas Govier in São Paulo and Claudio Lisias in Rio de Janeiro. Rolls Royce was assisted both locally and internationally in all real estate matters, including negotiations, contractual aspects and project approval with the head office.

Location - Santa Cruz. RJ Cittá América - Rio de Janeiro, RJ

Imag

e G

oogl

e

Net absorption is at its lowest since 4th quarter 2009

Market Bulletin is a quarterly publication about the o� ce markets in São Paulo, ABCD region and Rio de Janeiro, prepared by Ocupantes’ departments of Research and Marketing. All rights reserved. Reproduction of this material in part or in its entirety is permitted as long the source is cited.

São Paulo

* Class A: Buildings delivered after 1991, with a leasable area of 700 m² per � oor-plate, and high technical standards. ** Ocupantes works with information supplied by constructors and developers.

Market IndicatorsVacancy Rate Net Absorption Construction Activity New Stock

Much has been said about the heated real estate market of São Paulo. In fact, the Brazilian economy has expanded, companies have grown and this has prompted the need for additional space. As a result, demand for real estate increased vigorously elevating sales and lease � gures.

The vacancy rates which had been on the fall for the past six years – since the end of 2005 – took on a di� erent trend after reaching 2.72% (Class A* buildings) in the third quarter of 2011. From then on, as a result of the delivery of new o� ce space, the amount of vacant space went on the increase reaching 7.53% in this quarter – the highest rate since the � rst quarter of 2007. For buildings in the Others segment, there was a slight increase in the rate to 2.99%. In total, vacancy rates in São Paulo are 3.89% against 3.30% in the 1st quarter 2012.

Distinctly to the � rst quarter, the net absorption in the second quarter of 2012 was not that signi� cant – it summed 44,800 m² only in the city.

The two largest deliveries promised for the quarter were postponed once again. Coincidentally, both the Patio Malzoni and the D and E towers of WTorre located on the Juscelino Kubitschek Avenue encountered di� culties for obtaining the required documentation and permit for occupancy.

Vacancy rates in Vila Andrade were the highest in the city, increasing from 25.55% to 35.48%, with the delivery of the Empresarial Jardim Sul - Towers 1 e 2 - each with 6,258 m².

The forecast for delivery in the next quarter is 300 thousand m². The WTorre Paulista building is one of the main highlights with 24,000 m². If this forecast is accomplished in its entirety, vacancy rates - Class A – may surpass 10%.

Developers encounter di� culties in obtaining City Hall approvals for their buildings. Nonetheless, construction activity remains high in the city

As mentioned above, two of the city’s main developments are still unavailable for occupation due to delays in the issuance of their certi� cates of occupa-tion. Both Patio Malzoni and WTorre JK buildings D and E, part of the JK Iguatemi Shopping Mall complex, are undergoing an arduous dispute with the City Hall in order to obtain their much needed approvals before they can be occupied. **

-5%

0%

5%

10%

15%

20%

25%

-25,000

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000(sqm)

Net Absorption (SqM) - OthersNet Absorption (SqM) - Class A

Net Absorption and Vacancy Rate

Fore

cast

Vacancy Rate - OthersVacancy Rate - Class A

Vacancy Rates by District

0%

5%

10%

15%

20%

25% 32% 35%

Others

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000Others Class A(sqm)

Construction Activity

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Fore

cast

New Stock Others Class A(sqm)

After a record net absorption rate in the previous quarter (in excess of 100 thousand m²), there has been a drastic drop in the second quarter of 2012. In spite of this, the net absorption still remained positive at around 40 thousand m² during this quarter.

In the Class A* segment, vacancy rates suffered yet another drop, from 8.83% down to 8.59%.

Class A vacancy in Downtown Rio rose from 11.93% to 13.55%, reflected by the delivery of Edifício Porto Brasilis with its 18,150 m². However, when taking in to account all of the of-fice space in this region (Downtown Rio), the rate fell from 2.71% to 1.53%. Net absorption in Downtown Rio was positive at 7,800 m².

Delayed deliveries should be concluded within the second half of the year

The delivery of several large developments was scheduled for the second quarter of 2012, among them, the Centro Empresarial Senado with 77,000 m² due to be occupied by Petrobrás. This building one, among others, have been rescheduled for the second half of the year.

As a result, the expected deliveries for the second half of 2012 total 203,703 m². The most bene� tted region will be Downtown Rio de Janeiro, with 148 thousand m² in the Class A segment alone. One of the highlights is the Presidente Business Center, located on Presidente Vargas Avenue, with a total rentable space in excess of 40,000 m².

