High activity levels continue in the Lyon market
Succession of excellent quarterly results. After having posted 130,600 sq m of take-up over H1 2016, the Lyon market continued to perform well with an additional 68,300 sq m over the last three months. The overall volume therefore stands at 198,900 sq m, representing a 10% year-on-year increase. Such levels haven't been seen since 2007, a year when many of the records for the Lyon market were set.
The rising level of major transactions has led for far higher results than normal. With a cumulative figure of 118,450 sq m, the over 1,000 sq m segment accounted for 60% of overall take-up. The volume may be high, but so was the number of transactions: while there were only 23 transactions in the over 1,000 sq m segment across all submarkets by 30 September 2015, there were 37 over the first nine months of 2016. Examples of these transactions include ORANGE with 5,500 sq m in the "Anthémis" building in Part-Dieu, CARSAT's leases of 3,900 and 4,880 sq m and NOVACAP with 3,400 sq m in Ecully.
With 384 transactions recorded over the first nine months of the year, 2016 is one of the most active years ever recorded for the Lyon market. High-performance years in the Lyon market have historically been due to activity from turnkey transactions when these market "accelerators" have driven levels over the symbolic 200,000 sq m barrier. The same is true in 2016. 6 major projects, accounting for 46,000 sq m and 23% of overall take-up, were finalised . Turnkey deals are still desirable as they allow companies to tailor a building to meet their needs. The DANONE Group signed a forward funded lease for the future "Linux" building in Limonest (over 11,000 sq m) where it plans to install the head offices for its subsidiaries BLEDINA and DANONE NUTRICIA AFRICA OVERSEAS. The LDLC Group also completed a deal for the construction of two turnkey buildings totalling 7,000 sq m for its own use as well as the creation of the LDLC School offering digital skills training. Finally, ORANGE is to move to 26,000 sq m of dedicated office space on Avenue Lacassagne in the Part-Dieu submarket. The building should be completed by the end of 2019. Land reserves to meet this type of demand are still available in the suburbs and in Inner Lyon where several projects are under construction or consideration.
These good results are also indicative of consistent activity across all space segments. The small and medium space segment (under 500 sq m) remains a solid base for the market and has continued to be very active. Since the beginning of the year, transactions in this segment have accounted for 81% (311 in total), representing a 9% increase on the 10-year average. Examples of companies leasing small spaces in the city include INPI at "Convergence", ARCHI GRAPHI at "Greenopolis" and ST GOBAIN DEVELOPPEMENT at "Tour Part-Dieu".
Companies still favour Lyon and Villeurbanne: Inner Lyon accounted for 7 out of every 10 sq m transacted. Following an initial delay, the completion of the Orange lease mentioned above means that the Part-Dieu market is now back on track. The suburbs gained ground in 2016, mainly due to good performance in the North-West submarket, which saw strong demand over H1. This area accounted for 17% of overall take-up due to a high number of major turnkey transactions, most of which were completed over Q1.
Over the past few months, immediate availability in the Lyon region has seen a period of absorption and now stands at around 375,000 sq m with a vacancy rate of 6.3%, although with some marked differences across the various submarkets. While availability in Part-Dieu stands at 3%, the vacancy rate in Gerland stands at over 10%.
The share of new space in supply remained stable at 38% with some significant variations depending on the district. Given the localised lack of new supply, occupiers are turning to development projects. The pre-let rate for buildings under construction, which had fallen over the last few quarters, posted an increase to 42%. Inner Lyon remains in the lead both in terms of location and pre-lets with a slightly higher percentage (44%). Reduced levels of supply are encouraging companies to take early positions on projects. The gap is however narrowing with the suburbs which are attracting an increasing number of occupiers to latest-generation buildings with competitive rents and ever-improving public transport links.
The rate of new deliveries varies considerably in the Lyon region. One good year for new deliveries is normally followed by a downturn. 17,400 sq m is still under construction and should take the total amount of new space delivered by the end of the year to 74,500 sq m. 2017 will be a major year with around 50 projects reported including "King Charles" in Confluence, "Silex 1" in Part Dieu and "View One" in Carré de Soie.
Rental values remained stable in most submarkets. The prime rent remained at €300 per sq m per year excl. taxes and charges for high-rise towers in Part-Dieu as well as the office element of the future Grand Hôtel-Dieu district. The value for more traditional buildings in the Part-Dieu submarket also remained unchanged at €270 per sq m per year. Incentives are still widely used, although levels vary substantially depending on the district and the type of building. More substantial concessions are made for prime buildings or for leases of large spaces.
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