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Property
Market Trends
FRANCE
MARCH - 2016
2
Property Market Trends - France - March 2016
TABLE OF CONTENTS
INTRODUCTION
4
Main trends
5
Summary data table
THE ILE-DE-FRANCE RENTAL MARKET
8
Submarket profiles
10
A modest rise in take-up
17
Vacancy rates begin to decline
22
Headline rental values relatively stable
THE FRENCH INVESTMENT MARKET
26
A good year due to an outstanding second half
27
A clear return in speculative investment
28
Single-asset vs. portfolio balance
remains stable
29
Investment highly concentrated
in the €100-to-€300 million range
31
Offices maintain market dominance,
with growth in warehouse activity
32
Investment funds, SIICs, insurance firmes and
SCPIs most active players
34
Strong activity in West CBD and other Paris
36
Prime yields continue to fall everywhere
CONCLUSION
This report has been written by Catella based
on information from MBE Conseil and Catella Property.
The assessment was concluded on March 2016.
This report is based on information that we believe is
reliable. Whilst every effort has been made to ensure its
accuracy, we cannot offer any guarantee that it contains no
factual errors and accept no responsibility for any liabilities
that may arise as a result of such errors.
Photo credits: Jean-Marc Lavigne, Cyrille Dubreuil,
Sacha Lenormand, Luc Perenom, Vincent Fillon,
Meero, Shoootin.
Legally responsible publisher: Monique Benisty
Design by: www.thalamus-ic.fr
Translation by: David Hayhurst
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your request to: oceane.vinson@catella.fr
main TrenDs
MAIN TRENDS
> The French economy has entered a moderate
recovery phase in 2015 with 1.1% growth in GDP:
better than the initial forecast of 1%, despite a
slowdown in Q4 to only 0.2% due in large part to
the November Paris terrorist attacks. This growth
rate, however, has still been below that of France’s
main European competitors such as the UK (2.2%),
Germany (1.7%) and Spain (3.2%).
> Domestic consumption has regained a modest degree
of vitality (+1.6% in 2015), with declining oil prices
continuing to boost purchasing power.
> Business investment has also improved, helped by
lower oil prices and the depreciation of the Euro as a
result both of less stringent monetary policies on the
part of the ECB, as well as by the gradual effects of
policies such as the Tax Credit for Competitiveness
and Employment (CICE) that are continuing to benefit
the French economy. These policies have allowed for
a significant recovery in corporate margins in 2015,
which stood at 31.1% in 2015, 1.6 points more than
in 2014.
> This positive momentum should continue in 2016,
although it will likely remain modest. Domestic
consumption will remain the main engine of economic
growth, although it will likely be hindered by an
expected short-term rebound in inflation and a stillhigh unemployment rate. Business investment should
also continue to recover, aided by beneficial financial
policies (i.e, the CICE, the Responsibility Pact, extra
depreciation of industrial investment measures etc.)
and a monetary policy that will remain very favourable
with the extension of Quantitative Easing. However,
investment will also remain constricted in the short
term by an only very moderately optimistic business
climate and tax burdens that remain high.
> sustained growth, if indeed it does return, will remain
limited in the short and medium terms, due especially
to ongoing weak demand for French products,
particularly in emerging countries who have now
coped for over two years with a major economic
crisis. A consensus among economists predicts growth
of 1.2% and 1.4% in 2016 and 2017. This scenario
4
is however still subject to significant risk variables,
the main one being a global stock market crash, the
consequences of which are difficult to anticipate.
> employment growth has continued to fare better
in ile-de-France than in the rest of the country, with
year-on-year growth of 0.6%, compared to 0.4%
nationally. This has done much to drive take-up growth
for office space, especially for small and medium
surfaces.
> In the rental market, take-up has been slightly up
(+1%) on the year, with 2.21 million square meters
transacted in 2015. This result is very satisfactory
considering the poor take-up performance in the
first half of the year. Take-up growth has been driven
by demand for surfaces under 5,000 sq.m, (+12%)
while take-up of spaces over 5,000 sq.m has been
down 16%. This can be explained entirely by the
very sharp drop in activity in the over-20,000 sq.m
market (-37%).
> Vacancy rates have started to decline in 2015, due
in large measure to strong take-up performance,
as well as an upturn in transactions involving large
spaces in existing buildings in some areas. This decline
is expected to continue in 2016, with supply volume
available or releasable within a year being stable.
> Within-a-year supply of new and refurbished surfaces
is also down, with volume actually falling below breakeven levels in Ile-de-France as a whole. This decline
is expected to continue in 2017 due to construction
starts remaining quite limited, despite an increase
due to a growth in speculative investments in 2015.
If economic growth, however moderate, can be
sustained, there could very quickly be supply shortages
in major markets – especially within Paris - while
many other areas would gradually return towards
market balance.
> Headline rental averages have also changed very
little, with value adjustments continuing to be seen for
economic rents instead. According to Immostat, the
economic vs. headline value discrepancy has widened
by an average of one point in 2015.
> The investment market has confirmed its strong
appeal, with ever-increasing volumes of capital influx
into real estate markets. Investment volumes have
been up 2.5% over the year, reaching €26.2 billion:
an impressive performance that could have been
even better if there had been a greater number of
purchasing availabilities on the market.
> Geographically, two submarkets have benefited
the most from investor enthusiasm: the West CBD
(€4.24 billion invested: 16% of the market total vs.
13% in 2014), and Other Paris (€2.77 billion invested:
11% of the market total). The West CBD and Other
Paris have experienced annual investment volume
growth of 30% and 36%, respectively.
> The investment market in 2015 has been dominated
by deals of between €100 and €300 million: 46% of
total volumes invested in non-residential property in
France. However, there has been a sharp decline in
deals valued at over €500 million, in stark contrast to
the exceptionally high number of such transactions
in 2014, notably for retail properties and shopping
centres.
> Investment funds have increased their dominance
in the French market, accounting in 2015 for
41% of total investment volume (+ 51% compared to
2014). The market has also been driven by insurance
companies (20% of volume: + 15% compared to
2014), SIICs (14% of volume: + 28%) and SCPIs
(14% of volume: + 18%).
> While offices have been by far the most sought-after
product by investors (65% of total volume invested
in 2015: up by nearly 10% compared to 2014),
warehouses have also been particularly appealing.
Investments in warehouses have increased by
122% this year, but have only accounted for 8% of
total investment volume.
> Office market prime yields have continued to
fall, reaching 3.5% in the Paris CBD. Moreover, the
discrepancies in yields between the various submarkets
have been greatly reduced: a consequence of strong
competition for - and the relatively low amount of attractive assets, combined with the recent very high
levels of liquidity.
SUMMARY DATA TABLE
Office market in Ile-de-France in 2015
Total stock
sq.m
Take-Up sq.m
Vacancy rate
%
Top rent
€/sq.m/Y
Prime rent %
Paris CBD
8 632 500
574 200
4,00%
780
3,50%
West CBD
6 858 300
498 000
8,90%
540
3,75%
Paris Secondary BDs
3 957 500
164 750
3,90%
519
4,25%
Emerging North
2 498 500
79 900
11,60%
325
4,50%
East District
1 601 600
42 760
6,30%
275
5,15%
South District
1 735 400
59 800
11,50%
270
5,50%
Boucle Nord du 92
1 497 400
61 920
13,40%
350
5,00%
Greater Paris
56 373 200
2 210 000
7,00%
Source : MBE Conseil /Catella Property / CBRE/ Immostat
Property Market Trends - France - March 2016 5
01
The Ile-de-France
office rental
market
After a first half seeing take-up trending strongly downward, activity has been much more
dynamic in the second half of 2015, thanks to a more favourable macroeconomic context.
As a result, take-up has revived enough to see the year ending slightly better than 2014.
In total, year-on-year take-up has grown by 1.2% to reach 2.21 million square meters.
The small- and medium-surface markets have been the most dynamic: up 12% from 2014
with a transaction volume of almost 1.5 million square meters.
While this is still well short of the record performances of 2006 and 2007, these are the
best results in these size categories since 2008. however, take-up for surfaces of over
20,000 sq.m has been down since early 2015, showing an overall decrease of 37% compared
to 2014, despite a recovery toward the year’s end.
vacancy rates have started to decline, driven both by a recovery in large-surface transactions
in existing new buildings and a slight drop in releases. Overall, the vacancy rate in
Ile-de-France fell slightly, by 0.3 point, to 7%. headline rents have remained broadly stable
and there has been a further increase in incentives, which reached 21.5% in Ile-de-France.
01 | renTal markeT
SUBMARKET PROFILES
Ile-de-France office stock : 56.4 million sq.m in 2015
Airport
Roissy
Charles de Gaulle
Railway C
Railway B
ST DENIS
Boucle Nord
du 92
Railway A
ASNIÈRES
A
Pôle
Emerging North
86
CLICHY
COLOMBES
La Défense
PANTIN
LEVALLOIS
East district
NANTERRE
NEUILLY
Paris
CBD
PARIS
MONTREUIL
VINCENNES
West
CBD
BOULOGNE
BILLANCOURT
Railway A
ISSY-LESMOULINEAUX
MONTROUGE
South district
IVRY-SUR
SEINE
Railway C
A 86
Railway B
Paris CBD
Stock: 8,6 million sq.m
Paris Secondary BD
8
Other West CBD
La Défense
Airport
Orly
Emerging North
South district
Stock:1,7 million sq.m
Boucle Nord 92
East district
Stock:1,6 million sq.m
With a total stock of more than 56.4 million square meters,
the office market in the Ile-de-France region is among
the best organized and most “readable” in Europe, as
well as being among the most diversified. Office stock is
largely centered around Line A of the RER regional railway
network, which forms the transportation backbone for
the Ile-de-France office market as a whole. Away from the
main business districts (i.e., all of the Paris submarkets and
the West CBD), suburban areas are currently organized
primarily around the main transportation networks: namely,
the “Périphérique” main Paris ring road and the A86
secondary ring road for road traffic, as well as the various
metro, RER and tram lines. The ongoing public transport
infrastructure projects - especially the Grand Paris Express
“regional super metro” scheme - should not fundamentally
change the overall complexion of the market, at least in
the short term. Some projects will improve accessibility
to already mature business districts in cities and areas like
La Défense, Boulogne-Billancourt and Issy-les-Moulineaux.
Others, such as the Emerging North and South districts, will
also benefit from improved transport services. Once these
new infrastructure projects are fully in place, better public
transport service could gradually do much to move the
“center of gravity” of suburban markets toward locations
situated further from the Périphérique - especially Clichy,
Saint-Ouen, and Montrouge - or even areas which today
are considered as secondary locations, such as the Pleyel
district of Saint-Denis.
> The Paris Central Business District (Paris CBD),
with a stock of 8.6 million sq.m (15% of the total in
Ile-de-France), the Paris CBD has maintained its status as the
prime business district in the region. This submarket has the
highest rental and market values - as well as the lowest yields
- and is also the most consistently active office submarket.
> The West CBD, which includes La Défense, is the second
most developed market. It also incorporates the cities of
Neuilly-sur-Seine, Levallois-Perret, Boulogne-Billancourt,
and Issy-les-Moulineaux. Office stock now amounts to
over 6.9 million square meters - about 12% of the total in
Ile-de-France - of which more than half is located within
La Défense.
> The Paris Secondary Business Districts consist of
three major clusters of office stock. In addition to the
Front de Seine and Montparnasse districts, the district
formed by the Gare de Lyon, Bercy and Paris Rive Gauche
cluster has been the most dynamic market in terms of
new development in recent years. The Paris Secondary
Business Districts submarket has a stock of nearly four
million square meters that should continue to increase
in the coming years, especially in the Austerlitz Sud and
Tolbiac-Chevaleret areas where several projects are to be
developed speculatively by investors and should be delivered
between 2017 and 2018. The Front de Seine development
area has been extended to the south towards the Balard
district of Paris to include the Ministry of Defence project
as well as the Qu4drans projects being developed by Axa.
