Full speed at year end

Transcription

1 PROPERTY TIMES Full speed at year end Paris CBD Q January 216 Contents Economic climate 2 Take-up and rental values 3 Supply 4 Author Paris CBD witnessed an excellent end to the year with a final surge in activity over Q4 215 (14, sq m), bringing the overall office take-up for 215 to 447,2 sq m (+18%), a level not seen since 27. Spaces under 1, sq m (+34%) accounted for over half of the transaction volume and the medium space segment (1, to 5, sq m) ended 215 on a high (+2%). Major transactions fared less well with six such deals over the period (compared with 8 in 214) and take-up levels similar to those recorded during 214 (-6%). The average rent for new office space now stands at 65 per sq m per year (+3%). The agreement of a lease by a major name in the e-economy in #Cloud.Paris reached the highest rent of 78 per sq m per year ( 79 in 214) and is indicative of the growing appeal of this submarket. The average headline value for second-hand space stood at 52 per sq m per year; this level has remained stable for the last 4 years. Incentives may still be unavoidable, although they did reduce somewhat over 215. The level of activity seen both in 214 and 215 has led to a significant reduction in immediate supply which stood at 38, sq m in Q4 215 (-18% year on year). This level, among the lowest since 211, is having a particular impact on the medium and large space segments which are threatened by under supply. 215 saw the completion of 94, sq m of space via 9 new office transactions which were 75% pre-let upon completion. The pipeline for new production continued to grow with the CBD having 175, sq m under construction over 15 projects, 13 of which are speculative. This level should, at last, allow the CBD to secure demand for Class-A office space in the city centre. Pierre d Alençon Analyst +33 () pierre.d alencon@cushwake.com Contacts Delphine Mahé Head of Research France +33 () delphine.mahe@cushwake.com Magali Marton Head of EMEA Research +33 () magali.marton@cushwake.com Figure 1 Take-up in Paris CBD, sq m Joanna Tano Head of Operations EMEA Research +44 () joanna.tano@cushwake.com Centre Etoile cushmanwakefield.com PROPERTY TIMES 1

2 Paris CBD Q4 215 Economic climate Confident of an upturn in 216 Since the beginning of 216, the bad news has been piling up and could pose a significant risk to the increase in economic growth announced for this year. The French economy should end the year with a.2% increase in GDP for Q These figures are not so bad given the fragile state of household consumption, which was shaken by the November attacks, as well as unemployment levels which remain high. However, analysis points towards an upturn of around 1.2% to 1.5% for 216, driven by a moderate increase in household consumption and good corporate activity indicators. In the Greater Paris Region, the latest economic climate report from CROCIS has, once again, highlighted the wait-and-see attitude in the business climate, both in terms of investment and employment forecasts. Slight fall in confidence indicators Confidence indicators for householder and business confidence had increased over Q3 215 but have since fallen once again (Figure 3). In December 215, the French business climate posted a one-point reduction but still remained at over. An opinion poll published after the November attacks revealed that all indicators (6-month activity and employment forecasts) posted a decrease, but nothing of concern. The outlook therefore remains positive and should partially support growth in 216. Householder confidence also fell by one point compared to the 97 points reached in September. In France, people remain cautious regarding their consumption capacity while the outlook is still poor for their main area of concern, the employment market. Unemployment still rising The unemployment rate is still rising and reached 1.6% in Q3 215 compared with 1.4% for the previous quarter (Figure 4). INSEE s scenario of rate stabilisation due to job creations towards the end of the year, did not therefore come to pass. There has been a succession of policies to encourage employment, none of which has had the desired outcome. In the Greater Paris Region, the unemployment rate stabilised at 8.8% in Q2 215 (most recent published data) and remains markedly higher than pre-crisis levels (6.2% in 28). The climate is set to remain difficult for the industrial and retail sectors while the outlook for service companies is more optimistic. Therefore, it s not the economic climate itself that will encourage corporate moves but more a requirement to modernise workspaces in a bid to improve productivity and returns while protecting margins. Figure 2 GDP growth in France, %,8,6,4,2, -,2 -,4 Source: INSEE Figure 3 Business and householder confidence Source: INSEE Figure 4 Unemployment rate in France, % 11, 1,5 1, 9,5 9, 8,5 8, 7,5 7, 6,5 6, Source: BIT Business confidence Households confidence cushmanwakefield.com PROPERTY TIMES 2

