The expiry of numerous lease agreements entered into between 2005 and 2007 and ongoing company relocations as part of cost-cutting strategies will result in steady activity in the Ile-de-France office market in 2013, according to Savills.
The expiry of numerous lease agreements entered into between 2005 and 2007 and ongoing company relocations as part of cost-cutting strategies will result in steady activity in the Ile-de-France office market in 2013, according to Savills. The firm notes that large occupiers (of over 5,000 sq m) are increasingly looking away from traditional markets such as Paris and La Defense to seek space in the suburbs where there is a plentiful supply of top quality, modern premises for which they can secure lower rents. For example, in 2012 Carrefour moved to Massy (70 000 sq m) and Coface moved to Bois-Colombes (29 500 sq m).
Research by the international real estate advisor shows that of the 2.4 million sq m total take-up recorded in Ile-de-France in 2012, large lettings accounted for 51% with 73 transactions. Of these larger transactions public sector tenants dominated, for example SNCF took 59,200 sq m of space in three transactions in Saint-Denis (North Inner Suburb) and the French Nuclear Safety Authority (ASN) took 7,400 sq m in Montrouge (South Inner Suburb). Overall, public sector tenants accounted for 32% of take-up of large-scale lettings in Ile-de-France in this time period, up from 21% in 2011. The largest lettings of 2012 include three pre-lets, namely the Balard project (135,000 sq m) signed by the Ministry of Defence, the scheme Forum 3 (69,000 sq m) signed by France Telecom and the Tour Esplanade (53,000 sq m) acquired by the Ministry of Ecology, Sustainable Development and Energy in La Defense.
Raymond Genre-Grandpierre, joint head of office agency at Savills France, says: “The large lettings market was boosted significantly by public sector activity in 2012 as the French Government seeks to cut costs. Moving forward we expect prime rental values to remain stable, particularly in Paris, whilst we anticipate some rental reductions for non-prime offices as a result of ongoing rent renegotiations by occupiers.”
According to Savills data prime Ile-de-France CBD rents currently stand at €706 per sq m per year representing an 11.7% decrease year-on-year. This decrease is notably due to the lack of prime transactions. However, leases on prestigious office buildings can still be signed above the €800 per sq m per year mark. The average Ile-de-France rent remains stable at €318 per sq m per year.
The firm’s research shows that the level of available office supply in the region remained at approximately 3.6 million sq m in 2012 with just 650,000 sq m of new space due to be delivered in 2013. The largest of these schemes are three towers in La Defense including Eqho (79,000 sq m), Carpe Diem (41,800 sq m) and Egee (41,800 sq m). The current vacancy rate in Ile-de-France stands at 7.1% (in line with Q4 2011) and at 4.5% in Paris (up from 3.7% in Q4 2011).
Marie-Josée Lopes, head of research at Savills France, comments: “We expect the level of speculative development and new construction projects throughout the Ile-de-France to remain low in 2013 due to the ongoing challenges of the current economic climate. We forecast development activity will pick up significantly, particularly in all the Inner Suburbs, as soon as the economy shows clear signs of an upswing which we expect to see in 2014.”