In connection with the BNP Paribas Real Estate Advisory France thematic meetings, Laurent Boucher, Chairman, and Guillaume Delattre, Vice-Chairman, analysed the Paris region’s office market, sector by sector, and reported their outlooks.
Building on a particularly dynamic second half of 2015, the first half of 2016 saw a further increase of 20% in take-up for all office space in the Greater Paris region. However, this increase must be put into perspective: it is based on particularly disappointing results in the first half of 2015, and the transaction volume has simply returned to just above the ten-year average. “The market saw growth for all categories of spaces, from large operations over 5,000 m² (+43%) to transactions under 5,000 m² (+12%). Geographically, we are seeing users refocus on the traditional business districts of inner-city Paris and West Paris, since these sectors captured 83% of take-up in the first half”, said Laurent Boucher.
The incentives have remained high since July 2016 (21%). Still very steady in La Défense (28%), rent-free periods are more moderate in Paris (17%). Similarly, these incentives are higher for large operations over 5,000 m² (24%), whereas they are more moderate for medium-sized spaces between 1,000 and 5,000 m² (18%) and small spaces under 1,000 m² (13%).
The Paris Central Business District(i) showed good health in the first half of 2016 with 234,500 m² taken up, much higher than the ten-year average of the first half (191,000 m²). “This dynamic nature can be seen particularly in the niche of small and medium-sized spaces. The gradual shift of the CBD market from the west to the centre and east of Paris is now a true fundamental trend, particularly under the influence of companies of the net economy and the co-working sector, which have made Opéra their neighbourhood of choice”, explained Guillaume Delattre. While the inventory of offices in the Etoile area is two times higher than that of the Opéra neighbourhood, transaction volumes in each of the two districts are tending to converge.
Paris Centre East(ii) also enjoyed strong growth at the beginning of the year compared with the first half of 2015, with a transaction volume of 122,500 m² (+84%). All the areas of the north and east of Paris performed well, from the 3rd, 4th, 10th, and 11th arrondissements (+39%), to the 12th arrondissement (+89%), and the 18th, 19th, and 20th arrondissements (+166%), despite a significant lack of available new supply. Public transport accessibility and the vitality of these neighbourhoods now seem to be attracting users looking for lively, trendy areas to recruit and retain their young employees.
With 127,000 m² taken up, volumes in the Paris Left Bank(iii) were comparable with last year. However, the take-up volumes were maintained thanks above all to large operations over 5,000 m² (18%), whereas small and medium-sized areas declined (-19%), adversely affected by an under-supply, which limits the possibilities offered to users. Key corporate occupiers continue to favour the Left Bank, particularly in the 15th arrondissement with Altice Media’s move into Qu4drans (25,800 m²) and in the SEMAPA operations in the 13th arrondissement with Le Monde (18,600 m²), Natixis (14,800 m²), and BPCE (14,800 m²).
After a record year in 2015, the Southern Loop was down over the first six months of the year (-35%) because of the lack of large space transactions, even though transactions below 5,000 m² increased (+26%). However, the Southern Loop should be able to regain higher levels by the end of the year, thanks to several large transactions expected on new high-quality buildings.
While La Défense suffered a sharp drop in 2015, the beginning of 2016 saw a complete market turnaround. In just six months, transaction volumes are already equivalent to all of 2015. With 175,000 m² taken up, volumes more than tripled, particularly thanks to the eight large space transactions already signed, including two over 20,000 m²: Saint Gobain in M2 (49 000 m²) and Deloitte in Majunga (30,500 m²). The La Défense market appears to be benefiting from the efforts taken to improve the quality of life of users in the neighbourhood, whether in terms of transport or after-work activities.
For the large space segment, 2016 is off to a very good start with a 43% increase compared with the first half of 2015: 379,000 m² taken up in spaces over 5,000 m², representing 31 transactions. Users are favouring buildings that are delivered or in the process of delivery, since we counted only two operations signed before the offices were started (Le Monde and Saint Gobain).
“After decreasing since 2014, supply at one year could stabilise at around 4.6 million m² by the end of 2016. With the good level of transactions in all demand niches, we can count on an office space take-up in the Greater Paris region close to 2.4 million m² for 2016 overall”, anticipated Laurent Boucher.
(i) In this analysis, the Paris Central Business District includes all of the 1st, 2nd, 8th, 9th, 16th, and 17th arrondissements of Paris. The Etoile area includes the 8th, 16th, and 17th arrondissements. The Opéra area includes the 1st, 2nd, and 9th arrondissements.
(ii) Paris Centre East includes the 3rd, 4th, 10th, 11th, 12th, 18th, 19th, and 20th arrondissements of Paris.
(iii) Paris Left Bank includes the 5th, 6th, 7th, 13th, 14th, and 15th arrondissements of Paris.