> The Emerging North submarket has been evolving
as a “natural” extension of both the Paris CBD and the
West CBD. Consisting of the cities of Clichy, Saint-Ouen,
Saint-Denis and Aubervilliers, its rapidly developing
office stock is currently estimated at about 2.5 million
square meters and continues to demonstrate high growth
potential, especially in the areas set to benefit sooner
from improved public transport infrastructure.
> The East District, centered around the city of
Montreuil, has been the site of many major transactions
and subsequent developments in recent years, reaching
stock volume of 1.6 million sq.m in 2015.
> The South District stretches from Vanves through
Montrouge to Ivry-sur-Seine. This area extends beyond
the inner suburbs, and includes cities such as Châtillon,
where most local commercial development has occurred
near the Châtillon-Montrouge metro and tramway
stations. Office stock in this submarket currently totals
1.7 million square meters.
> Finally, the “Boucle Nord” area of Hauts de Seine
includes the cities of Asnières-sur-Seine, Colombes, BoisColombes, La Garenne-Colombes and Gennevilliers. This
area has greatly matured in recent years, with available stock
in 2015 measuring 1.5 million square meters, and should
continue to expand. This submarket is currently divided
into two sections. The cities of Colombes, La GarenneColombes, and Bois-Colombes in the western half are
closer to La Défense and have the higher rental values.
The eastern half consists of Asnières and Gennevilliers.
01 | renTal markeT
A MODEST RISE in Take-Up
a moderate rise
in take-up
Take-up has been up 1.2% in 2015, with a volume of
2.21 million square meters. Despite such weak growth,
this result is far above what market analysts had expected
at the end of Q3 2015. This is due to a very active fourth
quarter, during which nearly 710,000 square meters
were commercialized: up 18% compared to the fourth
quarter of 2014. However, take-up still remains below
its average for the past 10 years of around 2.3 million
square meters.
Take-up in Ile-de-France
3000
Trend
1,000 sq.m
2500
2000
1500
1000
500
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source : MBE Conseil - Immostat
12% take-up rise for spaces
under 5,000 sq.m
Take-up has been largely driven in 2015 by transactions
of less than 5,000 square meters, especially in the
1,000-to-5,000-sq.m range: up 18% compared to 2014,
whereas transactions of over 5,000 square meters have
been down by 16%.
Take-up in Ile-de-France by size category
> 5 000 sq.m
1,000 sq.m
Trend
< 5 000 sq.m
3000
2500
2000
1500
1000
500
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source : MBE Conseil/Catella - Immostat
10 Property Market Trends - France - March 2016
Transactions in the small- and medium-surface markets
directly correlate to changes in employment levels,
with historic cycles in both categories closely following
the same trends. In 2015, employment growth in
Ile-de-France has reached 0.6%: better than the
national average of 0.4%.
This growth largely explains the market interest in
small and medium surfaces. Moreover, in 2015, growth
in transactions of less than 5,000 square meters has
been faster than the overall growth in employment,
driven by a rebound in the non-market services sector
which has recorded a 1.1% growth in employee hiring.
Take-up by size category and employment levels in Ile-de-France
%
1,000 sq.m
2000
Transactions < 5 000 sq.m
Transactions > 5 000 sq.m
Employment Growth in Greater Paris
4
3
1500
2
1
1000
0
-1
500
-2
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-3
Source : MBE Conseil/Catella, Immostat and Crocis for employment rates - * : annual variations calculated up to Q3 2015 for employment rates
After returning to growth in 2014, large-surface
transaction activity has slowed again in 2015. Overall,
volume has been down by 16% compared to 2014.
56 transactions involving surfaces of over 5,000 sq.m
have been concluded in 2015, totalling 714,000 sq.m,
compared to 63 transactions totalling 847,000 sq.m
in 2014. It is rather remarkable that this decline in
demand for large surfaces has only affected the over20,000-sq.m market.
Transactions over 5,000 sq.m by size category
1,000 sq.m
5 000 to 10 000 sq.m
10 000 to 20 000 sq.m
1300
> 20 000 sq.m
1040
780
520
260
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source : MBE Conseil
It is the decline of transactions over 20,000 sq.m
that explains the slow down in take-up of more than
5000 sq.m. Only seven transactions were recorded
in 2015 in the over-20,000-sq.m range, compared to
13 in 2014, with corresponding volumes of 395,000
square meters in 2014 falling to 247,300 square
meters in 2015. This decline has occurred despite
four transactions of over 40,000 square meters being
finalized in 2015 for a total volume of 171,500 square
meters: up 31% compared to 2014. Rather, it has been
the 20,000-to-40,000-sq.m market which has seen the
biggest decline in 2015, with only three transactions
totalling 75,900 square meters, compared to ten deals
for 264,220 square meters in 2014: a plummet of 71%.
The trend in recent years of many businesses to seek
rationalization of office space and / or achieve rental
savings through relocation is running out of steam, after
having for seven years been the main factor driving
take-up. Employment growth is still not sufficient to
stimulate much commercialization activity, while some
building owners have made heavy concessions in order
to retain their existing tenants.
a 37% decline in the
over-20,000-sq.m market
01 | renTal markeT
but good performances in the
5,000 sq.m to 20,000 sq.m
range…
Growth in transactions for
existing new buildings…
… and light upward trend for
turnkey projects
… but a major drop
in pre-lettings
… and also for second-hand
buildings...
In the 5,000-to-10,000 sq.m category, activity has been
down by 4% compared to 2014. 31 transactions totalling
218,600 square meters were concluded, compared to
33 transactions for 228,500 square meters in 2014. The
main actors in this size segment have been internetbased companies (e.g., BlaBlaCar, Le Bon Coin), and
insurance firms. As in 2014, take-up has continued
to increase significantly in the 10,000-to-20,000-sq.m
range. 18 transactions have been finalized in 2015 for
a total volume of 247,800 square meters, compared
to 17 for 223,600 square meters in 2014: an increase
of 11%. In this size category, 45% of transactions have
occured in the outer suburbs (i.e., Rueil-Malmaison,
Nanterre, Massy, Saint-Quentin-en-Yvelines, MarneLa-Vallée and Bobigny); 16% in the West CBD apart
from La Défense; 16% in the Paris CBD and 13% in
La Défense.
Contrary to the prevailing trend of the last four years,
deals involving existing new buildings have driven largesurface take-up in 2015, thus avoiding an even worse
market downturn for larger spaces. Such transactions
were up 108% compared to 2014, reaching a volume of
279,000 square meters. Activity in this market category
was mainly in the West CBD (61% of transactions
involving new buildings, of which 16% were in La
Défense); the Paris CBD (12%) and in Other Paris (12%).
This change in market activity, much hoped for in the
past four years, has resulted in substantial vacancy rate
reductions in these submarkets. However, this trend has
so far only slightly affected the more outlying suburban
areas, especially the most oversupplied submarkets
such as the Boucle Nord or the inner South District.
This growth of take-up has been generally helped by
significant adjustments in asking values.
Minister (43,700 sq.m), and the future headquarters
of Novartis in Rueil-Malmaison (42,500 sq.m). Despite
this improvement, market performance has been well
below the exceptional results generated by the turnkey
project activities of major corporations and the public
sector in 2011 and 2012.
Turnkey projects, having fallen sharply in 2014,
have experienced a slight upward trend in 2015.
121,000 square meters in turnkey operations have
been transacted in five deals, including two of over
40,000 square meters: the Ilot Fontenoy Segur which
will house the administrative staff of the French Prime
However during 2015 there has been a sharp drop in
pre-lettings in buildings either under construction as
well as in upcoming projects. These have fallen from
275,000 square meters in 2014 to 136 000 sq.m in 2015:
a decrease of 51%. This decrease is explained by the
growth of take-up on existing buildings for which the
economic conditions are often more favorable today.
There has also been a sharp decline of 46% in transactions
involving second-hand buildings that have either been
renovated or been presented in their current state,
similar to the downturn seen in 2013. Again, adjustments
in economic rental values, especially for new buildings,
have led to a transfer of interest to new buildings at
the expense of second-hand buildings, even those that
have been renovated.
Take-up over 5,000 sq.m by building status
Second hand
1,000 sq.m
New available
Pre-letting
Turnkey project
1500
1200
519
381
900
22
180
600
245
300
0
218
250
195
332
289
129
329
2010
2011
2012
128
243
141
132
2013
107
275
121
136
134
330
279
2014
2015
178
Public vs. private-sector transactions
for surfaces over 5,000 sq.m
1400
1200
1000
Private sector
Public sector
1,000 sq.m
781
952
800
739
600
521
510
446
400
200
0
131
2011
135
2012
2013
108
2014
193
2015
Public-sector demand has driven large-space take-up
in 2015, with the sector’s proportional activity in the
size category rising from 13% in 2014 to 34% in 2015.
This has involved 14 transactions with a total volume of
242,300 square meters. Public-sector actors were involved
in four of the seven transactions of over 20,000 sq.m in
2015, filling the gap caused by the slowdown on the part
of the private sector in this size category.
The overall decline in private-sector market activity
explains the drop in take-up in the over-5000-sq.m
market. As in many other areas, the recovery observed
in 2014 in this size category has proved short-lived. It has
been down 36% from 2014 with market activity mainly
driven by Other Services and Manufacturing.
Public-sector take-up returns
strong drop
in private-sector take-up
66% of take-up for large surfaces has involved four
business sectors: Other Services, Public Administration,
Manufacturing, and Insurance.
01 | renTal markeT
Other Services sector top
consumer for large surfaces
The Other Services sector has clearly been the
prime consumer in the large-surface office market
in 2015. This sector rose from the third-biggest
actor in this size category in 2014 to first place in
2015. As in 2014, two companies in this sector have
finalized two of the largest transactions of the year:
La Poste leased the 42,600-sq.m Lemnys Building in
Issy-les-Moulineaux in the interests of consolidating
some of its operations, and Accor Hotels has rented
43,000 square meters vacated by Bouygues Télécom
in the Tour Sequana. Besides these two large spaces,
the Other Services sector has primarily sought
surfaces of between 5,000 and 10,000 square meters,
located in either Paris or La Défense (five out of
eight such transactions).
The Public Administration sector returned to second
place in large-surface rental activity. Public-sector
members of local, national or international agencies
in 2015 leased 139,000 square meters in eight largespace transactions.
Against all expectations, manufacturing has returned
to third place. Companies in this sector, including
auto-makers and the defence industry, (but excluding
luxury goods makers) have continued to seek
space rationalizations by leasing mostly (90% of the
transactions signed with manufacturers) surfaces
over 10,000 square meters, including Novartis’
42,500-sq.m turnkey project in Rueil-Malmaison.
81% of these deals are located in the outer suburbs,
including in Rueil-Malmaison, Saint-Quentin-enYvelines, Suresnes and Massy.
The insurance and banking/ finance sector, which
had increased activity sharply in 2014 to become
the biggest leaser of large surfaces in 2014, has not
retained this position in 2015. These two sectors
have greatly reduced their consumption of large
surfaces in 2015, with 76,500 and 50,500 square
meters respectively taken up: down 38% for insurance
and 55% for the banking / finance sectors from their
2014 levels. In the majority of cases, these companies
are eager to find economic savings or streamline
their operations by consolidating work spaces, but
their growth is still insufficient to generate demand
for expansion.
Ten leading consumers of large surfaces by business sector: 2014 vs. 2015
2014
2015
Other services
Public
Administration
Other industries
Insurance
Bank/Finance
Cosmetics/
Luxury industry
Consultancy
Advertising/
Communication
Transportation
Energy
0
20 000
40 000
60 000
80 000
10 0000
120 000
140 000
sq.m
160 000
Among the top ten business sectors renting large surfaces,
the cosmetics/ luxury goods industry in 2015 saw none of
the dynamism like the significant rental activity of L’Oreal
in 2014, which did much to invigorate the large-surface
market that year. In 2015, the sector’s take-up activity
slumped by 41%, with only four large transactions totalling
47,300 square meters. The accounting/ consultancy
sector was also significantly less active, with only
38,300 sq.m taken up: down 58% from 2014. The largest
transaction of the year in this sector was the letting by
Grant Thornton of 13,300 sq.m in the Alégria Building
in Neuilly-sur-Seine. All other transactions have been of
between 5,000 and 9,000 square meters.
