Office market in the Greater Paris RegionQ4 2012Good resilience of therental and investmentmarkets in 2012Unexpected momen...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 2The leasing market thwartsthe forecastsAgainst all ...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 3Status quo for immediate supplyFor the third consec...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 4A solid investment market in2012, despite no "fisca...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 548% of capital invested in Inner ParisInner Paris c...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 6Key market indicators – Q4 2012(Source: Immostat/Jo...
On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 7Distribution of investment volumes by sector(Source...
Jones Lang LaSalle in FranceParis40-42 rue La Boétie75008 ParisTél. : + 33 (0)1 40 55 15 15Fax : + 33 (0)1 46 22 28 28La D...
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Office market in the greater Paris region - Q4 2012

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Good resilience of the rental and investment markets in 2012
Unexpected momentum in 2nd semester under adverse economic conditions
For the third consecutive year, the immediately available supply hardly changed this quarter with a total of 3,585,000 sq m.
Prime rent in the CBD fell slightly at the end of the year and now totals €770 per sq m.
€10.9 billion invested since the start of the year – a slight drop of 8% in one year.
30 deals exceeding €100 million registered in 2012 for over €6 billion.
Prime yields did not change during Q4 and were positioned in a range between 4.50 and 5%.

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Office market in the greater Paris region - Q4 2012

  1. 1. Office market in the Greater Paris RegionQ4 2012Good resilience of therental and investmentmarkets in 2012Unexpected momentum in 2nd semester under adverse economicconditionsFor the third consecutive year, the immediately available supplyhardly changed this quarter with a total of 3,585,000 sq m.Prime rent in the CBD fell slightly at the end of the year and nowtotals €770 per sq m.€10.9 billion invested since the start of the year – a slight drop of8% in one year.30 deals exceeding €100 million registered in 2012 for over €6billion.Prime yields did not change during Q4 and were positioned in arange between 4.50 and 5%.
  2. 2. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 2The leasing market thwartsthe forecastsAgainst all expectations the leasing market in 2012 showed goodresilience to adverse economic conditions. After a slow 1st semesterand down nearly 20% compared to the previous year, Q3 and Q4showed unexpected momentum. In total, 2,380,000 sq m wereleased in Greater Paris Region, which is close to the 2011 level.Ultimately, the market only fell 3.4%Large transactions buoyed the marketLarge transactions buoyed the market, particularly in 2nd semester,setting a new record with the signature of the Balard transaction bythe Ministry of Defence for a total surface area of 135,000 sq m.Other significant transactions were registered on the market: FranceTelecom for 69,000 sq m in Châtillon (Q3), the Ministry of Ecologyand Sustainable Development in the “Tour Esplanade” in LaDéfense for 53,000 sq m (Q4), Sanofi for 50,000 sq m in the“Campus Val de Bièvre” in Gentilly (Q3), Allianz for 35,000 sq m inthe “Athéna” tower in La Défense (Q4) or Nexity for nearly 22,000 sqm in the CBD in “Solstys” (Q4).In total, 70 transactions exceeding 5,000 sq m were registered thisyear, including 12 over 20,000 sq m. They represented 47% of thetake-up in 2012 (1.1 million sq m), an amount unmatched on themarket. The leasing market, driven for two years by very largetransactions, has developed with a growing number of pre-lets andturnkeys (rental and purchase). Thus, concerning the scope oftransactions exceeding 20,000 sq m, the share of pre-lets was over90% and the share of turnkeys and own accounts was two thirds.The Inner Suburbs on topThe Paris markets and the Outer Suburbs fell (-10% and -14%respectively) in favour of the Inner Suburbs, where businessincreased by 8%.In Paris, the sectors that experienced the greatest slowdown areParis 12/13 (where demand has been cut in two), Paris 5/6/7 (whichlost a third of its business in one year), and Paris 3/4/10/11 (-28%).Overall the left bank markets were penalised by very low vacancyrates not exceeding 4%. Even in the Paris 14/15 sector if weexclude the Ministry of Defence transaction, which accounts for135,000 sq m, demand totalled 63,000 sq m, two times less thanlast year.In the CBD, lets were also down (-13%). However, the good resultsof Q4 helped close the gap in the sector, which was 26% at the endof September. Large transactions, numbering 6 for 55,000 sq m thisyear were down compared to 2011 (7 transactions over 5,000 sq mfor 70,000 sq m). In Q4, there was the Nexity transaction in “Solstys”(22,000 sq m) and that of Allianz in “Opera Italiens” (5,000 sq m).The Inner Suburbs, the Southern Inner Suburbs and the SouthernBend registered a good level of activity, with the signatures at theend of year of Sodexo in “Horizons” in Boulogne-Billancourt (10,000sq m) and EDF in the “Viva” in Malakoff (8,000 sq m). The abundantquality supply close to the capital, attractive rents followingreadjustments of values, and good accessibility of these marketshave attracted businesses.The Northern Inner Suburbs, too, for the second consecutive yearregistered very good results with more than 200,000 sq m in 2012,i.e. a level not reached since 2000. Transaction activity exceeding5,000 sq m was particularly vigorous, with no fewer than 10transactions compared to two last year (including SFR). In Q4 alone,SNCF took the lease for “Le Monet” and “City One” in Saint-Denis(both 20,000 sq m, in addition to taking the lease for “Innovatis 2” inQ3). Siemens pre-let the “Sisley” selling the ZAC of Landy II. AndSamsung moved into “Ovalie” in Saint-Ouen, after a slow 2011 forlarge transactions in the town. These transactions exclusively werefor new buildings under construction or recently delivered buildings.In La Défense, the good performance in Q4 also ensured thebusiness district ended the year on a positive note. The markettherefore reconnected with large users that have been lacking inrecent years. In total 162,000 sq m will have been leased in 2012(+39%), a level comparable to 2009. A result that is also positive forPéri-Défense (+8% yoy).
