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Contrasting trends between the rental market and the investment market
- A rental market down by 18%, totalling 960,000 sq m take-up in H1, with a fall in large transactions in Q2.- Supply available remains stable in quantity and quality, with close to 3.6 million sq m of office space available, including 24% new.- Prime rents slightly down at €810/ sq m (Paris 7th), whereas the CBD remains stable at €770/ sq m.- €4.8 billion invested in H1 2012, a 37% rise in one year.- Sales of over €500 million have greatly impacted the market in Q2.- Prime yields are again stable, apart from the best areas in the Paris inner suburbs.
If the start of the year has been similar to the end of 2011 with over 530,000 sq m let, Q2 has stalled: -100,000 sq m compared to Q1. The verdict is unequivocal: the rental market is clearly on the downturn.Marked fall in rental activityCumulatively, take-up totalled 960,000sq m in H1 compared to 1,175,000 sq m a year earlier, i.e. -18%. The worsening financial crisis in Europe and the general economic slowdown observed since the spring eventually impacted the market. Potential tenants are more hesitant and landlords are willing to make a lot of concessions to keep their current tenants. Furthermore, activity has also been affected by the long public holiday weekends in May and the electoral context.
One of the main drivers of the rental market, the large transactions segment (over 5,000 sq m) started well in Q1 with a greater number of transactions registered than the past year, although of a smaller size. In Q2, this market segment stalled. Large transactions now represent only 26% of rented space whereas they accounted for 39% of the market in Q1.In total since the start of the year, 27 large transactions have been registered in the Greater Paris Region compared to 31 in mid-2011, which is a 13% fall. In addition, overall all the market segments are affected by the slowdown in activity (e.g. -21% for the 1,000 – 5,000 sq m segment).Large users still favour new or restructured surface areas since two thirds of the large transactions completed since the start of the year have been concluded in new buildings.
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19 July 2012