Notable transactions of over 5,000 sq.m in Ile-de-France in 2015
TenanT
siZe (sq.m)
aDDress
ToWn
sUBmarkeT
sTaTUs
Accorhotels
43 000
Tour Sequana
Issy les moulineaux
Other West CBD
Second-hand
Poste immo
42 571
Lemnys
Issy les moulineaux
Other West CBD
New
OCDE
32 613
In/Out
Boulogne-Billancourt
Other West CBD
New
Publicis
20 320
PariSquare
Paris 11
Other Paris
New
Elior
19 035
Tour Egée
La Défense
La Défense
Second-hand
PSA Peugeot Citroën
15 049
Art&Fact 2
Rueil malmaison
Outer suburbs
New
RFF
14 541
Le Coruscant
Saint Denis
Emerging North
New
Sagem Défense Sécurite
14 400
Le Campus 1
massy
Outer suburbs
Second-hand
Grant Thornton
13 331
Alegria
Neuilly sur Seine
Other West CBD
New
Richemont holding France
12 000
33 rue Lafayette
Paris 09
Paris CBD
Second-hand
mairie de montreuil
11 160
Tour Altais
montreuil
East
New
Blablacar
9 483
Le Cloud
Paris 02
Paris CBD
New
Banque Publique
d'Investissement (BPI)
9 337
24 rue Drouot
Paris 09
Paris CBD
New
Bredin Prat
8 600
53 quai d'Orsay
Paris 07
Other Paris
Second-hand
CSC
8 168
Carpe Diem
La Défense
La Défense
New
ministère des Douanes
6 307
Le vitalys
Paris 19
Other Paris
New
Shearman & Sterling
6 300
Eden monceau
Paris 17
PARIS WEST CBD
New
Le Bon Coin
5 562
85 rue du Faubourg Saint martin
Paris 10
Other Paris
Second-hand
Crédit Agricole
5 194
Le voluto
montrouge
South
New
Auxia
5 114
Pushed Slab
Paris 13
Other Paris
New
Source : mBE Conseil
Within Ile-de-France, Paris and the West CBD (excluding
La Défense) have been the two areas benefiting most
from the improvement in take-up in 2015.
In particular, Paris experienced a 15% growth in take-up,
accounting for 43% of the Ile-de-France total, compared
to a 37% share in 2014. This very good performance
has been mainly in the Paris CBD, where take-up has
increased by 18%, and in the Other Paris submarket
where it has grown by 30%. In Other Paris, take-up
growth has been most notable in the 7th arrondissement,
due to a 43,700-sq.m turnkey project for administrative
services for the Prime Minister’s office, as well as in
the 11th arrondissement with the letting by Publicis of
20,300 square meters in the PariSquare Building. More
generally, within these arrondissements, there has
been increased take-up in the over-1,000-sq.m range:
+ 38% in the 1,000-to-5,000 sq.m category, and
+ 52% for space of more than 5,000 square meters.
Take-up for surfaces of less than 1,000 square meters
has seen a more moderate increase of 12%.
Good performance in Paris
The Paris CBD market was sustained by activity in the
below-5,000-sq.m market (+24%) while large-surface
take-up was down by 6% from 2014.
The only submarkets showing less activity were the
secondary business districts of Paris: down by 14% due
to a short-term lack of large-surface supply in the most
sought-after areas of the Gare de Lyon / Bercy / Paris
Rive Gauche district.
01 | renTal markeT
Good performance in West
CBD, except for la Défense
In the West CBD (except in La Défense), take-up has
stayed dynamic in 2015 at 376,000 square meters: a
9% yearly growth. However, activity by city has been very
different from 2014. In 2015, Boulogne-Billancourt - and
more so Issy-les-Moulineaux - have seen the most activity
in the West CBD, due to three transactions of more than
20,000 square meters: La Poste’s lease of 42,600
sq.m in the Lemnys Building; Accor Hotels’ letting of
43,000 square meters in the Tour Sequana in Issyles-Moulineaux, and the renting by the OECD of
32,600 square meters in the In/Out Building in BoulogneBillancourt. Take-up has, however, experienced a sharp
decline in Levallois-Perret, where no transaction of
more than 5,000 square meters was concluded in 2015,
compared to four totalling 90,200 square meters in
2014. The city has also suffered a 28% drop in take-up
in surfaces of less than 5,000 square meters. Activity has
also been slightly down (-9%) in Neuilly-sur-Seine, due
mainly to less take-up involving small and medium surfaces.
Transactions in Ile-de-France by submarket: 2014 vs. 2015
1,000 sq.m
600
2014
Paris : +15 %
500
Suburbs excluding business districts : -0,5%
2015
+14 %
+18 %
+1 %
400
+30 %
300
-14 %
-41 %
ub
rs
th
e
O
uc
le
No
ur
bs
th
ou
eS
gin
eE
er
gin
Em
rd
as
t or
Em
er
gin
gN
tQ
er
W
es
th
Dé
La
th
CA
se
is
Pa
r
er
th
O
fen
O
Pa
ris
Se
co
n
Pa
r
da
ry
is
C
BD
BD
0
-13 %
+2 %
-23 %
Bo
-37 %
100
Em
er
200
Source : MBE Conseil/Catella – Immostat
low take-up in La Défense...
...as well as elsewhere
in the suburbs
After emerging from a state of crisis in 2014, take-up
activity in La Defense fell by 41% this year. No transactions
for spaces over 20,000 square meters have been
concluded in 2015, representing a decrease of 58%
in large-size transactions, while take-up in the below5,000-sq.m market increased by almost 9%. La Défense
has been heavily affected by the general downturn in
take-up in the over-20,000-sq.m market in 2015.
Elsewhere, other submarkets have continued to be
disadvantaged by the shift in take-up activity towards
Paris and the West CBD. With the exception of the
outlying suburbs, where take-up volumes are continuing
to recover, (while remaining below their best levels in
2011 and 2012), and the inner South District where
growth has been stable but moderate, others submarkets
have declined: take-up fell by 37% in the Emerging North;
by 23% in the inner East District, and by 13% in the
Boucle Nord.
VACANCY RATES BEGIN TO DECLINE
Immediate supply has declined by 3% compared to
the end of 2014, due to an increase in transactions
involving existing new buildings and to a slow-down in
large-surface releases. Immediate supply at the end of
2015 stands at 3.9 million square meters. The vacancy
rate has fallen accordingly, from 7.3% at the end of 2014
to 7% at the end of 2015. Declining vacancy rates have
been particularly evident in Paris, with the city having
benefited the most among all markets from take-up
growth. The vacancy rate within Paris city limits has
declined 0.6 point to 4.5% at the end of 2015, down
from 5.1% a year earlier. As a result, Paris as a whole
has begun to drop below break-even levels. Parisian
market shortages could occur as early as 2016, due to
the fact that the decrease of immediate supply is also
being accompanied by a 5% drop in supply deliverable
or vacatable within one year.
A fall in vacancy rates
Ile-de-France vacancy rates
%
Paris
15
12
9
6
3
0
Greater Paris
Suburbs
12,1
10,8
10,3
7,3
4,7
6,5
2,4
4,9
8
7
7,4
6,9
5,7
4,5
1,1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source : MBE Conseil - Immostat
In suburban markets, vacancy rates have fallen more
moderately from an average of 8.2% at the end of 2014,
to 8.0% a year later.
In Paris, the decline in vacancies has affected almost
all submarkets, with the exception of the Paris North
East area where the rate has increased slightly from
4.6 to 4.7%.
In the Paris CBD, the vacancy rate has dropped significantly
from 5.2% in 2014 to 4% in 2015. The Paris CBD has
entered, as of the end of 2015, an undersupply situation
that could allow, depending on overall macroeconomic
conditions, for possible rent increases.
Paris CBD
is now undersupplied
01 | renTal markeT
vacancy rates by submarket
2014
%
2015
16
13,4
11,6
12
11,5
11
8,9
8
8
6,3
3,9
4
O
ut
er
S
ub
ur
rd
9
Bo
uc
le
No
So
rg
ing
Em
e
bs
2 ut
h Ea
st Em
er
gin
g
or
gN
gin
Em
er
W
es
tC
er
th
O
th
BD
se
fen
Dé
La
da
ry
Se
co
n
Pa
ris
Pa
ris
CB
D
BD
0
4
Source : MBE Conseil - Immostat & CBRE
...with short-term shortages
in Paris secondary business
districts
In the Paris secondary business districts, vacancy rates
have been on a downward trend, reaching an average
of 3.9% at the end of 2015 and indicating a short-term
shortage of supply. This shortage has been greater in
the Gare de Lyon / Bercy / Paris Rive Gauche area, where
the vacancy rate stands at only 1.9% at the end of 2015.
However, in the business districts of the 14th and
15th arrondissements, the vacancy rate has increased,
due to the delivery of 45,400 square meters of the first
phase of the Qu4drans campus project, leading to a
vacancy rate rise from 5% at the end of 2014 to 5.6%
at the end of 2015.
Despite its poor take-up performance, the vacancy rate
has fallen also in La Défense. With all 2015 transactions
involving existing buildings, a net absorption of supply
has occurred. La Défense’s vacancy rate has fallen from
12.4% at the end of 2014 to 11% in late 2015, indicating a
continuing major oversupply situation that should continue
to affect rental values. Second-hand buildings, whether
being presented in their current state or renovated,
account for the majority of vacancies. Available secondhand buildings accounted for 6.7 vacancy points at the
end of 2015.
In the rest of the West Central Business District, the overall
vacancy rate has finally begun to drop after three years
of strong growth, falling from 10.7% at the end of 2014
to 8.9% at the end of 2015. Boulogne and Neuilly have
seen the strongest decline, with take-up having focused
on buildings that were already available in late 2014. In
Boulogne, the vacancy rate fell from 11.5 % at the end
of 2014 to 9.3% at the end of 2015 largely due to the
full rental of the In/Out Building. In Neuilly-sur-Seine,
the vacancy rate has declined by more than half to 6.3%,
from 13.8% at the end of 2014. Commercialization of
the Alégria and Newtime buildings has had a significant
impact on the vacancy rate, while there was also a sharp
drop in supply in the 1,000-to-3,000-sq.m range, leading
to a decline of nearly 3.5 vacancy points.
In the other non-CBD submarkets, vacancy rates have also
begun to fall again despite poor take-up levels. Rising stock
volumes and the extensive commercialization of existing
buildings account for this trend. The only exception has
been in the inner South District, where the rate has
continued to rise, from 10.4% in 2014 to 11.5% at the
end of 2015. There has been a notable increase in supply
in the South East area, particularly in Ivry-sur-Seine. The
Emerging North has seen a slight drop in vacancies, from
11% at the end of 2014 to 10.6% a year later. The fall in
immediate supply in Saint-Denis and Saint-Ouen has been
partially offset by an increase in Clichy and Aubervilliers.
Vacancies have also fallen in the inner East District, where
the rate stood at 6.3% at end of 2015 compared to 7.8%
at the end of 2014. An overall decline in immediate supply
has been seen in Montreuil and Bagnolet in particular.
In the Boucle Nord area of Hauts-de-Seine, the vacancy
rate remains high, but has been gradually decreasing
(13.4% in late 2015 from 15% at the end of 2014),
through the leasing in divisible units of some large
buildings such as the West Plaza in Colombes. There
has been a substantial decline in the rate in Asnières
(17.2% in late 2014 to 14.1% in late 2015) and in Colombes
(18.3% in late 2014 to 13.3% in late 2015).
Slight dip in vacancy rate in
La Défense
Vacancy rate drop in West CBD,
especially Boulogne and neuilly...