3 Paris CBD Q4 215 Take-up and rental values Year-end sprint The spectacular upturn in activity seen over the 4 th quarter (14, sq. m) allowed the Paris CBD to end the year 215 with fantastic results. A total of 447,2 sq m of office space was transacted over the year as a whole (+18% year on year). The increase in pace over the last six months of the year meant that this market posted its best annual performance since 27 (Figure 5). The CBD fared well throughout the year as corrections were limited (-3%) while activity fell across the Greater Paris Region over the first six months of the year (-2%) and a more intense upturn (+43%) was seen over H2 215 than across the wider region (26%). After a downward cycle from 21 to 213, the core of the Parisian powerhouse began to recover in 214. The office space below 1, sq. m segment led the way (+27% year on year) and secured over half of all transactional activity for the year with 861 transactions or 11 more than in 214 (Table 1). The stumbling block in 215 was the medium space segment which made a major contribution to annual performance in the Paris business district. SANDRO (3, sq m) or ZADIG ET VOLTAIRE FRANCE (2,9 sq m) both carried out transactions over Q Results for major transactions were rather different, with 6 transactions recorded over 215 (compared with 8 in 214) giving a -6% year-on-year decrease. The largest transaction of the year was CHANEL s move to Rue Cambon in Q4 215 which allowed volumes to get close to 214 levels. It s also worth noting the rising level of interest from the e- economy in the CBD as these companies are now seeking ever larger spaces: the most recent lease was by BLABLACAR with 9,5 sq m in #Cloud.Paris. Rents stable but likely to rise The average rent for new space stood at 65 per sq m per year representing a 3% year-on-year increase; these levels have been rising since 213 and disguise a temporary reversal in the usual Centre/Etoile hierarchy. Several leases such as EXANE have been seen with headline rents of 73 to 8 per sq m per year and have driven up the average headline rent for leases of new office space in the Centre to above the levels seen in Etoile. A transaction by a leader in the e-economy with 3,6 sq m and a headline rent of 78 per sq m per year in #Cloud.Paris caused a slight correction in the CBD prime rent ( 79 per sq m per year last year). Rental values for second-hand space remained stable at 52 per sq m per year; this level has not changed for the last 4 years. Incentives remain widespread but have stopped rising; levels now stand at 1% to 18% depending on the amount of space and the lease term. This reduction in incentives combined with reduced availability in the medium space segment could lead to an increase in rents over 216. Figure 5 Take-up in Paris CBD, sq m Table 1 Take-up by surface segment in Paris CBD SPACE SEGMENT SQ M SHARE ANNUAL CHANGE Below 1, sq m 233,2 52% +27% 1, to 5, sq m 146, 33% +2% Over 5, sq m 67,6 15% -6% Total 447,2 % +18% Figure 6 Rental values in Paris CBD, /sq m/yr Cushman & Wakefield Rents are expressed charges and taxes excluded. 2nd hand average rent Prime rent Q1 Q2 Q3 Q4 Average 1st hand rent cushmanwakefield.com PROPERTY TIMES 3