With the forecasted stock increase, the trend is that vacancy rates will continue to rise in the second half of the year, possibly overtaking 10% in Class A buildings. **

Class A vacancy rates drop for the second consecutive quarter, but are expected to rise over the coming months

Market Bulletin2nd Quarter 2012

Information contained in this document is a result of research undertaken by Ocupantes, with the aim of estimating trends in the corporate real estate market. It does not constitute a legal document.

Rio de Janeiro

Market IndicatorsVacancy Rate Net Absorption Construction Activity New Stock

OCUPANTES is the � rst Brazilian Real Estate consulting � rm to exclusively represent corporate end users in Brazil. It is composed of highly skilled professionals with ample experience representing Brazilian and multinational companies.

Net Absorption (SqM) - Others-Net Absorption (SqM) - Class A -

Vacancy Rate - Others-Vacancy Rate - Class A

Net Absorption and Vacancy Rate(sqm)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

Fore

cast

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000 Others Class A

Construction Activity (sqm)

Centro26,1%Botafogo

0,6%

Barra da Tijuca50,2% Others

23,1%

Construction ActivityDistribuition by District

0

40,000

80,000

120,000

160,000

200,000

240,.000Others Class A(sqm)

New Stock

Fore

cast

The Alphaville market registers high net absorption and the vacancy rates drop

ABCD and Alphaville

Success Stories - Catalent occupies a new sales o� ce in São Paulo

Catalent combines world-class talent with cutting-edge technology, to develop and supply drug and biologic products for the main manufacturers in the pharmaceutical industry. Acting as a world class catalyst for talent the company was created in April 2007 with the acquisition of Cardinal Health, by The Blackstone Group, a global in-vestment and consultancy company.

The company is the current market leader in this segment and helps clients get more molecules to market faster, enhance product perfor-mance, and provide superior, reliable manufacturing and packaging results.

In Brazil, Catalent o� ces and manufacturing facilities were both located in the city of Sorocaba, however there was a desire to prospect for new o� ces in the metropolitan region of São Paulo to be within close proximity of their clients.

The new location would require close access to the Marginal Pinheiros and with less than two months for the start of refurbishing, Ocupantes Real Estate was hired to identify and locate new o� ces, manage and speed up commercial negotiations and expedite the availability of the new facilities for the contracted archi-tect and constructors, as well as obtaining all the documentation for the refurbishing project.

Ocupantes proceeded with negotiations targeted at a building located in Vila Olimpia. Upon executing due diligence it was detected that the relevant documents were missing and this could pose a future prob-lem for the company.

In order not to waste any time, Ocupantes undertook an in depth survey of the buildings located in the southern region of São Paulo, searching for sites which would allow for an excellent visibility with clients.

Upon executing the selection process according to Catalent requirements, the best suited option was two central units in the Edi� cio Landmark building.

Ocupantes proceeded to assist the client in the lease process, securing the facilities and avoiding the loss to an outside party already at an advanced negotiation stage. Catalent moved swiftly into their new o� ces, taking advantage of the surrounding services and facilities found close by Landmark.

In the past 12 months the market for o� ce space in Alphaville was boosted with the delivery of 120 thousand m². All these deliveries re� ected automatically in the region’s vacancy rates. By the end of 2011, 27.69% of all available o� ce space in Alphaville was vacant. In the Class A buildings, vacancy rates were even higher – reaching 39.55%.

However, this scenario changed over the � rst half of 2012. Companies occupied a large portion of the available space, taking advantage of available tax breaks in the region, in addition to a large amount of available space at more attractive rates. Net absorption in the quarter was 78,652 m², the largest � gure since the beginning of 2007.

Large areas across important new o� ce buildings in Alphaville were occu-pied; as an example the Alpha Square Of-� ces (The City Torre 2), Brascan Century Plaza (towers O� ce and Corporate), in addition to the iTower – part of the Iguatemi Alphaville complex. Altogether, practically 70 thousand m² were occupied across the four buildings.

The other markets of the Greater São Paulo region underwent little change. The most notable occurrence was in Santo André, with the delivery of the Condomínio Edifício Unique Empresarial with 2,563 m², increasing vacancy rates to 5.13%.

Barueri - Alphaville

São Bernardo do Campo

Diadema

São Caetano do Sul

Santo André

São Paulo

ABCD and Alphaville

Total Stock - OthersTotal Stock - Class A

Vacancy Rate - OthersVacancy Rate - Class A(sqm)

0%

10%

20%

30%

40%

50%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Alphaville - Total Stock and Vacancy Rate

Fore

cast