Lastly, the vacancy rate has increased slightly in the outer
suburbs, rising from 7.9% at the end of 2014 to 8% at
the end of 2015.
This overall decrease in vacancy rates is expected to
continue in 2016 throughout Ile-de-France. The volume of
supply vacatable or releasable within one year has remained
relatively stable as of the end of 2015, with 945,000 square
meters predicted to be returned to the market in 2016: a
very slight increase of 0.7%. This decline may accelerate if
take-up for large surfaces in existing buildings remains as
dynamic as in 2015. This looks promising at the beginning
of 2016 with, for example, the leasing of the last available
spaces in the Tour Majunga in La Défense.
...as well as in the other
suburbs
01 | renTal markeT
Supply available within one year in the Greater Paris Area
Immediate supply
1,000 sq.m
To be delivered or vacated within one year
5000
1 083
1 061
1 251
938
1 115
945
831
4000
1 360
1 082
888
937
3000
3 925
979
973
2 963
3 626
1 025
3 604
3 609
3 585
2011
2012
4 024
3 906
3 000
2 745
2 770
2 644
2 503
2 423
2006
2007
2000
1000
0
2002
2003
2004
2005
2008
2009
2010
2013
2014
2015
Source : MBE Conseil/Catella Property, Immostat, BNP Paribas Real Estate
Guaranteed future supply
very limited in both volume
and location
Total within-a-year supply has fallen slightly to reach
4.85 million square meters. New supply is greatly reduced
and represents only 20% of the total, compared to
23% at the end of 2014. Moreover, a general decline
in new supply could continue in Ile-de-France in 2016.
Among this new within-a-year supply, 743,000 sq.m
will be surfaces of more than 5,000 square meters.
This figure is down 22% from 2014, illustrating the
beginning of the absorption of new or refurbished large
supply. As a result, for the first time in four years, such
supply will fall slightly below the break-even level of
800,000 sq.m in Ile-de-France.
However, despite the fact that buildings presently
under construction for delivery in 2017 are more
numerous than last year, (driven mainly by renewed
speculative investment in Ile-de-France), their volume of
379,000 square meters is still far below the break-even
level. Although a rebound in take-up for existing buildings
is confirmed for 2016, the office market is expected to
experience a shortage of new large-surface buildings in
2017. Only 32,000 square meters of large spaces are
now under construction for delivery in 2018.
But while the number of projects presently underway
is few, there are still many scheduled.
In 2018, more than 598,000 square meters of office
space with issued construction permits and with investor
backing are presently scheduled for delivery. While it
is known that some of these will not be developed
speculatively and their construction starts are awaiting
at least partial pre-letting, some will be launched in
areas that are soon expected to be undersupplied. An
additional 317,000 square meters of space with investor
support is currently waiting permit approval. However,
not all of these programs are expected to be delivered
in 2018 and some will probably be postponed for at
least a few quarters.
Future supply for new buildings over 5,000 sq.m in greater Paris area owned by an investor
1,000 sq.m
Project
Application Filed
Building Permit Granted
Under construction
Available
1400
1200
1000
800
600
400
200
0
Immediate
1 year
2017
2018
2019
2020
2021
Project
Source : MBE Conseil, Catella, CBRE, developers and investors
To these figures must be added almost 1.1 million square
meters of space where permits have either been obtained
or filed, but which are not presently backed by investors and
whose delivery probability in 2018 is almost non-existent.
However, considering the recent level of investor enthusiasm
for speculative projects, which offer the promise of higher
yields even in the most sought-after areas, some of these
projects could materialize quickly.
also a further 100,000 square meters-worth of currently
unsupported projects for possible delivery between 2019
and 2021.
Added to this are a further million square meters of projects
for which permits have not yet been filed, but which have
investor support, and which could reach the market in the
medium term.
From 2019 onwards, far fewer projects are scheduled:
382,000 square meters of surfaces with permits either
granted or pending, and which are supported by
investors, could reach the market in 2019, with a further
248,000 square meters in 2020 and 2021. There are
01 | renTal markeT
hEADLINE RENTAL vALUES
relaTiVely sTaBle
The evolution of headline rents in Ile-de-France
has become largely disconnected from the overall
macroeconomic environment. Immostat’s most recent
indicators regarding incentives reveal a further increase
in the gap between economic and headline rents, with
the average widening to 21.5% in Q4 2015 from
20.2% in Q4 2014. This gap varies from 15% in the
Paris CBD to 26.7% in La Défense and is, according to
Immostat, 3.7 points higher for transactions of more than
5,000 square meters.
However, it is possible that a maximum has been reached
with regard to incentives, with supply having become
more limited in certain markets, most notably in the
Parisian business districts which have recently become
undersupplied. On the other hand, corporate margins,
after having bottomed out in mid-2015, rebounded
sharply late in the year to their 2011 levels. If this trend
continues in 2016, companies should be able to afford
higher rents, which could lead initially to a reduction
in incentives. Nevertheless, corporate margins would
likely have to return to levels close to 33% for any rise
in headline rents to occur.
Average headline values for new buildings in the Paris
Central Business District have remained very stable in
2015, at €663 / sq.m. The top-range values, however,
have increased from €750 / sq.m to €780 / sq.m. Average
second-hand values have been stable, at € 556 / sq.m,
but with a slightly higher median of €460 / sq.m in 2014
rising to €465 / sq.m in 2015.
Evolution of weighted average rental values for new buildings
€/sq.m/p/y
750
Paris CBD
Paris secondary BD
West CBD
Suburbs
663
519
500
453
250
rental values stable
in Paris CBD
0
277
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
In the Paris secondary business districts, rental values have
also been very stable. Average rents for new surfaces
stood at €520 / sq.m with median rents at €490 / sq.m
/ year. Average rents for second-hand buildings have
trended slightly downwards from €431 / sq.m / year
at the end of 2014 to €425 / sq.m / year in late 2015.
In the West Central Business District, headline average
values have continued to decline to reach €453 / sq.m.
While statistically this decrease is mainly due to the
letting by La Poste of 42,500 square meters in the
Lemnys Building in Issy-les-Moulineaux at €415 / sq.m,
it is nevertheless indicative of a significant trend affecting
most cities in the West CBD in 2015. In La Défense,
average values for new buildings in 2015 amounted,
at most, to €460 / sq.m / year, while in Boulogne rents
were higher (470 € / sq.m / year for prime properties,
but down from the initial asking values. Rental values for
second-hand buildings have shown a downward trend,
reversing their 2014 increases. These have fallen to
€356 / sq.m / year: down 9% on the year. Second-hand
values have ranged between €300 and €480 / sq.m, with
the exception of the Coeur Défense Building which has
consistently seen headline rents of €530 / sq.m / year).
...and in the Paris secondary
business districts
lower average values
in West CBD
Evolution of weighted average rental values for second-hand buildings
€/sq.m/p/y
600
Paris CBD
Paris secondary BD
West CBD
Suburbs
556
500
425
400
356
300
200
205
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
0
19
93
100
In the outer suburbs, average rental values have trended
downward in 2015, falling from €318 / sq.m in 2014 to
€277 / sq.m / year for new buildings, and from
€225 / sq.m / year to €205 / sq.m / year for second-hand
properties. While headline rents have been as high as
€360 for new buildings in Rueil- Malmaison, the majority
of large-space deals were agreed at rents of between
€205 and €320 / sq.m / year in 2015. Rental values have
also been falling for second-hand buildings, averaging
€205 / sq.m / year at the end of 2015. This decrease is
mainly due to the effect on the market of higher take-up
in the outer suburbs in 2015.
Values also trending downward
in outer suburbs
02
The French
investment
market
As has been seen in the rental market, the investment market has experienced an
exceptional second half of the year following its lacklustre first six months. €26.2 billion
have been invested in the non-residential real estate market in France, up 2.5% over 2014.
This result was only surpassed in 2006 and 2007. Despite this similarity, the two markets
have followed very different trajectories in the past two years. The investment market
continues to benefit greatly from the very high volume of liquidity available for properties,
coupled with the relatively limited supply of same. This has generated, with increasing
competition between players, higher values and severely reduced yields. Unlike in 2014, it
has been transactions in the €100-to-€300 million range which have proved the strongest
market impetus in 2015. But deals in excess of €500 million have shown a sharp decline
after the truly outstanding performance the previous year. While offices have remained
the most sought-after product type, warehouses have been the strongest growing product
in 2015. Investment funds have strengthened their dominance in the French market, while
there has also been a comeback by SIIC-listed companies, insurance companies and SCPIs.
Property
PropertyMarket
MarketTrends
Trends- -France
France- -March
Mars 2016
2013 25
02 | FrencH inVesTmenT markeT
A GOOD YEAR DUE TO
an oUTsTanDinG seconD HalF
€26.2 billion invested
in French non-residential
real estate
This has resulted in 2015 being the third-best year
ever in the non-residential sector. While the French
market is now the third largest in Europe in terms of
volume, it is still well behind Great Britain (€86 billion)
and Germany (€56 billion). This very good result was
achieved thanks to an outstanding second half where
nearly €18 billion were invested - exceeding all records
- as well as being enough to largely offset the decline
in volume recorded in the first half of the year.
volumes invested in the French non-residential real estate market: 1999-2015
Trend
€ billion
35
30
25
20
15
10
5
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source : MBE Conseil/Catella Property
54% of acquisitions
« core »
Confirming the trend evident since the start of the
financial crisis, so-called «core» assets have remained the
most sought after by investors. These have represented
nearly 54% of the volume invested in transactions
valued at over €50 million, both as single-asset and
portfolio sales.
Investment strategies :
(Single-asset and portfolio transactions valued at over €50 million)
Core
Core +
Opportunistic
Yield
24 %
54 %
15 %
7%
In contrast, the share of opportunistic transactions fell
from 22% in 2014 to 15% in 2015. A general lack of
suitable supply, whether because of asset type location
or market values, is the main reason for this decline.
Finally, the transactions finalized as “income investments”,
(i.e., long-term investments, often in more peripheral
locations or in old buildings, or on alternative products
to offices, based on income and not on a potential capital
gain), have increased to 24% of total investment volume
in 2015. Long-term investment funds have shown the
most interest for this type of asset: one that allows them
to improve their overall returns on investment in a year
when the drop in yields on core assets has been strong.
A CLEAR RETURN in specUlaTiVe inVesTmenT
Beginning in 2014, the recovery in speculative investment
has gathered pace in 2015. Nearly two billion euros were
invested speculatively this year: up 97% from 2014. The
reasons for this return are twofold: first, as in 2014,
speculative investments allow buyers potentially higher
returns on investment, especially in markets where prime
yields have declined the most. Moreover, the growing
shortages of new buildings, especially in Paris, encourages
speculative investments in areas where rental risks are
lower while the macroeconomic environment gradually
improves. In 2015, speculative investment has been highly
concentrated in areas where vacancy rates have been
very low, such as the Rive Gauche and Batignolles areas
of Paris, and in Lyon.
+97% increase
in speculative investments
Speculative investments share
35000
€ million
Let
Partially let
Spec
30000
25000
20000
15000
10000
5000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Nearly 69% of speculative investments were made in Paris,
especially in the Parisian secondary business districts (28%),
particularly in the Gare de Lyon / Bercy / Paris Rive Gauche
area and the ZAC Clichy Batignolles district (16%). These
include the acquisition by Aviva of the Elements Building;
by the Caisse des Dépôts of the Austerlitz Building in the
ZAC Paris Rive Gauche, and the purchase by Cardif of Lot
O7 in the ZAC Clichy Batignolles.
The Paris North East area also benefited from two speculative
operations: the acquisition by Amundi of the View Building in
the ZAC Paul Meurice in the 20th arrondissement (developed
by Crédit Agricole Immobilier and Nexity), and the purchase
of the Tempo Building in the ZAC Gaston Tessier in the 19th
arrondissement by the CNP. Nine percent of speculative
investments were made in the Paris CBD, involving either
empty buildings, or those in the process of being vacated and
refurbished. All these investments were made on the basis of
potential yields of between 6% and 7% for non-CBD areas.
