The Greater Paris Region office market ended 2013 with an increase in quarterly take-up; 512,000 sq m was transacted in Q4 2013 compared to an average of 450,000 sq m for the first 3 quarters. In spite of this improvement, the annual transaction volume stood at 1.8 million sq m, representing a 25% fall compared to 2012. This decline is largely linked to activity in the major transactions segment drawing to a halt and posting a 45% year-on-year fall. The small space segment also posted widespread falls amounting to an average of 13%: -5% in the Parisian market and from -20% to -34% in the outskirts. The intermediate space segment was the only segment to post a slight year-on-year increase (+3%). Even so, there were varying levels of activity: levels rose in Paris, La Défense and in the Western Crescent while they fell considerably in both the Inner and Outer Suburbs.
The Western Crescent was the only market to post a year-on-year increase with 589,000 sq m of take-up in 2013. Paris slowed and posted a 19% average fall in transactions, although the decline was only 6% in the CBD which has been left to one side in favour of the Paris Centre West sector. In La Défense, activity in the medium-size space segment was not enough to compensate for the weak level of transactions seen in the over 5,000 sq m segment (107,000 sq m of office take-up) meaning this market posted a 34% year-on-year fall.
The Greater Paris Region saw further adjustment in rental values with an average 4% fall in rents for new space. Paris has seen a fall in transaction values whereas levels remained stable in the Western Crescent and in La Défense. Transaction values for less volatile second-hand office space have seen little change (-2% in 2013), apart from in La Défense (-7%). However, these observations only partially reflect real office market rental values in the Greater Paris Region: incentives are now omnipresent and account for around 15-30% of headline rents, depending on the market and the space segment concerned.
Immediate supply continued to rise (+9% in a year); almost 3.9 million sq m is currently available in the Greater Paris Region giving a vacancy rate of 7.5%. La Défense has seen levels of immediate availability double over the last year to over 400,000 sq m of vacant space. In Paris and in the Western Crescent, immediate supply is also rising but more moderately: +9% in Paris (803,000 sq m) and +12% in the Western Crescent with over 1 million sq m of availability.
2013 saw an upturn in office deliveries with levels at almost 800,000 sq m. 2014 is set to follow the same trend with significant volumes of office space coming onto the market in the Western Crescent and La Défense. Longer term, almost 2.7 million sq m of space has been granted building permits and is awaiting construction launch. Over 800,000 sq m could come onto the market by 2015.
Source : DTZ (Groupe UGL)