4 Paris CBD Q4 215 Supply Temporary state of under-supply The rising pace of transactions, both over 214 and 215, has led to a considerable reduction in the level of immediate supply. Only 38, sq. m of office space was available over Q4 215 (-18% year on year), such a level has not been seen since 211 and this has caused a degree of imbalance (Figure 7). On the one hand, availability in the small office space segment remained stable from one year to the next due to the steady level of releases and the significant level of occupier rotation in this submarket. On the other hand, there was a significant reduction in availability in the 1, to 5, sq m segment (- 25%) and an even more spectacular drop in the large space segment (-37%). Overall office availability is now well below its 1-year average and demonstrates an increasingly blatant lack of supply in the medium and large space segments. Given the impressive levels of future supply in the pipeline, this temporary situation could prevent the CBD from reaching its full potential, particularly in the medium space segment. A debottlenecking of new space is currently underway with almost one square metre out of every two of new/refurbished space being located in buildings of over 5, sq m. The general trend for vacancy rates across the Greater Paris Region (7.3%) is a downward one and rates also fell in the CBD (4.4%) and remained below the Paris average of 4.6% (Figure 8). Figure 7 Immediate supply in Paris CBD, sq. m 5 2 Figure 8 Vacancy rate 8% 7% 6% 5% 4% 3% 2% 1% % Less than 1, sq m More than 5, sq m From 1, to 5, sq m Burst of new production In 215, the level of completions in the CBD and in the Centre Ouest of Paris reached 94, sq m with 9 major projects (8 speculative) with a pre-let rate of 75%. This very good rate was particularly linked to the successful pre-let of #Cloud.Paris which was delivered in Q4 this year. The volume of availability in the Paris CBD and Centre Ouest through to 219 stood at 382, sq m (projects underway or with building permits), 175, sq m of which is already under construction (15 buildings) strictly within the CBD; this is a clear indication of developer confidence in this submarket. This impressive volume, most of which is still available to rent, corresponds to 15 projects, the largest of which are 13 Rue d Amsterdam (8,5 sq m), La Samaritaine (2, sq m) and In Town (18,85 sq m). Given the good level of demand for the CBD, this level of new production should lead to the threat of availability depletion at some point in Cushman & Wakefield Figure 9 Future first-hand supply (above 5, sq m) under construction and with building permit, sq m Paris CBD Paris Greater Paris Region Paris CBD Source: Cushman & Wakefield. Paris Center-West (CBD non-incl.) cushmanwakefield.com PROPERTY TIMES 4

5 Paris CBD Q4 215 Definitions Average rent 2 nd hand: Expressed in Euro per year, excluding taxes and charges. The average rent corresponds to the average of rents, weighted by the total area of second hand space transacted (excluding new and restructured space). Average rent new space: Expressed in Euro per year, excluding taxes and charges. The average rent corresponds to the average of rents, weighted by the total area of new space transacted (new and restructured space). Confirmed new development: Total of developments underway at a moment in time T, not yet delivered. Immediate supply: Total of vacant space offered for sale/lease at a particular time T. Searches for replacement tenants and leases under notice are excluded until the tenant has vacated the premises. Likely new development: Total of developments not yet underway at a moment in time T with consent and/or planning permission. New development: Total of new space to be built and under construction with or without authorisation (planning permissions and consent) and not yet delivered. Potential new development: Total of projects identified that have not secured consent and/or planning permission. Prime rent: The prime rent is the average of the highest transaction values recorded for new or restructured buildings that are in best locations and are let on long-lease terms. Take-up: Total of rental and sales deals carried out by end users including pre-lets, turnkeys and owner-occupier deals. VEFA: Property for future completion. cushmanwakefield.com PROPERTY TIMES 5

6 EMEA John Forrester Chief Executive +44 () France Antoine Derville CEO +33 () antoine.derville@cushwake.com Olivier Gérard Chairman +33 () olivier.gerard@cushwake.com Disclaimer This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our prior written consent is required before this report can be reproduced in whole or in part. 216 Cushman & Wakefield LLP. All rights reserved. To see a full list of all our publications please go to cushmanwakefield.com or download the Research App Global Headquarters 77 West Wacker Drive 18th Floor Chicago, IL 661 USA phone fax info@cushwake.com Cushman & Wakefield France 8 rue de l Hôtel de Ville Neuilly-sur-Seine Cedex France phone +33 () Cushman & Wakefield France 21 rue Balzac 758 Paris France Phone +33 () cushmanwakefield.com