Speculative investments have also increased in the French
regions, representing 20% of the national total after being
virtually non-existent in 2014. The Lyon area accounted for
55% of speculative regional investment, including acquisitions
by Prédica of the View One Building in the Carré de Soie
area in Villeurbanne as well as the former Hotel Dieu, to
undergo total refurbishment on the banks of the Rhone
in Lyon’s 2nd arrondissement.
Away from these relatively secure areas in terms of rental
risks, however, other speculative investments have been
made in riskier locations. This includes some of the outer
suburbs of Paris, such as Standard Life’s acquisition of
the Bonne Energie Building in Nanterre, as well as in the
Emerging North where Amundi bought the United Building
in Clichy. In such instances, the risk premiums were much
higher, with yields of between 6.8% and 8.5% depending
on the submarket.
Speculative investments and vacancy rates by location
350
€ million
Vacancy rate
Amount invested
18 %
16 %
300
14 %
250
12 %
200
10 %
150
8 %
6 %
100
4 %
50
0
2 %
0 %
Paris 17ème
Paris 13ème
Paris 12ème
Paris 8ème
Paris 20ème
Paris 19ème
Clichy
Paris 14ème
Paris 9ème
Nanterre
As in 2014, speculative investment has essentially been
dominated by insurance companies (44% of such invest-
ment) and investment funds (31%), and to a lesser
extent by SCPIs (11%) and SIIC-listed companies (9%).
SINGLE-ASSET VS.
porTFolio Balance remains sTaBle
Slight rise
in single-asset sales …
Sales of single assets have been up by 4% to reach over
€18.5 billion: slightly short of the record performance
of 2007 when they approached €21 billion. Portfolio
sales, meanwhile, fell slightly in volume, but displayed
a sharp increase in the number of transactions (61 in
2015 vs. 47 in 2014) while remaining at a high volume
of €7.6 billion. Again, this result, while short of the
record-setting years of 2006 and 2007, is one of the
best since 1995.
Single-asset vs. portfolio sales
Portfolios
€ billion
Single Asset Transactions
30
25
20
15
10
5
0
2009
2010
2011
2012
2013
2014
2015
Portfolio sales boosted
by very strong growth in paneuropean portfolios
Sales of portfolios of between €100 and €300 million
posted the highest growth in 2015, boosted by the growth
of pan-European portfolios in which the French assets
came within this value range. These have grown almost
four-fold from 2014 to represent 37% of total portfolio
sales volume in 2015. In contrast, sales of portfolios valued
at over €500 million were down by 33% but still represented 44% of total volumes, compared to 64% in 2014.
Office and warehouse portfolio sales have dominated
this market segment in 2015. Office-related sales have
increased by 82% compared to 2014 to represent 41%
of the total. Among the most important of these include:
the sale by Ivanhoé Cambridge to Gecina of a portfolio
of three buildings in the Paris CBD and La Défense for
€1.24 billion; Blackstone’s purchase from GE Real Estate
of a €622 million portfolio (office share), and the French
portion (nearly €250 million) of the Aqua portfolio
acquired by Amundi from Union Invest.
Warehouse portfolio sales were also very numerous in
2015: 13 portfolio sales were recorded including three
for more than €200 million with a volume increase of
120% compared to 2014, representing 18% of total
portfolio-related sales.
Retail portfolios, however, have been sharply down
compared to 2014, which was an exceptional year in
this market sector. Volumes, however, have remained
significant and represented 24% of portfolio sales, including the acquisition by China Investment Corporation
of the Celsius portfolio for nearly €500 million.
74% of portfolios were acquired by investment funds
(47%) including opportunistic funds and SIIC-listed
companies (27%).
INVESTMENTS HIGHLY CONCENTRATED
in THe €100-To-€300-million ranGe
Unlike in 2014, where investments exceeding €500 million
represented 30% of volumes, investments in 2015 have
focused on assets (single or portfolio) of between €100
and €300 million. These have accounted for 46% of total
volume at over €12 billion: up 92% from 2014. This result
is 32% higher than the previous record set in 2007.
76 transactions valued at between €100 and €300 million
were concluded in 2015, compared to 41 in 2014. Offices
have been the most attractive asset, accounting for 67%
of volumes invested in this value range, while retail assets
have ranked far behind at 12%.
These assets were acquired mostly by insurance
companies (26%), core or core plus funds (25%),
opportunistic funds (15%) and SCPIs (11%).
Faced with the recent influx of liquidity, many players have
chosen to direct their investments to large size buildings:
a strategy that had already begun in 2014. Like SCPIs,
many insurance companies have asked and received
permission to increase the size of their investments.
Moreover, there has also been a proliferation of asset
management companies that contributed to the creation
of numerous «club deals» for the acquisition of assets
of this size.
However, investment volumes fell by 24% in the €300to-€500 million range, in which €2.1 billion were invested
in five transactions, mostly for offices. Among these
were the acquisition by Adia of the Ecowest building
in Levallois-Perret for €477 million; by Sogecap and
Prédica of a property at 22-30 avenue de Wagram in
the 8th arrondissement for more than €300 million, and
a building at 43- 49 avenue des Champs Elysées by the
Emir of Qatar for €300 million.
46% of investments between
€100 and €300 million
A 24% decline in the
€300-to-€500 million
volumes invested in non-residential property by value range
€ million
+92 %
2014
2015
12000
10000
8000
6000
¯8 %
+6 %
4000
-57 %
-24 %
2000
0
< 50 €mn
50 - 100 €mn
100 - 300 €mn
300 - 500 €mn
> de 500 €mn
Source : MBE Conseil/ Catella Property
activity in the
over-€500-million
market down by 57%
€50-to-€100-million market
up by 6%
Transactions valued at more than €500 million, which
drove the market in 2014 with their outstanding volume,
fell by 57% in 2015. Such a decline was expected, at least
in the retail property sector.
It was highly unlikely that 2015 would see any operation
on the scale of that carried out by Foncière Carmila in
2014. There have also been less single assets sales of this
size in 2015, compared to three in 2014, (i.e., the Coeur
Défense Building, the SFR Campus and the Beaugrenelle
shopping center).
Furthermore, four portfolios in 2015 valued at more
than €500 million were transacted for a total value of
€3.3 billion, compared to five worth nearly €5 billion
in 2014. Only one transaction of more than €1 billion
was concluded: the acquisition by Gecina from Ivanhoé
Cambridge of a €1.24 billion portfolio, compared to two
in this value range in 2014.
In the lower value segments, there has been a satisfying
degree of activity in the €50-to-€100 million market, with
nearly €4.2 billion having been transacted : up 6% compared to 2014. These operations have been geographically
distributed relatively evenly : 21% in the regions, 21% in
the Paris CBD, 13% in the rest of Paris, 18% in the inner
suburbs and 18% in the outer suburbs. Only the West
CBD recorded very few operations in this range (5%). Such
transactions primarily involved the office market (64%) as
well as warehouses (13%) and retail properties (14%).
Investment funds, (whether “core” or opportunistic),
insurance companies and, to a lesser extent, SCPIs were
the most active investors in this value range.
major transactions in France : 2015
markeT
seller
BUyer
sUrFace
(sq.m)
sales
price
(€ mn.)
yielD
properTy
Type
IDF
Ivanhoé Cambridge
Gecina
121 251
1 240
5,00%
Office
Portfolio
France
Ge
Blackstone
842
Celsius portfolio
France
CBREI
China Investment
Corporation
502
EcoWest - Levallois-Perret
West CBD
BNP Paribas
promotion
Adia
Portfolio of six Roy hotels
France
cegho
maranatha
22-30 Avenue de Wagram- Paris 08
Paris CBD
EDF
Sogecap/Predica
24 000
>300
<4%
43-49 avenue des Champs Elysées
- Paris 08
Paris CBD
Westbrook
Emir Du Qatar
8 200
300
3,00%
Office
aDDress
Three-building portfolio - Grande
armée Paris 16 - Tours T1 et B La
Défense
58 300
477
Office
5,7%
360
Shopping
center
Officewarehouse
hotel
Office
Regions
Unibail Rodamco
Allianz
17 407
294
5,00%
Shopping
center
Portefeuille Aqua - Boulogne
– Clichy
West CBD
Union Investment
Amundi Immobilier
35 500
248
5,50%
Office
Parisquare - Paris 11
Other Paris
Stam Europe/Tristan
Capital Partners
Oxford Property
Group
24 100
215
4,25%
Office
Pushed Slab Paris 13
Other Paris
Banque Populaire Rive
de Paris
Aviva
18 286
197
4,09%
Office
morgan Stanley
Altafund/Goldman
Sachs
63 500
190
Office
France
Apollo
Cbrei/Arax Properties
439 835
241
Warehouse
Tours CityLights 2 – Boulogne
West CBD
BNPPI/GE Real Estate
Gecina
28 511
185
7,00%
Office
261 rue Saint honoré - Paris 1
Paris CBD
Roberto Cavalli
CBREI
2 079
145
3,00%
Retail
m7 - Paris 13
Secondary BD
mEAG
Sogecap
17 450
135
5,00%
Office
Sky 56 – Lyon
Regions
Cirmad/Icade
Gecina
30 700
134
7,00%
Office
Outer suburbs
Bouygues Immobilier/
BNPPI
Predica
16 197
131
4,50%
Office
Regions
b&o
Cnp
16 000
130
3,50%
Retail
Outer suburbs
Gecina
Cnp
18 000
96
5,01%
Office
Ecopole - Saint martin de Crau
Regions
Dyna logistique
Logistis
99 000
63
6,40% Warehouse
Le Crown - Nice
Regions
Edissimmo/Genepierre
10 757
39
6,00%
Parc logistique – Troyes
Regions
m&G Re
43 482
25
6,65% Warehouse
CC Nice Etoile – Nice
Tours Pascal - La Défense
Portefeuille Nautilus
Art et fact 2.0 - Rueil-malmaison
Le Printemps – Strasbourg
NewSide - La Garenne Colombes
Source : MBE Conseil/Catella
* Estimation
Concerto
Office
Single-asset sales valued at under €50 million have fallen
by 8% compared to 2014. These have been conducted
mostly in the regions (40% of volume) and in the outer
suburbs (18%). SPCIs have been the most active in this
value range at 38% of investment volume, followed by
investment funds at 21%.
8% decline in transactions of
under €50 million
OFFICES MAINTAIN MARKET DOMINANCE,
WiTH GroWTH in WareHoUse acTiViTy
Investors have increased their market share in offices
by five percentage points over 2014, and have also
tried to diversify their investments, seeking assets with
the promise of higher yields such as warehouses, or
diversification assets such as healthcare facilities. Retail
assets are still very popular, but proportionally fell
sharply after 2014’s exceptional levels.
Offices have strengthened their domination of the
non-residential real estate market, accounting for
65% of the investment volume in 2015: up 11%
compared to 2014. The amount invested in offices
reached almost €17 billion in 2015, representing 66%
of investment volume for transactions valued at more
than €100 million. This concentration is due both to an
increase in the number of transactions valued at over
€100 million (56 in 2015 vs. 41 in 2014), as well as by
the increase in market values.
Geographically, the increase in investment in offices has
essentially benefited the West Central Business District,
where volumes increased by 29% with the District’s
market share growing from 21% in 2014 to 25% in
2015, as well as Other Paris, which has experienced a
55% increase in volumes and a 5-point market share
boost, reaching 16%.
The major market phenomenon of 2015 has been the
resurgence of investor interest in warehouse assets,
with volumes increasing by 122% in 2015 to exceed
€2 billion. Without breaking the records set in 2006 and
2007, 2015 saw the sector’s third-best historical result.
After collapsing in the wake of the financial crisis, with
volumes not exceeding €1 billion in 2008, then falling to
between €300 and €400 million in 2009 and 2010, the
volumes invested in warehouses returned to growth.