  3. 3. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 3Status quo for immediate supplyFor the third consecutive year, immediate supply remained almoststable with 3,585,000 sq m available in Greater Paris Region, withthe growing proportion of pre-lets and turnkeys not impacting thestock of vacant premises. The vacancy rate now stands at 6.8% atthe regional level. Although the level of immediate supply remainsstable, Paris is still one of the European cities where the immediatevacancy rate is the most restricted.The market is still showing shortages and oversupply from onesector to another. With a vacancy rate of 4.4%, the supply in InnerParis has tended to fall faster than the average (-16% over 2 years),whereas it has steadily increased in the Inner Suburbs (15% in 2years), and mainly in the Western Crescent (18% in 2 years), whichalso has the bulk of new supply and deliveries. In Greater ParisRegion, the share of new buildings available continues to decreasegradually and is now less than 22% (compared to 30% at the heightin 2009). However, it remains true that behind this average,significant disparities appear between sectors. The Inner Suburbs(including La Défense) to date has the majority of the new supplyimmediately available with a total of over 500,000 sq m, i.e. 65% ofthe vacant new supply of Greater Paris Region, unlike Paris, whichhas four times less.Rent under pressureConcerning prime rental values, CBD prime rent fell slightly at theend of the year to €770 per sq m due to a lower number oftransactions over €800 per sq m. It remains the benchmark marketin the region.In La Défense, prime rent remained stable at €530 per sq m. Theupturn in the leasing market will only happen with the readjustmentof values. Therefore, 2013 should be a year of transition, before amore marked upturn in 2014-2015 once value corrections havebeen made, and the supply renewed.In general, rents are attacked by businesses, which are logicallyreducing their costs. Some owners have started to adjust theirvalues downwards, more in line with market reality, which haschanged in the past 5 years. Caution is still the order of the day forowners.OutlookThe economic climate leads us to adopt a cautious outlook for themarket in 2013. We expect the level of take-up to be slightly downcompared to 2012, between 2 and 2.1 million sq m.Demand will remain mainly motivated by a search for savings andstreamlining of occupied surface areas by bringing together teams,driving companies to search for the best cost and introducingcompetition.“Lease renegotiations, enjoying rapid growth this year, willundoubtedly occupy a significant share of the market next year.However, companies will no longer forego taking the opportunitieson new buildings or those to be delivered, which could fuel take-upin 2013” emphasises Jacques Bagge, Head of Leasing at JonesLang LaSalle.Established tertiary districts, which are currently offering attractiverental terms, could benefit from this momentum as the difference inrent between central sites and peripheral sites is tending to shrink.Availability is abundant, particularly in the Inner Suburbs and thereis no shortage in the supply of new properties. In addition,approximately 430,000 sq m of new projects currently underconstruction in Greater Paris Region, to be delivered by the end of2013, will increase the number of new buildings available in some“supplier” sectors.Within this context, rents will remain under a downward pricepressure, particularly in sectors where the available supply exceedsdemand. Headline rental values will continue to fall in 2013,whereas economic values are already low. Incentives could evenincrease at the discretion of the owners in some “over-supplier”sectors.In Inner Paris, and particularly in the CBD, pockets of scarcityobserved for prime buildings should maintain rent at a high level.Consulting firms and law firms, in competition for the few newbuildings in the sector, are willing to pay the high price.
