Activity in French Office Market Drops

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Occupier take-up in France's office market decreased 17 percent in 2013, from the previous year, as companies are renegotiating leases instead of relocating due to uncertainties in the economy. 
 
The fourth quarter was the most active in 2013, with 530,00 square meters of gross take-up recorded, according to research firm Cushman & Wakefield. However, the market lacked deals over 4,000 square meters, which previously drove the market. 

The decrease in large lease transactions resulted in a sharp increase in office supply. At the end of the fourth quarter about 4.37 million square meters were available in the Ile-de-France market, increasing the vacancy rate to 8.2 percent at the end of the year.  

"The space comprises both new or redeveloped office complexes and second-hand premises which do not meet current occupier requirements for more efficient and modern premises," the firm states. "There is however, variety across the city - highest in Boucle de Seine and lowest in Paris Rive Gauche. New space continues to be developed with nearly 900,000 square meters of new and redeveloped space expected in 2014, of which 47 percent is available." 

A total of €2.3 billion was invested in the French office market in the fourth quarter, bringing the year's total to €9.7 billion, a 3.2 percent decrease from 2012 trading volumes.  
In the final quarter, the largest deal of the quarter was ADIA's €580 million portfolio purchase from French investors Docks Lyonnais. Going forward, the firm doesn't expect significant improvement in the French office market in 2014 due to the slow economic recovery. 

C&W expects take-up will remain under the 10-year average, with companies continuing to renegotiate their leases instead of incurring the cost of relocating.

"Supply in Ile-de-France will remain stubbornly high and competition from landlords vying for occupiers will increase as rents come under further pressure," the report states. "Even assets that are less secure will benefit from efforts made by sellers and interest shown by opportunistic investors."