The warehouse sector was boosted in 2015 by sales
of portfolios - especially the French portions of panEuropean portfolios which have represented nearly
78% of total volume. These included the acquisition
by CBRE Global Investors of the Viking portfolio for
€248 million and the Nautilus portfolio for €214 million;
AEW’s €200-million buyout of the Corridor portfolio,
and Blackstone’s of the French assets within the Shine
portfolio, estimated at €150 million. Over 80% of investments in warehouses have been made by investment
funds, overwhelmingly British and American.
Retail, especially shopping centers, has experienced a
sharp drop in investment volumes. This fall, following an
exceptional year in 2014, should not distort the attractiveness of this type of asset: 2015 stands as the sector’s
best year after 2014, with volumes much higher than
those seen in 2010 or 2013.
More than €4.6 billion have been invested in retail assets
in 2015, 68% in the form of street boutiques, retail parks
or shopping malls.
65% of investment volume
in offices
Warehouses prove
very attractive
Despite a big yearly drop,
retail assets still at
historical highs
The market was boosted in 2015 through the extensive
sales of assets in the prestigious Paris Central Business
District, such as “flagship” shops like Celine on avenue
Montaigne or Roberto Cavalli on rue Saint-Honoré,
for which prices have largely exceeded €50,000 / sq.m.
The investment market has also been stimulated by
sales of large portfolios, with seven valued at more than
€100 million. Examples include the Celsius portfolio,
acquired by China Investment Corporation for over
€500 million, and a 35-asset portfolio acquired by Tikehau
Capital Partners for €240 million Investment funds (39%
of market share) and insurance companies (20%) were
predominant in this value range.
volumes invested in non-residential property by product type
€ million
2014
2015
18000
15000
12000
9000
6000
3000
0
Offices
Light industrial
Warehouses
Shopping centers
Retail
Diversification
Growth in investment in
diversification products
The light industry sector
remains marginal
Diversification assets – mainly hotels and healthcare
facilities – grew in volume by 15% over 2015. Statistically
this is chiefly due to Icade Santé’s acquisition of the
Vedici portfolio for €600 million. Two other clinics
valued at over €100 million were also acquired by
Icade Santé in Reims and Toulouse. Healthcare facility
investment is expected to be a growing market for
the foreseeable future. They represent an interesting
alternative product and usually offer yields higher
than 6%. A fund managed by Primonial is expected
to acquire the Gecimed portfolio in 2016 for more
than €1.35 billion.
Hotels have remained the diversification asset sector
of choice, with more than a billion euros invested, but
was down nearly 8% from 2014.
Among the largest transactions were the acquisition by
a Qatari investor of the Intercontinental Hotel Scribe in
Paris for €330 million, and by Maranatha of the Hotels
du Roy portfolio for €360 million.
Light industrial premises recorded a slight decline in
investment volume of 8% compared to 2014. With
€463 million invested, the sector accounted for
only 2% of total investments and remains marginal
compared to other types of assets. The majority of
such investments (52%) concerned operations valued
at under €50 million, except for the Sunrise portfolio
acquired by Industrial Securities for €60 million and
the light industrial share of the Printemps Portfolio
by Northwood Investors, purchased for €164 million.
INVESTMENT FUNDS, SIICS,
INSURANCE FIRMS AND SCPIS
mosT acTiVe players
Investment funds considered core, core plus, or
opportunistic have confirmed their dominance in the
non-residential property market in France, having invested
more than €10.8 billion in 2015: up 51% compared to 2014.
Investment funds
dominate the market
It has been the core and core plus funds who have most
strongly increased their presence in the French market.
They have invested more than €6.8 billion, compared to
€4.3 billion in 2014, an increase of 57%.
Among these, the French investment funds have performed
particularly well, boosted by the creation of numerous
so-called «club deals» to acquire larger buildings, such as
the three created by Primonial to buy the Eureka Building in
Nanterre, the Noda in Issy-les-Moulineaux and a property
at 91-93 boulevard Pasteur in the 15th arrondissement
of Paris. They have invested €2.2 billion or 36% of the
volumes invested by the fund core and «core +» in France.
Middle East-based funds have returned as major market
players in 2015, with nearly €1.4 billion invested: almost
four times more than in 2014. Among the most significant
transactions carried out by these Middle Eastern funds
include the Ecowest Building purchase in Levallois-Perret by
Adia for €477 million, and the purchase of 43-49 Avenue
des Champs-Elysées in the 8th arrondissement by the Emir
of Qatar for €300 million.
Finally, the North Americans core or «core plus» funds
who first entered the French market in 2014 have been
consistent in their investment volume compared to 2014
at just over €1 billion.
There has also been an understated, but genuine return
by German funds to the French market in 2015, led by
Deka and Real Is. Deka acquired the Millénaire Building
in the 19th arrondissement of Paris for €165 million
while Real Is purchased the Eden Monceau building in
the 17th arrondissement for €111 million. In total, the
German funds have invested €754 million in the market
in 2015, up 211% compared to 2014.
Opportunistic funds have also been more active in 2015,
investing €3.96 billion: up 41% over 2014. Seventy-six
percent of this has come from American opportunistic
funds, thus confirming their return to the French market.
The largest transaction of the year was the acquisition by
Blackstone of the GE Real Estate office/warehouse/leisure
center mixed portfolio for around €940 million.
volumes invested in non-residential property by investor type
€ million
2014
2015
12000
10000
8000
6000
4000
2000
0
Listed property
companies
core &
Other property
core + funds
Cies
Opportunistic
SCPI
OPCI
Life insurance
Private
Confidential
deals
SIIC-listed companies have continued the return to acquisitions they started in 2014. They invested €3.56 billion
in 2015, up 28% compared to 2014. A SIIC was behind
the largest transaction of the year: Gecina’s acquisition of
three buildings in the Ivanhoe Cambridge portfolio located
in the 16th arrondissement and in La Défense for €1.24
billion. This single transaction accounted for nearly 35% of
the total volume invested by SIIC companies. Gecina has
been by far the most active SIIC, followed by Icade Santé.
The latter concluded five clinics transactions, including a
€606 million portfolio sold by Védici.
SIICs have been most active in the office (61%), clinics
(27%) and retail property markets (12%). The location
of their investments has been less atypical than in 2014:
34% in the West CBD; 19% in the regions; 17% in global
portfolios (including the Védici clinics) and 10% in the
Paris CBD.
Non-SIIC-listed property companies, however, have been
significantly less active, due to the absence in 2015 of very
high-value deals such as those concluded by Carmila in
2014. They invested €919 million in 2015 compared to
€3.5 billion in 2014. However, this behavioural change has
not been typical of unlisted companies in general.
SCPIs have remained very active in 2015, due to a very
strong net collection --actually breaking records in the first
half of 2015 - and have showed an annual increase of 18%
of their investment volume in non-residential property.
They benefit from the deferral of private savings into real
estate paper, which has proven more profitable than the
stock market, bonds or “Livret A”.
With investments reaching nearly €3.6 billion, SCPIs have
somewhat changed their overall strategies in an effort to
cope with the influx of liquidity available and have clearly
increased the scope of their investments by buying large size
buildings in collaboration with other SCPIs or with OPCIs.
SCPIs’ single-asset investments valued at between €100
and €300 million increased from 8% to 31% of activity
in this value range between 2014 and 2015. This value
SIICs stay active in the
market
SCPIs remain very active
range has accounted for all SCPI investment growth, with
all investments of less than €100 million showing a decrease
(-8% for less than €50 million and -21% for operations of
between €50 and €100 million).
The geographical locations of their acquisitions have
remained relatively stable: 20% in the regions, 80% in Ilede-France. In Ile-de-France, the geographical distribution
has remained balanced: 16% in the West CBD, 11% in
the Paris CBD, 15% in the rest of Paris, 15% in the inner
suburbs and 14% in the outer suburbs.
Private investors, due to the lack of any large size operations
in 2015, have seen a significant drop in their investment
volumes. They have directly invested €763 million in nonresidential property, compared to €2.8 billion in 2014. No
transactions worth over €500 million have been negotiated
involving private investors this year, while two were in 2014.
This relative market withdrawal of direct investment by private
investors is due to the recent major fall in yields that has made
the investment market generally less attractive for them.
insurance companies
remain active
Insurance companies and pension funds have increased their
market participation, with acquisitions valued at €5.1 billion:
up 15% compared to 2014. This increase was made possible by a further increase in the collect of life insurance
firms, from €22.6 billion in 2014 to €24.6 billion in 2015.
Life insurance companies have not, however, changed the
proportion of their investment dedicated to real estate,
especially commercial real estate, which has remained
stable at 3%. Insurance companies have concentrated
86% of their acquisitions on office properties, focusing
on operations valued at between €100 and €300 million
(61% of their total investment).
They have focused their investments heavily within
Paris, which accounts for 62% of their acquisitions
(including 33% in the Paris CBD alone), followed by the
regions (17%). Outside these locations, 8% of investment volume has been in the West CBD (excluding
La Défense). The most noteworthy acquisitions in this
submarket were by Prédica of the Carré Vert Building
in Levallois-Perret for €166 million, and by AG2R
La Mondiale of the L’Angle Building in BoulogneBillancourt for €135 million.
Both the inner and outer suburban submarkets have
remained minor locations for investments in 2015, at
only 6% of the total each. Transactions have included the
acquisition by Sogecap of the Portes du Parc Building in
Saint-Ouen for €89 million; Prédica’s purchases of the
Oxygène Building in Clichy for €93 million and the Art
et Fact Building in Rueil-Malmaison for €130 million,
and the CNP acquisition of the Newside building in La
Garenne-Colombes for €95.5 million.
The volumes invested by OPCIs, however, have been down
31% to €1.25 billion in 2015. They, unlike other investors,
have preferred retail assets, which have represented
49% of their acquisitions, with offices making 41% of
their spend. Among the most significant OPCI-related
transactions were the acquisition by Tikehau Capital
Partners a 35-asset portfolio for €240 million, the
acquisition by the general public OPCI from Amundi
of the Colisée III and IV buildings in Saint-Ouen for
€150 million, and Ciloger’s purchase of the Monoprix
portfolio for €148 million.
STRONG ACTIVITY
in WesT cBD anD oTHer paris
a very good year
for the West CBD
a record year
for Other Paris
The West CBD and Other Paris benefitted the most of
all submarkets from investment volume growth.
A total of €4.2 billion have been invested in the cities
of the West Central Business District: up 30% from
2014. This is the second-best historical result for this
submarket after 2007, when investment volumes reached € 6 7 billion.
La Défense continues to lead the area, with more than
€1.5 billion taken up, thanks in large part to Tours T1 and
B included in the Ivanhoé Cambridge portfolio, which
represent more than half of the amounts invested, as
well as through the acquisition by Goldman Sachs and
Altafund of the Tours Pascal for an estimated €190 million. Boulogne-Billancourt has been in second place in the
West CBD, with €1.1 billion invested in 14 operations,
including the Ardeko Building acquired by Primonial for
€231 million; the L’Espace Lumière Building acquired
by Invesco for €217 million € and the Tour CityLights 3
bought by Gecina for €185 million.
Other Paris also displayed a sharp increase in attractiveness to investors, with investment volumes rising by 36%,
reaching nearly €2.8 billion, a historical record for the
submarket. The 17th arrondissement outside the Paris
CBD has been among the most attractive areas, including
the ZAC Clichy Batignolles where Cardif acquired lot O7
from Emerige for €180 million. Another active area has
been the Porte d’Asnieres / Monceau district, where Real
Is acquired the Eden Monceau Building for €111 million,
and also where JP Morgan acquired the Métropolitan
operation at rue Philibert Delorme at an estimated
price of €95 million. The 19th arrondissement has also
attracted many investors: the Millénaire Building was sold
by Icade to Deka for €165 million, the Tempo Building
was acquired speculatively by the CNP for €84 million,
and the A2 Building in the ZAC Claude Bernard was
acquired by Northstar and Cale Street for €71 million.
