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The Paris Office Market - Q1 2013

- The rental market weakened in Q1 faced with a still complicated macro-economic situation.
- Since 2009, immediately available supply has hardly changed and remains capped at close to 3.6 million sq m.
- Prime rent in the CBD fell again in Q1 and is now €760 per sq m.
- Over €2 billion invested since the start of the year – a rise of 43% in one year.
- 5 transactions exceeding €100 million registered in Q1 2013.
- The key prime yield, in the Central Business District, remained stable in a range between 4.50 and 5.00%.

After very good results in 2011 and 2012 (over 2.4 million sq m leased each year), the rental market slowed in Q1, impacted by the poor economic conditions. In total, 393,500 sq m were leased during the first three months of the year, which represents a fall of around 24% compared to last year (Q1 already itself down 19%). It is the weakest quarter registered since 2009.

The economic crisis has finally caught up with the office market

For a number of months already, companies have been wallowing in a sluggish and uncertain context: low confidence indicators, slowdown in activity, austerity, fiscal and social uncertainties, reduced margin level… an environment hardly likely to encourage relocation decisions but which, on the contrary, is forcing companies to cut costs.

This willingness to reduce costs is conveyed by a growing phenomenon over the past few years: renegotiations, which are limiting the level of the take-up. This solution is often chosen by companies whose motivation is to cut costs: the conditions for financial negotiations with their owner are favourable and the option to stay put proves to be the least risky solution employee-wise.

“In fact, given the falls in effective rents in the established markets, relocating solely for economic reasons would now involve moving further away from the centre of Greater Paris Region. This type of decision involves risks with regard to human resources that companies do not want to take, particularly in Greater Paris Region where the majority of companies are present in the service sector, or are head offices of industrial groups, whose main asset is their employees. Conversely, companies that choose to shift do so for reasons that go beyond pure financial reasons: search for synergies, company image, recruitment and retention of talent” says Jacques Bagge, Head of Agency at Jones Lang LaSalle.​

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