Q4 2020 figures and outlook
Offices: steep fall in take-up as occupiers shift their priorities
Logistics: resilience of logistics real estate confirmed
Investment: differences between asset values are set to widen
Letting market: take-up in Ile-de-France for 2020 came in at 1.3 million sqm
All business sectors were very quickly affected by the health crisis, and real estate was no exception. “The usage revolution and the lack of visibility have limited occupiers’ ability to realise their real estate plans. As such, office take-up in Île-de-France came in at just 1,321,000 sqm over the full year 2020, showing a significant 45% fall over one year and well below the 10-year average (2,261,000 sqm)” explains Éric Siesse, Deputy General Manager in charge of the office letting division in Île-de-France for BNP Paribas Real Estate Transaction France. The volume of large units (over 5,000 sqm) changing hands was historically low, despite two exceptional deals over the course of the year (TOTAL in the future The Link tower in La Défense with some 130,000 sqm and ENGIE in its future Eco-campus in La Garenne Colombes with floor space of 83,000 sqm). All told, there have been only 21 deals over 5,000 sqm since the beginning of the year. Meanwhile, the segment of small/medium-sized offices (0–5,000 sqm) has also experienced a significant decline of 39% over one year.
The immediate vacancy rate for offices in Île-de-France rose considerably by the end of Q4 2020 to 6.8%. Although it has risen in all districts, some have fared worse than others, creating two distinct situations. On the one hand, the vacancy rate in the Péri-Défense district is already exceedingly high (around 18%). Conversely, Paris CBD still has little availability (3.6%), and remains below its long-term average. After surging last year, the supply of offices under construction has stabilised since the beginning of the health crisis, standing at 1.8 million sqm as of January 1, 2021. Most future completions will be in the Inner Rim (40% of supply).
“In 2021, occupiers’ evaluation criteria should continue to evolve amid the current revolution in uses. The key themes for offices in the future will be attractiveness, agility and ESG”, adds Eric Siesse.
Logistics real estate in France confirms its resilience
“The logistics market in France has confirmed its solidity during this extraordinary year”, remarks René Jeannenot, head of the Logistics division for BNP Paribas Real Estate Transaction France. Take-up of warehouses over 5,000 sqm in France came in at 3.6 million sqm over the whole of 2020, down just 7% over one year. “Given the health and economic context, the outstanding trend in the second half with 2.1 million sqm transacted (+21% over one year) is a positive indication. The current conditions, with the ongoing reorganisation of the Supply Chain among industrial and retail players, the rise of e-commerce and investors’ confidence in this asset category make us highly confident for 2021” observes René Jeannenot.
Investment of over € 28bn over the full year
Investment in commercial real estate in Q4 2020 totalled € 10bn in France, bringing overall investment for the full year to € 28.2bn, i.e. a 35% fall over one year. After several consecutive record years, investment fell back to a less exceptional level in 2020, closer to the long-term average (€ 28bn). “Although this decline happens to all asset categories, offices remain most popular with investment of ca. € 18.6bn over the full year. The Logistics/Industrial premises segments and Offices have proved most resilient this year with a fall of around 30%. Conversely, investment in service real estate has suffered badly in the current economic climate”, points out Olivier Ambrosiali, Deputy General Manager in charge of the Sales and Investment division for BNP Paribas Real Estate Transaction France. There has been no great shift in the landscape this year, with cash-rich players still the most active participants, notably life insurance companies, pension funds and unlisted investment vehicles such as SCPI and OPCI. Also of note in 2020 was the reduced activity of foreign - and particularly Asian - investors.
With investors seeking risk-free assets at any price, prime yields for logistics and offices have fallen further, to respectively 3.90% and 2.70% as of January 1, 2021. Only retail has seen yields increase by around 65 basis points over the year. “The gaps between risk profiles are set to widen in 2021. Asset values are likely to see a new hierarchy according to the intrinsic quality of assets and the assessment of their risk”, forecasts Olivier Ambrosiali.