More noteworthy transactions in Other Paris include the
building at 6 Place d’Alleray in the 15th arrondissement,
purchased by the CNP for €210 million, PariSquare in
the 11th arrondissement purchased by Oxford Properties
for €215 million, and the Pushed Slab Building acquired
by Aviva for €197 million.
volumes invested in Ile-de-France by submarket
2014
€ million
2015
4 910
5000
4 239
4 194
4000
3 379
2 969
2 769
3000
2 115
2000
1 569
1000
os
Gl
ob
al
po
rtf
oli
ce
s
rb
bu
O
ut
er
su
su
er
Inn
Pr
ov
in
s
s
rb
bu
BD
tC
W
es
is
Pa
r
er
th
O
Pa
r
is
se
co
n
Pa
r
is
da
ry
CB
D
BD
0
Outer suburb investment volumes also increased in 2015
after a lacklustre 2014 but have still been far from finding
their record levels of 2006 and 2007 when they were well
above €4 billion. Investment reached nearly €3.4 billion, due
mainly to seven transactions valued above €100 million. The
most noteworthy of these were in Villeneuve-la-Garenne
where Altarea Cogedim bought 50% of the Quartz shopping
center from Orion for €200 million, and in Nanterre where
Primonial acquired the Eureka Building for €193 million.
The inner suburbs have seen investment volume increase
slightly by 8%, reaching €2.1 billion. The area has suffered
in 2015 from the absence of any transactions of the size of
the SFR Campus purchase in 2014 by Aviva and Prédica for
€680 million. Six transactions valued at between €100 and
€300 million, however, were conducted in 2015, demonstrating the attractiveness of the inner suburbs to investors.
The largest operation carried out in the sector was the
acquisition by EDF Invest of the Smartside Building in SaintOuen for €240 million.
Other submarkets have seen investment volumes falling
more or less, depending on location, explained mostly by
the absence in 2015 of any very high-value transactions
after at least one was finalized in 2014.
The Paris CBD has been down 11% in investment
volume, due to the absence in 2015 of an operation
the size of the Risanamento portfolio sale (€1.16 billion)
purchased by the Olayan Group in 2014, as well as to a
slight decrease in average transaction sizes in the €300to-€500 million range.
However, investment volumes valued at below
€300 million have seen a very significant increase of
36%. Volumes invested between €100 and €300 million
rose by 14% to represent 35% of the total invested in
the Paris CBD. Ten transactions have been concluded
in this range. Among the most significant were the
acquisition by Sogecap of the Immeuble Bleu in the
16th arrondissement, and the Ilot Marignan / Marbeuf
acquired by the CNP.
Investments of between €50 and €100 million were
also very common in 2015: up by 161% to represent
23% of the total volume invested in the Paris CBD
compared to 8% in 2014.
A more moderate rise
in other suburbs
Paris CBD down 11%...
But a 36% rise in transactions
under €300 million
Insurance companies have sharply increased their investment in the Paris CBD to around €1.7 billion in 2015,
compared to €697 million in 2014, accounting for 40%
of their total investment against 15% in 2015. Investment
funds - the vast majority of them long-term funds - have
accounted for 32% of the volume invested in Paris CBD:
down from 36% in 2014.
secondary Business Districts
remain attractive
overall decline in investment
in regions ... but rising in the
under-€300 million market
Parisian secondary business districts have seen investment volumes down by 19%. Again, it is the absence of
any transaction of the magnitude of the Beaugrenelle
shopping center in the 15th arrondissement that has
made the difference. The Parisian secondary business
districts, including the Gare de Lyon / Bercy / Rive Gauche
area, still remain attractive to investors, many of whom
have not hesitated to buy buildings speculatively due to
the very low vacancy rate in the area. There has also
been a transaction valued at between €300 and €500
million in the Montparnasse district: the acquisition by
Primonial of Amundi’s headquarters at 91-93 boulevard
Pasteur, sold by Adia for €308 million.
In the regions, no transaction valued at more than €500
million has occurred in 2015, unlike the two in 2014 (i.e.,
the regional portion of the Klépierre portfolio purchased
by Carmila and a shopping center portfolio Wereldhave
bought from Unibail), fully explaining the decline in
investment volumes in the regions. Conversely, volumes
invested in transactions of under €300 million have
experienced a very significant increase of 46%. Portfolio
sales have boosted investments in 2015, accounting for
33% of investments in the regions.
Unlike in 2014, however, 48% of investment volume
had been for warehouse portfolios, not for retail assets,
which accounted for 84% of total regional portfolio
investment in 2014.
Investments in regional markets have been fairly evenly
divided between the three largest classes of real estate
products: 27% in offices; 24% in warehouses and light
industrial premises, and 27% in retail outlets. Beyond
these three product types, 14% was invested in shopping centers and 9% in hotels or healthcare facilities.
These were largely made by investment funds (33%
of the total, of which 17% came from core or core
plus funds with the remaining 16% from opportunistic
funds), insurance companies (18%), SPCIs (15%) and
SIIC-listed companies (14%).
In addition to operations of global regional portfolios
that have accounted for 27% of volumes, and whose
allocation city is not known, investments were highly
concentrated in the Lyon region (19.5% of the regional
total), with Nice (8%), Marseille (5%), Strasbourg (4.7%)
and Lille (2.8%) very distant competitors.
PRIME YIELDS CONTINUE
To Fall eVeryWHere
The trend seen in recent years of decreasing prime yields
has intensified in 2015 (with calculations based on officeonly buildings with leases agreed for at least six years). In
the Paris CBD, prime yields have fallen a further 40 base
points between 2014 and 2015, dropping from 3.90% at
the end of 2014 to 3.50% at the end of 2015. The top yield
value of 3.5% has been for a building at 13-15 rue de la
Ville-l’Evêque in the 8th arrondissement of Paris, acquired
by the CNP. The key conditions underlying this decline are
identical to what we observed last year: a massive influx
of cash into a market that has endured insufficient supply,
high competition, and low government bond yields. The
loose monetary policy of the ECB has further enhanced
these effects. Despite a rise in government ten-year bond
yields in late December 2015 to 1.01%, the real estate
risk premium remains high at 269 basis points. Moreover,
government bond yields have trended downward again
since early 2016 and stood at 0.69% at the end of January.
This further decline followed the ECB announcement
on the extension of quantitative easing for another year,
with further related policy statements expected at the
beginning of March.
But while declining prime yields in the Paris CBD have
both been expected and have followed a relatively predictable pattern so far, falls in other markets have been
one of the major property market events of 2015. Prime
yields in the West CBD excluding La Défense show a
decline of 175 basis points compared to the end of
2014, a record drop, reflecting the strong competition
between investors in one of the most attractive markets
of the year. The top yield was seen in Issy-les-Moulineaux
for a turnkey project for Colas, a Bouygues subsidiary,
acquired by the CNP for 3.75%.
Office market yields
Paris CBD
2010
2011
2012
2013
2014
2015
4,75 - 5,50%
4,50 - 5,00%
4,25 - 5,00%
4,25 - 5,50%
3,90 - 5,00%
3,50 - 4,25%
Paris secondary BD
6,00 - 6,50%
5,70 - 6,00%
5,35 - 5,75%
5,20 - 5,75%
4,80 - 5,75%
4,25 - 4,75%
La Défense
5,70 - 7,00%
5,70 - 6,20%
5,50 - 6,50%
6,60 - 7,50%
5,60 - 7,50%
5,00 - 5,50%
Other West CBD
6,00 - 7,00%
5,60 - 6,80%
5,50 - 6,20%
5,50 - 6,50%
5,50 - 6,50%
3,75 - 6,00%
Other suburbs
6,00 - 8,00%
5,85 - 7,00%
6,25 - 7,00%
6,25 - 8,00%
5,25 - 8,00%
4,50 - 7,00%
Regions
6,20 - 8,25%
6,00 - 8,00%
5,80 - 8,00%
5,70 - 8,00%
5,40 - 8,00%
4,80 - 8,00%
In La Défense, prime yields have dropped less severely:
from 5.60% in 2014 to 5% in 2015, a decline of 60 basis
points. La Défense, one of the most important markets in
Ile-de-France, has suffered the consequences of a currently
oversupplied rental market. Meanwhile, the rest of the
West Central Business District, while still also oversupplied,
seems to worry investors less.
In Other Paris, prime yields have declined to 3.6%, an
example being for the building at 13-15 rue Falguière
in the 15th arrondissement acquired by SwissLife Reim.
In the regional markets, prime rates have also been
declining and now stand at 4.8% in Lyon, down from
5.4% in 2014.
Even more than declining prime yields, it is the sharp
contraction in the rate discrepancies between various
locations or, in some areas, its inversion which has been
the biggest milestone of 2015.
Thus, the gap in prime yields between the Paris CBD
and the West CBD (excluding La Défense), which were
between 110 and 160 basis points between 2008 and
2014 – have been no wider than 25 base points in 2015.
This very limited range is below the previous record set
in 2007 of 40 base points.
In suburban markets, prime yields fell by 75 base points
to 4.5% at the end of 2015, compared to 5.25% in late
2014. In the inner suburbs, yields have generally ranged
between 4.5% and 5.5%, especially in the Emerging North.
In the more outlying suburbs, the range has been larger
and has been more linked to the various markets’ distances
from the capital. Thus, prime yields of between 4.5% and
5.5% have been recorded in business districts such as in
Rueil-Malmaison, Nanterre and La Garenne Colombes
for new buildings rented with leases of at least six years.
However, yields have been higher in more distant suburban
cities, including Velizy and Saint-Quentin-en-Yvelines, at
between 6% and 6.5%.
However, there remains a significant gap between the
Paris CBD and the Other suburbs. This difference, which
was between 135 and 200 base points between 2008
and 2014, has since fallen to 100 points. While this gap
is again lower than in 2007, it is still very large.
Long-term evolution of prime vs. government bond yields: 1993-2015
10
%
Prime yields
10 years Bond yields
8
6
4
2
0
93
19
94
19
95
19
96
19
97
19
98
19
99
19
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
conclUsion
CONCLUSION
After a difficult first half, economic growth picked up as had been expected - in the last six months of 2015.
Overall GDP growth was 1.1% in 2015, slightly higher
than had been forecast at the end of 2014. The French
economy has widely benefited from the positive effects
of falling oil prices, and the decline of the Euro, as well as
the policies implemented in 2013 such as the Tax Credit
for Competitiveness and Employment (CICE). Domestic
consumption and business investment levels have
been trending more positively. Growth has remained,
however, hampered by the decline in external demand
especially from emerging countries such as China and
Brazil, which have experienced significant downturns.
The best news received at the end of 2015 was
undoubtedly the recovery in corporate margins:
up 1.6 point from 2014 and reaching a far more
acceptable level of 31.1%. This rebound has not yet
fully translated into employment growth, however, which
reached 0.6% in Ile-de-France in 2015. Nevertheless,
corporate margin growth could turn out to be a major
factor stimulating the economy, provided it can be
sustained in 2016.
2016 should be a year of continuity. All the more positive
conditions of 2015 look likely to continue (i.e., lower oil
prices, a more favourable Euro / Dollar exchange rate,
etc.). However, obstacles to growth will still be present, - in
particular a still restrictive fiscal policy and burdensome tax
levels - even if their effects diminish gradually. However,
monetary policy will remain generally accommodating
with the renewal of quantitative easing (QE) for another
year, hopefully allowing, thanks to lower interest rates
and greater access to financing, a recovery in business
investment. It should be kept in mind, however, that one
of the original primary objectives of quantitative easing was
to enable a needed recovery in inflation. The policy has
so far failed in this respect. Certain ongoing deflationary
pressures are still worrying, and are limiting hopes for any
significant recovery in economic growth.
Any economic recovery will be gradual, with GDP growth
expected to reach 1.2% in 2016 and 1.4% in 2017,
combined with slow job growth and an unemployment
rate that does not look likely to fall much before 2017.
