Profitability of commercial property in Brazil is slowly on the rise
Economics
07 February 2018

Profitability of commercial property in Brazil is slowly on the rise

The capital return rate showed a positive variation after six consecutive quarters in decline.

The General Index for the Commercial Real Estate Market (IGMI-C), calculated by FGV’s Brazilian Institute of Economics (IBRE) for the fourth quarter of 2017, showed income return, capital return, and total return rates of 1.75%, 0.15%, and 1.89%, respectively, compared to the previous quarter. The capital return rate showed a positive variation after six consecutive quarters in decline. In addition, the income return rate also reversed the downward trend recorded in previous quarters. As a result, the total return rate also grew compared to the third quarter of 2017 (1.40%). With these results, the total year-over-year return rate broke free from the downward slope seen since the last quarter of 2013.

Year-over-year rates of income return, capital return and total return were 7.23%, -0.54% and 6.67%, respectively. The milder decrease in the year-over-year capital return rate in the last quarter of 2017 offset the downturn in the annual income return rate for the period, virtually maintaining the same YoY total return rate compared to the previous quarter (-6.66%), ultimately stopping the constant decrease shown in recent quarters. The economic recession in Brazil between 2Q14 and 4Q16 was one of the longest and deepest downturns in the country’s recent history, and its negative impacts over the commercial real estate market’s profitability were flagrant.

IGMI-C results show early signs of how the recovery of Brazil’s economy is starting to benefit profitability in this particular sector, albeit still at a sluggish pace. 

Go to the website to see the complete results, available in Portuguese.