The Ile-de-France Office Rental Market - January 2021
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2020 recorded a historic decline in take-up. With a total take-up of only 1.3 million sq m in the Paris Region, the market has contracted by -45% in one year, and this despite two major transactions of 126,000 sq m (TOTAL in La Défense) and 83,000 sq m (ENGIE in La Garenne-Colombes).
Large surface leases were most significantly impacted by the decline. Only 21 transactions of more than 5,000 sq m were signed in the Paris Region in 2020, versus 72 transactions in 2019 and an average of 65 per annum, i.e. a -55% decline. Transactions of 0 to 5,000 sq m suffered a more limited fall of -39%.
Overall, transactions within Paris have fallen by -48% compared with 2019. Tertiary districts have suffered most, as take-up has dropped by -49% and there has not been a single signature for more than 5,000 sq m in this sector. Only 5 transactions of more than 5,000 sq m were signed in the CBD, versus 12 last year. However, a few small and medium-sized prime rent transactions were signed, and even reached €930/sq m/year for refurbished buildings.
Vacancy rates have increased significantly. Although the Paris region market remains balanced with a 6.3% vacancy rate, it could easily tip into oversupply.
Incentives have generally increased across all surface areas, and particularly in sectors where supply is becoming abundant. Rents in La Défense have started to be revised.
Average rent for new space has generally started to fall slightly in tertiary districts and the Western business district. It has however continued to rise in Paris CBD, primarily due to the number of leases signed for top rent and the low number of transactions.
2020 recorded a historic decline in take-up.