It is worth keeping in mind that, according to INSEE, a
growth rate of at least 1.3% is needed to stimulate job
creation substantially. In the current economic climate,
employment growth in Ile-de-France should be slightly
higher than in 2015, while still not exceeding 1%.
The rental market is expected to continue along the
path of recovery that began in 2014. Take-up volume for
surfaces under 5,000 sq.m, which is directly correlated
with employment growth, should continue to improve
in 2016. But the overall state of the rental market will
again depend on the behaviour of large companies,
whose property needs will obviously be very decisive in
determining take-up volume. According to the Odessa
study published by DTZ in December 2015, intended
demand for spaces of over 5,000 sq.m was up 20%
compared to 2014. As was the case in late 2014, 53 %
of these requests consist of short-term demands that must
be finalized within the year. More generally, about 75%
of these large-surface requests are for transactions to be
concluded within a maximum of two years. Companies,
it seems, are beginning to anticipate a shortage of new
buildings in the most attractive areas and have subsequently
renewed their interest in considering relocations, in order
to take advantage of more favourable overall economic
conditions. The average size of their requests has also been
increasing, especially in the 10,000-to-25,000-sq. m. range.
Overall take-up could increase more substantially in 2016,
reaching as much as between 2.3 and 2.4 million sq.m.
As in 2015, shortened lead times for relocation projects
will result in an increase in transactions involving delivered
buildings, and should allow a further decline in vacancy
rates, at least in the most popular markets like Paris and
the West CBD. New supply in particular should continue
to decline. As a result, we should soon start observing
situations of short-term undersupply for new buildings
in certain areas - especially in the Paris CBD and the Paris
secondary business districts - until 2017. In some parts
of the West CBD, including La Défense, transactions
concluded in early 2016 have helped confirm the very
rapid absorption of new supply. A return to equilibrium
should be imminent, and undersupplied pockets may
appear in the area between late 2016 and early 2017.
Downward pressure on rental values, particularly
economic values, should still be significant in 2016, but
could begin to subside if the recovery in corporate
margins can be sustained while there is a simultaneous
shortage of new supply. However, this should first lead
to reduced incentives, which would thereby generate
higher economic rents while headline rents would remain
stable. Headline rental values will only start to increase
if corporate margins reach – or even possibly exceed 32.5%: a situation unlikely to occur before 2017.
The investment market should remain very active.
The capital available for real estate is still abundant, and
could even increase due to the high levels of volatility in
stock markets since early 2016. Furthermore, the one-year
extension of the quantitative easing policy by the European
Central Bank will clearly continue to influence currency
exchange rates as well as interest rate levels.
For buyers:
• Foreign investors are likely to further strengthen their
presence in France despite the anxieties in the wake of the
terrorist attacks of November 2015. The Euro / US Dollar
exchange rate is still advantageous for European markets,
including the French market, and could help boost foreign
investment. This increase could be further strengthened if
the recent growth in the rental market can be sustained.
• French investors will also remain very active, for reasons
very similar to those seen in 2014.
• Life insurance companies have benefited in 2015 from
a net collect that, without matching the record growth
levels seen in 2014, still managed to rise by almost 9%
to €24.6 billion. The persistent weakness of government
bond yield rates; the implementation of Solvency 2 on
1 January 2016 and continued market volatility should
logically favour further increases in real estate investment
by insurance companies in 2016.
• The collect of SCPIs and general public OPCIs exceeded,
once again, all previous records. In H1 2015, net influx
for SCPIs was up 47.5% year on year, while that of
OPCIs was already higher by 53% in the first six months
of 2015 than in 2014 as a whole.
• While not all of these collects will be invested in France
- seeing as SCPIs and general public OPCIs, have been
investing increasingly in other European countries,
including Germany, the Benelux countries and Spain
- the French market should experience investment
volume at least equal to that of 2015.
• Since 2014, publicly-listed property companies have
been very clearly increasing their acquisitions and should
continue at the same pace in 2016.
• Finally, real estate financing has continued to improve
since 2014 and only a deeper systemic crisis could reverse
this trend.
From the supply side, anxieties about the amount of
suitable investment products on offer are lower than
last year. However, 2015 has shown that the capital gains
expectations generated by falling yields and rising market
values have helped to ease such concerns much more
strongly than was initially expected. The same overall
circumstances are expected in 2016. While some
“jumbo deals” are still anticipated in 2016 – most notably
the completion of the sale of Gecimed by Gecina for
€1.3 billion and the acquisition by AXA Reim of the
Tour First for around €800 million – the number of such
deals will likely still be far below the exceptional levels
of 2014. However, many single-unit buildings valued at
between €100 and €300 million have already been put
on the market. In total, we have already accounted for
nearly €8 billion in deals currently being finalized, or
assets for which the selling process is underway. But as
in 2014, there are currently few offers for assets valued
at between €50 and €100 million. Moreover, the market
will also be supplied in 2016 by buildings that will be
sold, following the expiry of capital gains exemptions
for Luxembourg companies, effective December 31,
2016. Although supply should become more plentiful,
however, it will still be insufficient to fully respond to
the influx of capital.
Volumes invested in non-residential property should stay
high, at somewhere between €27 billion to €29 billion,
depending on the number of very high-value deals that
will be transacted in the coming year.
In terms of yields, however, it appears that prime yields
have bottomed out and that we will be unlikely to see
lower rates in 2016. The general responses to tenders
so far this year confirms this analysis. However, the
actual yield on acquisitions has been lower than generally
acknowledged because it has been calculated based on
headline, not economic values. We therefore anticipate a
stabilization of prime yields in the office market. However,
there could still be some yield reductions for warehouses,
especially in the regions, or for diversification assets (i.e.,
hotels and healthcare facilities).
• Furthermore, the recent proliferation of so-called “club
deals” arranged by asset management companies to buy
large buildings should also feature quite heavily in 2016.
conclUsion
2015 : WAITING FOR ThE RECOvERY…
stéphane Guyot-sionnest - ceo catella property
After a slow first half of the year, the office market in late 2015 was far more active, allowing the
year to end with take-up of over 2.2 million square meters: an increase of 1% compared to 2014.
2015 was an erratic and complex year in many ways, sometimes making the rental market rather
difficult to read:
• The market was mainly driven by small and medium-sized transactions, (i.e., those that were
generally less than 5,000 sq.m);
• Transaction activity above 10,000 sq.m stalled, and few deals in the over 40,000 sq.m range
served to mask certain market realities;
• Between 5,000 and 10,000 sq. m., the market was also down compared to 2014;
• Similarly, while economic recovery has been tepid, Paris as a whole has outpaced the rest of Ile-de-France;
• The inner suburbs have seen both the worst and the best-performances, with some relatively dynamic areas such
as the West CBD (excluding La Défense), while others have been comparatively very weak, like La Défense and
the Emerging North;
• In the more distant suburbs, the market is still rather fragile, though signs of improvement are noticeable;
• Faced with this fairly opaque market, actors have remained cautious and bankers, developers and investors remain
very selective about where to consider launching speculative operations (i.e., very much concentrated within Paris). This
has allowed future supply to be kept under control and for average vacancy rates in Ile-de-France to be maintained
at the break-even level of around 7%, (or at even lower levels in central Paris).
Nevertheless, with a stock of nearly 56 million square meters, the Ile-de-France office market remains the biggest
in Europe and within the top three in the world.
To conclude on a note of optimism, the rise in corporate margins at the end of 2015 is very good news. If this continues,
it could mean the end of a long period of sluggish rental values, or even declines in terms of economic rents. From early
2017, one could therefore anticipate generally higher rents - especially for new buildings due to the looming shortage
in that category.
2016 is undoubtedly looking better economically; economic growth is gaining momentum, albeit slowly, with subsequent
job growth, especially in Ile-de-France. Demand for large surfaces is slowly returning, especially between 10,000 and
25,000 sq.m. Small and medium-sized transactions should also remain dynamic, driven in large measure by take-up
from internet-based and media companies.
In total, we should see take-up volumes of between 2.3 and 2.4 million square meters, reaching again the average levels
seen over the past decade.
Beyond these market data, we should certainly also welcome the approach initiated by the “Réinventer Paris” scheme
which, having recently completed its consolidation phase, has provided ambitious and original projects, helping the French
capital to assume the international prominence it deserves.
The investment market
Emmanuel Schreder - CEO Catella Property
«The French market is expected to remain very active and fluid in 2016. But while France remains
the third-largest European market for investment behind the UK and Germany, national gaps are still
very wide: €85 billion for the UK, compared to €56 billion for Germany, then €26 billion for France.
This considerable gap could be narrowed, however, if British voters choose the «Brexit» in June:
a result that could have a negative effect on the UK, but could clearly benefit other European countries,
particularly Germany and France.
The market will be led in 2016, as in 2015, by an accelerating asset turnover, with holding periods
shortening, especially in the holdings of major savings collectors traditionally seen as long-term investors. Lower yields allow
these actors to achieve unexpected capital gains by choosing sometimes more opportunistic investment strategies.
While the origins of potential sellers will thus be more diverse within the market in 2016, they will still be insufficient to
fully meet the influx of available capital for real estate that is continuing to arrive on the French market. Like last year, this
liquidity is originating from foreign investment funds, who are looking to benefit from the recently very favourable Euro /
Dollar exchange rate for investment in Europe, as well as from French investors, whose collects have been very substantial.
However, the French market will still be constrained by the lack of large assets: a situation that has led French investors
to seek such products elsewhere in Europe, or through pan-European portfolios. 2016 investment volumes are expected
to range between €28 and €30 billion. The only real risk to this scenario is a global stock market crash that would obviously
generate a systemic crisis and impact financing very negatively. Financing from both banks and life insurance firms has
returned to its previously high levels. Due to leveraging, office market financing in 2015 has helped to generate investment
volumes that rank in the top three highest years. However, the risks emanating mainly from the recent sharp drops in Asian
markets - especially in China – have seemed to diminish slightly in early 2016.
While offices will continue to dominate the investment market, 2016 will clearly also be a year of diversification into riskier
products with increased speculative acquisitions, or greater interest in other asset types promising higher yields. We also note
a very substantial investor appetite for warehouses, healthcare facilities (i.e., clinics or retirement centers), and retail assets.
Transactions will however remain limited in volume for shopping centers due to a lack of available large assets on the market.
Speculative deals should also continue to grow - especially in Paris, due to the lack of new supply – as well as in the inner
suburbs, where risk-taking offers the promise of higher potential yields.
Throughout 2015 we observed a general fall in prime yields, as well as narrowing yield discrepancies between the various
markets. Moreover, this compression has also affected all asset types, with the exception of residential assets. As a result,
2016 has seen a return in residential block sales.These have generated a renewed interest for investors enduring the decline
in office yields.
Yields, however, are expected to stabilize in 2016 - and it is also advisable not to go below a risk premium of between
250 and 300 base points, especially if this is based on headline rents. Prime yields in Paris today are comparable to those
in London, but are much lower than in Germany, where they usually fluctuate between 4.50% and 4.60%. It would therefore
seem that in France, the low-point for yields has been reached.
catella is a european finance group active in corporate Finance and asset management.
500 employees work in 26 cities and 12 european countries including France, Germany,
sweden, norway, Denmark, Finland, spain and the Uk.
catella property combines the structured approach of an investment bank with
local market knowledge and “Dealability”: in 2015, we acted as advisor in property
transactions throughout europe for a total value of approximately eUr 5,6 billion.
Emmanuel Schreder, managing Director
Stéphane Guyot-Sionnest, managing Director
monique Benisty, mBE Conseil
catella property
4 rue de lasteyrie
75116 paris
France
Tél. : +33 (0)1 56 79 79 79
Fax : +33 (0)1 56 79 79 80
info@catella.fr
www.catella.fr
The Property market Trend is available for downloading on the website
www.marketsummarybycatella.com, as well as our market analyses available online.

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