The office market in the Greater Paris Region – 3 rd quarter 2013 Between light and shadow The leasing market continues to slow, impacted by the sharp drop in turnkey transactions. Immediate supply continues to rise while new supply remains contained. Rents remain under pressure. More than €7.9 billion has been invested since the beginning of 2013, an increase of 8% in a year. Twenty transactions exceeding €100 million were recorded in the first nine months of the year. The key prime yield in the Central Business District is stable in a range between 4.50 and 5.00%.
- The leasing market continues to slow, impacted by the sharp drop in turnkey transactions. Immediate supply continues to rise while new supply remains contained. - Rents remain under pressure. More than €7.9 billion has been invested since the beginning of 2013, an increase of 8% in a year. - Twenty transactions exceeding €100 million were recorded in the first nine months of the year. - The key prime yield in the Central Business District is stable in a range between 4.50 and 5.00%.
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
The office market in the Greater Paris Region – 3rd quarter 2013
Between light and shadow
The leasing market continues to slow, impacted by the sharp
drop in turnkey transactions.
Immediate supply continues to rise while new supply remains
contained.
Rents remain under pressure.
More than €7.9 billion has been invested since the beginning of
2013, an increase of 8% in a year.
Twenty transactions exceeding €100 million were recorded in the
first nine months of the year.
The key prime yield in the Central Business District is stable in a
range between 4.50 and 5.00%.
On Point • The office market in the Greater Paris Region – Q3 2013 Page 2
Downturn in the leasing
market
At the end of Q3, the leasing market was down by 30% compared to
last year, with 1.3 million sq m of take-up in the Greater Paris
Region. This difference is no surprise since solely Q3 of 2012 was
exceptionally active, with the completion of transactions by the
Ministry of Defence (135,000 sq m in the 15th district), France
Télécom (70,000 sq m in Châtillon), Sanofi (50,000 sq m in Gentilly)
or Thalès (49,000 sq m in Vélizy).
As we already mentioned mid-year, large transactions are lacking
this year. The sharp drop in turnkey transactions, after two
exceptional years, has greatly impacted the 2013 results. Indeed, it
is interesting to note that the share of these tailor-made transactions
in take-up fell from 24% in 2012 (32% at end of September 2012) to
11% in 2013. In fact, although the drop in activity appears exposed
at the moment, in 2011 and 2012 leasing activity was "boosted" by
these specific major transactions.
There were no such transactions in 2013. But those, which have
long gestation times, are difficult to gauge in terms of a calendar
year. And then some companies, faced since mid-2012 with the
downturn in indicators and economic outlook, as well as a sluggish
national climate, have postponed their real estate projects, curbing
their ambitions or renegotiating their lease.
For two years the phenomenon of lease renegotiations has grown in
the Greater Paris Region. According to Jacques Bagge, Head of the
French leasing team at Jones Lang LaSalle, “One of the key drivers
of demand in the past two years, was looking for savings. This has
now halted, the companies whose sole motivation was to lower their
real estate costs being satisfied to renegotiate their leases with
landlords, careful to avoid the leasing vacancy in their assets.”
Ratio of turnkey transactions in the total take-up (yoy change)
Source: Jones Lang LaSalle
Macro-economic data as at Q3 2013 (yoy change)
2013 Yoy change
GDP (2nd quarter) +0.5%
Salaried employment (1st quarter) +3,594
Business climate (Sept.) 94
Source: INSEE
Greater Paris Region KMI’s Q3 2013 (yoy change)
Q3 2013 Yoy change
Total take-up 1,302,172 sq m
Immediate supply 3,758,000 sq m
Immediate vacancy rate 7.2%
Prime rent €705 /sq m/pa
Average 2nd hand rent €312 /sq m/pa
Source: Jones Lang LaSalle/ImmoStat/ORIE
32% 11%
1,848,000
1,302,000
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
Q3 2012 Q3 2013
In million sq m Turnkeys
Excl. turnkeys
The large turnkey transactions have been absent this
year, with 440,000 sq m missing
On Point • The office market in the Greater Paris Region – Q3 2013 Page 3
CBD and La Défense have experienced a good level of leasing
activity, despite the widespread drop
From a geographical point of view, activity has varied greatly from
one sector to another. In Paris, demand fell 23%. Although all the
Parisian markets are lagging behind, Paris Centre West and Central
Business District are resistant and have performed well. The
correction in leasing values today allows many companies to claim a
Parisian location, or around the capital, in traditional business
districts. Moreover, there are twice as many big deals as last year in
this sector: the largest transaction was the Tribunal de Grande
Instance (30,000 sq m) in the 17th district. Indeed, the institution will
move its entire workforce, currently on the Ile de la Cité, to the new
courthouse, which will be located in the Clichy Batignolles urban
development zone, by 2017.
In La Défense leasing activity also increased significantly, thanks to
a particularly active Q3 with, amongst others, the signatures of
ERDF in the “Tour Blanche” in Courbevoie (22,000 sq m), delivered
in early 2014, and Allianz in “Easy Building” in Puteaux
(11,500 sq m).
In the rest of the Western Crescent, performances were variable.
Neuilly-Levallois and the Northern Bend are having a good year. In
Q3 we particularly note the pre-let of “Unicity” (~35,000 sq m) by
Cetelem to Levallois, which should be delivered in 2016. The results
of the Southern Bend have been sustained through the partial pre-
let of the “City-Light” transaction in Boulogne-Billancourt by GE
(38,000 sq m), which is scheduled for completion in 2015.
In general, the abundance of quality supply in these outlying areas,
which are accessible and close to Paris, has attracted companies
that benefit from very attractive lease terms.
In the Inner and Outer Southern Suburbs, lettings have dropped
sharply, due to very large transactions signed last year in these
sectors, such as France Télécom in Châtillon (70,000 sq m), Sanofi
in Gentilly (50,000 sq m), Thalès in Vélizy (49,000 sq m), EDF in
Palaiseau (~30,000 sq m) or Casino in Vitry-sur-Seine (~25,000 sq
m) for Q3 alone.
Number of large transactions > 5,000 sq m (as at 3rd quarter of the year)
nature, without prior written permission of Jones Lang LaSalle except for any permitted fair dealing in accordance with all applicable copyright laws. Full acknowledgement must be given for any such
use. This presentation is based upon materials either compiled by us through independent research or supplied to us by third parties. Whilst we have made every effort to ensure the accuracy and
completeness of the data used in the presentation, we cannot offer any warranty that no factual errors are present. We take no responsibility for any direct or indirect actual or potential damage or loss
suffered as a result of any inaccuracy or incompleteness of any kind in this presentation. We would, however, like to be told of any such errors in order to correct them. These forecasts are generated
from a range of statistical techniques, including econometric models. They are subject to errors stemming from three main Source: measurement and statistical errors, which relate to raw data and the
econometric model, as well as errors arising from assumptions regarding the future behaviour of explanatory variables. As a result, we place greater emphasis on trends and turning points than on
precise values. Jones Lang LaSalle takes no responsibility for any damage or loss suffered by reason of the inaccuracy or incorrectness of this report.