Office Rental Market - January 2020

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Paris region take-up totalled more than 2.3 million sq.m in 2019. Although this represents a 10% decrease compared to 2018, it is nevertheless equivalent to the average over the last ten years.
 

After a sharp decline in H1 2019, a low annual take-up was feared. However, the market picked up from Q3 onwards, making for a satisfactory year-end total.
 

The large surface area market, which had collapsed in H1 2019, performed well in the second half of the year, with a 27% y-o-y increase in take-up.
 

Geographically, take-up decreased across all sectors except the emerging North and Western business district. In the North, 3 transactions of more than 20,000 sq.m were signed; the 3 largest transactions of Q4 were signed in the Western business district (excluding La Défense): CNP and CANAL+ in Issy-les-Moulineaux (40,800 sqm and 37,600 sq.m, respectively) and BNP PARIBAS RE in Boulogne for 37,000 sq.m.
 

Vacancy rates are dropping across all business districts, indicating a space shortage.
 

Although vacant space is decreasing, supply available within one year increased by 5% for the first time since 2013. This points to a slight increase in vacant space for 2020. Occasional vacancy rate increases could affect La Défense and the emerging market in the North.
 

Rent for new buildings has increased across all sectors due to the growing shortage of supply. In the CBD for example, several transactions were signed for more than €800/sq.m and a top rent of €880/sq.m; in the Western CBD some transactions reached €520/sq.m.

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Paris region take-up totalled more than 2.3 million sq.m in 2019. Although this represents a 10% decrease compared to 2018, it is nevertheless equivalent to the average over the last ten years.

Géraldine LATHAM

Key figures January 2020

Take-up in Île-de-France region per quarter ​

Source: MBE Conseil according to Immostat

Take-up in Île-de-France region per quarter  ​

  • 2,316,500 sq.m take-up in the Paris region for 2019: a 10% decrease compared to 2018, but a satisfactory take-up that is in line with the average over the last ten years;
     
  • Take-up was unevenly spread over the year: after a 20% decline in H1, excellent demand in Q3 helped limit the overall decrease in take-up.

Take-up in Île-de-France region by size

Source: MBE Conseil

Take-up in Île-de-France region by size

  • Significant 40% decrease in 10,000-20,000 sq.m transactions, and a 29% decrease in 5,000-10,000 sq.m transactions;
     
  • Although large transactions were absent in H1, they surged in H2 (+145%) with a total of 5 transactions. As a result, this segment grew by 27% in 2019;
     
  • Decreased take-up for the <5,000 sq.m segment (-7% in 2019; -22% in Q4 due to a 29% decrease in the 1,000 to 5,000 sq.m segment).

Take-up in Île-de-France region by geographic area

Source: MBE Conseil according to Immostat

Take-up in Île-de-France region by geographic area

  • The decrease has affected all sectors except:
    • The emerging North market, which is this year's big winner in terms of growth: +79%, i.e. 175,000 sq.m. This must be understood in context, as this increase is primarily the result of 3 major transactions; 

    • The Western CBD (excluding La Défense) performed well in 2019, with a 15% increase. 3 major transactions were signed in this market: CNP’s 40,800 sq.m and CANAL+’s 37,600 sq.m in Issy-les-Moulineaux, and BNP PARIBAS RE’s 37,000 sq.m in Boulogne;

    • La Défense: take-up increase is highly relative as 2018 was already a difficult year; 

    • Overall take-up volume in Paris CBD decreased by 13% for a total of 407,000 sq.m. This is due to a space shortage but perhaps also to ever-increasing rents?

Vacancy rate in Île-de-France

Source: MBE Conseil according to Immostat

Vacancy rate in Île-de-France

  • Space is growing increasingly scarce throughout the Paris region;
     
  • The Paris vacancy rate continued to drop slightly to 2.1%;
     
  • Vacancy rates have dropped across all Inner Rim sectors except the PeriDéfense whose vacancy rate increased (11.4% vs. 9.8% y-o-y);
     
  • The 4.8% vacancy rate in La Défense must be understood in context as supply available within one year is substantial and the rate could edge towards 8% if demand does not improve.

Evolution of average weighted rental values for new buildings

Source: MBE Conseil according to Immostat

Evolution of average weighted rental values for new buildings

  • Rent for new buildings has increased throughout the Paris region;
     
  • In the CBD, average rent for a new building is €734/sq.m, with a top rent of €880/sq.m.
  • Top rents were often paid for co-working spaces in the CBD, but also for space in other business sectors such as WOJO's transaction for €650 /sq.m in the ATELIER GAITE building next to Montparnasse, i.e. about €100 more per sq.m than the sector’s top rent;

  • Top rent in the Western CBD reached €520 with the lease of SWAYS by CANAL+;
     
  • Several Inner Rim buildings were leased for €300 to €390/sq.m, the latter of which was paid for the KONECT building which borders the Paris ring road and has a double address: Saint-Ouen and Paris 17th.

Selected major transactions over 5,000 sq.m in Q4 2019

Significant transactions for spaces - Janvier 2020
DATETENANT/PURCHASERLETTING/TRANSACTIONSPACE (sq. m)ADDRESSLOCATIONCONDITION
Q4 2019CANAL +L37634SwaysISSY-LES-MOULINEAUXNEW
Q4 2019ENEDISL29200ParallèleCOURBEVOIENEW
Q4 2019HSBCL1327838 KléberPARIS 16NEW
Q4 2019AIR FRANCE KLML10550Altais EvolutionMONTREUILNEW
Q4 2019PAYFITL7500Quai 8PARIS 08NEW
Q4 2019ACCURACYL612916 MatignonPARIS 08NEW
Source: MBE Conseil

Selected major transactions over 5,000 sq.m in Q4 2019