The impact on Paris office property of the UK's plans to leave the EU has so far been slight but the better investment climate since President Emmanuel Macron's election, plus the Grand Paris transport network expansion, mean the outlook is very positive, says Paul Raingold, founder of the private Generale Continentale Investissements group.
"What I personally believe is that this is a very good time in Paris because you have Macron who is pro-business and bringing in economic reforms and even reducing taxes a bit," he told BIE in an interview. 'Brexit' is however not yet bringing noticeably more space demand. "I don't think up to now it has had any impact at all... I saw that the CEO of Goldman Sachs said he would move not only to Frankfurt but also to Paris, and I would think that if HSBC ever moved they would choose Paris for different reasons. But up to now we haven't seen too much activity."
Raingold is perfectly positioned to know. An Englishman by birth, he founded GCI in 1975 and for some years in the 1990s was active in both markets. But the firm, now mainly run by daughter Sharon and sons Raphaël and Alexander, focuses on investment, management and development in Paris office. Its strength - and Raingold senior's skill - has been to find poorly-used properties, often high-rise towers, and to identity value that can be gained by re-positioning and refurbishing - before letting up and profitable onward sale.
Major assets on which GCI's formula has worked to date include the development of Collines de l'Arche, part of the Grande Arche development in La Défense. Awarded to GCI by the French state in 1987, this led to several other projects in the huge office complex west of Paris centre. Last decade, GCI developed, with its partner Benson Elliot, the Ava Tower in the complex, providing 64,000 sqm. More recently it launched the 21,000 sqm CityLife office project at the western end of La Défense near the Nanterre rapid transit station.
One recent project elsewher was the 13,000 sqm Tour Hachette in the 15th quarter of Paris close to the Eifel Tower. Refurbished and renamed Greenelle Tower, this has since been sold to giant fund manager Amundi. In the centre of Montreuil in the east of Paris the firm in 2016 purchased a 45,000 sqm tower, refurbished and renamed it Cityscope. "When we bought it it was only 30% let; we did some fine tuning on the renovation and my team got it let 100% in 18 months," Raingold says.
GCI generally works on each asset with a partner. These have included names such as Goldman's Whitehall Funds - a relationship that spanned seven years – MGPA, now part of Blackrock, Swiss bank UBS, the British manager Rockspring - last year taken over by Germany's Patrizia - and a Canadian pension fund which is the partner in CityLife. "We tend to bring in a partner on our deals and normally write a seven-year business plan," Raingold says. "But after we rent it we might hold it for two or three years, and then we would sell."
So does Raingold think that Brexit will eventually have an impact on Paris office demand? "I personally believe that if I was in the UK and was to move offices I would very seriously consider Paris: one, because you have a political president who has a majority; two, it's just a two-hour journey on the train; three, for the workers it's a capital city, the only major capital city in Europe apart from London. So for the workers it's a good place to be."
But whether or not Brexit has an impact, Paris office rents, static for years while other European cities experienced strong increases, are finally beginning to tick higher. "In London six or seven years ago rents went up close to 100%; now in Germany rents have been going up for the last few years. But in Paris rents have been wobbling around for the last 10 to 15 years but have basically been stable. My personal view though is that we are seeing growth again... When that has happened in the past - in my experience a couple of times: late 1987 to '91 or '97 to 2001 - they go up fast. Whether they will increase 100% as in London I don't know, but I think there's going to be growth in rents in a significant manner."
The other big plus for the French capital is the transformative Grand Paris project, now becoming reality. "You've got something a little unusual in Paris which is Grand Paris," Raingold says. "In most major cities like Toronto, Chicago, London people move to the suburbs. But young people actually want to live in the city centre so you build towers. Yet in Paris there's been a height limit restriction in place since the Second World War so you couldn't do that... With Grand Paris they are putting in new metro lines which will get people in and out of the city in 20 minutes instead of an hour, and that is beginning to have a major effect on real estate... I was with the president of a major institution the other day and he said, 'listen, this happens only once in every 250 years!'."