MARKETBEAT

OFFICE SNAPSHOT
FRANCE

Q4 2014

A Cushman & Wakefield Research Publication

OVERVIEW

The French office market continued its

cautious recovery in 2014, with a rise in
take-up compared to 2013 but still lower
than the 10 year average. Leasing activity
stalled H2 2014 due to lengthy decisionmaking by occupiers uncertain about the economic climate.

OCCUPIER FOCUS

Take-up for 2014 totalled 2.01 million sq.m in 2014, 15% higher
than that of 2013 but far from the record performances of the
mid 2000s. With many occupiers still focused on cost-cutting,
24% of total take-up in 2014 was for large, renovated space,
allowing companies to reduce their costs without compromising
on quality or location. Nevertheless, new and redeveloped
premises were by the far the most prominent choice for
occupiers, with some large transactions recorded in districts
within Western Ile-de-France, as larger companies take advantage
of landlord incentives.
After reaching a historical high in Q2 (4.4 million sq.m) the
volume of properties available on the market for less than 6
months now stands at 4.2 million sq.m (-4% y/y). Vacancy in the
Paris Region currently stands at a relatively low 7.8%, although
the last few months of 2014 did not succeed in balancing out
supply in different tertiary sectors within the wider region. Inner
Paris is still experiencing a shortage of high-quality office stock,
while there are many varied opportunities in some Western
markets, including La Dfense.

INVESTMENT FOCUS

The office market saw a surge in office investment in Q4, with

the transaction volume climbing 67% q/q to 4.4 billion and the
yearly total nearly doubling y/y to 14.5 billion. Whilst Paris CBD
continues to be a key target for investors, a lack of quality
product has resulted in yield compression in other districts,
including Rive Gauche and La Dfense where yields have fallen as
much as 25bp and 50bp respectively over the course of 2014.

MARKET OUTLOOK
Prime Rents:

Prime rents hold steady as demand stabilizes.

Prime Yields:

Yields coming under downward pressure in

Paris most popular submarkets.

Supply:

Supply of prime stock is diminishing due to

limited speculative development.

Demand:

Demand remains high for large, high-quality

space in the CBD, La Dfense and WBD.

PRIME OFFICE RENTS DECEMBER 2014

MARKET (SUBMARKET)

SQ.M/YR
750

US$
SQ.FT/YR
84.3

Paris (Rive Gauche)

750

84.3

0.0

4.6

Paris (La Dfense)

530

59.6

0.0

-0.7

Lyon

270

30.4

3.8

0.8

Marseille

260

29.2

8.3

3.9

Bordeaux

180

20.2

0.0

1.1

Strasbourg

190

21.4

0.0

-0.5

Lille

190

21.4

0.0

0.5

Toulouse

190

21.4

2.7

0.0

Nice

195

21.9

0.0

-1.0

Nantes

170

19.1

0.0

0.0

Paris (CBD)

PRIME OFFICE YIELDS DECEMBER 2014

MARKET (SUBMARKET)
(FIGURES ARE NET, %)

CURRENT
QUARTER
4.00

LAST
QUARTER
4.00

LAST
YEAR
4.25

HIGH
5.75

10 YEAR
LOW
3.80

Paris (Left Bank)

4.75

5.00

5.00

6.25

4.50

Paris (La Dfense)

5.50

5.50

6.25

6.75

4.50

Lyon

5.50

5.75

6.00

7.00

5.50

Provinces other

5.75

6.25

6.25

8.00

6.00

Paris (CBD)

With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of
Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very
much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used
as a comparable for any particular property or transaction without regard to the specifics of the property.

RECENT PERFORMANCE

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Yields

8.00%

15.0%

7.00%

10.0%
5.0%

6.00%

0.0%

5.00%

-5.0%

4.00%

-10.0%

3.00%

-15.0%
Dec-04

Dec-06

Yield - Prime
Rental Growth - Prime

Dec-08

Dec-10

Dec-12

Rental growth (y/y)

OUTLOOK

Given the slow rate of economic growth and the significant

number of opportunities offered to companies to rationalise their
properties, several trends observed in 2014 will remain relevant
in the coming months. 2015 could therefore take the form of a
transition period, before a stronger recovery in 2016. By then,
the progressive rarefication of the new redeveloped supply will
sharpen the appetite of companies for large renovated and highquality surfaces and could even, in districts with little supply,
facilitate a restoration of the balance of power between landlords
and tenants.

GROWTH %
1YR 5YR CAGR
-6.3
1.4

Dec-14

Yield - Country Average

Rental Growth - Country Average

Source: Cushman & Wakefield

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