  4. 4. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 4A solid investment market in2012, despite no "fiscalcarrot"The investment market ended 2012 with a total volume of €10.9billion invested, and therefore showed a slight slowdown of -8% inits activity compared to 2011. However, it achieved a betterperformance than expected at the start of the year.Last year, the investment market experienced a significantperformance in Q4, with close to €6 billion investment, i.e. nearlyhalf the volume of the year. In 2012, Q4 confirmed the trend of amore active market at the end of the year, but to a lesser extent with€3.8 billion invested (1/3 of the volumes).“The 2012 performance was built solidly throughout the year, withtwo leading quarters: Q2 and Q4,” commented Stephan von Barczy,Head of Capital Markets at Jones Lang LaSalle.Very strong activity on transactions exceeding €100 million inQ4In 2012, 30 deals exceeding €100 million were finalised for over €6billion, i.e. 56% of the market. If we analyse the risk level of thesesales, we can see that investors are still cautious in this time ofeconomic turmoil. They are mainly positioned on secure or ultra-secure products (51% and 24% respectively); in summary, onassets without any vacancy, and with fixed-term leases of at least 6years at the time of purchase.In Q4 alone, 13 transactions exceeding €100 million were recorded.“The investment market has confirmed this year, despite fundsremaining more restricted than in the past, that liquidity exists in allmarket segments,” says Stephan von Barczy.Among the recent major transactions in 2012, we could cite theacquisition by PREDICA of “23-25 rue de lUniversité” in the 7thdistrict of Paris for an estimated amount of €250 million, theacquisition by QATAR INVESTMENT AUTHORITY (QIA) of “116bisAvenue des Champs Elysées” for €160 million, and that of the“Start”, a forward funding property acquired by a French institutionalinvestor, 100% leased to EGIS for a total of around €110 million(Jones Lang LaSalle transaction).The interest of “value added” investors for “secondary” assets isreal. However, this requires the market to have “non-prime” assetsto trade, that buyers and sellers agree on the valuation of theassets, and that they are fundable.The re-internationalisation of the market is underwayAt the end of 2012, the re-internationalisation of the market wasconfirmed, with a foreign capital share of 46% of the investmentmarket in Greater Paris Region. In the segment of transactionsexceeding €100 million, the ratio is even higher and represents 64%of capital invested.For two years sovereign funds have invested heavily in the Parismarket creating a new geography of the source of funds: Norway,China, Qatar in the first half of the year; Arab Emirates, UnitedStates and Azerbaijan in the second half. Thus, in Q4, LASALLEINVESTMENT MANAGEMENT (LIM) acquired for ABU DHABIINVESTMENT AUTHORITY (ADIA) “90 boulevard Pasteur” for €252million, and the Azerbaijan oil fund acquired “8 place Vendôme” for€135 million.Whereas the French market was historically very European andNorth American, capital flows in 2012 have moved east.French investors were also very active in 2012. Their influence inthe market is still significant: 54% of volumes invested. Institutionalinvestors and real estate investment trusts (benefiting from recordinflows), focused on the segment of transactions below €100 millionwhere they represent 72% of amounts invested.As for German investors – historically active purchasers – they wereabsent during HY1 (only 3% of invested capital) or were even netsellers. However, they reappeared in HY2, totalling 7% of capitalinvested in the Paris region market.
  5. 5. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 548% of capital invested in Inner ParisInner Paris captured 48% of the investments made at the end of2012 in the Paris region market. This high proportion is explained bythe very large transactions completed since the start of the year withdifferent sovereign funds in Paris assets. In Q4, five of the sixlargest sales were also finalised in Paris: "90 boulevard Pasteur" inthe 15th district, “23-25 rue de lUniversité” in the 7th, “Sequana” and“Austerlitz II” in the 13th and finally “116bis Avenue des Champs-Elysées” in the 8th.The La Défense market experienced a difficult year in 2012 withonly 5 transactions, representing €234 million invested. The onlysale in Q4 was that of STAM with the “Arago” tower forapproximately €20 million.The unit volume of assets and the performance of the leasingmarket fell sharply, coupled with a shortage of bank financing, stillexplain the loss of interest of investors for this sector.Significant fall in forward funding sales this year, and in a moremarked way for unsecured salesThe forward funding market slowed sharply in 2012: more than €1billion invested compared to nearly €1.9 billion last year (-41%).Unsecured transactions fell sharply in 2012, from a total investmentof €1.3 billion in 2011 to less than €400 million.In Q4, five new forward funding transactions were recorded for morethan €317 million. Only one of them relates to an unsecured asset,AMUNDI acquired a 16,000 sq m building “Helios” located in Massy.Stability of yields during Q4Prime yields remained stable in Q4, and in the Golden Triangle,prime rates are positioned in a range between 4.50% and 5.00%.However, investors are still willing, in some cases, to positionthemselves at lower yields for products, the cash flow of which issecure over a long period, particularly medium-sized products (€50million) which are “trophy” buildings (situated in Paris, in cut stone,with top of the range services).OutlookSubject to renewal of the supply, the Paris market is expected toreach comparable levels of activity in 2013. We therefore anticipatea volume invested between €10 and €11 billion next year. Moreover,the start of the year should be more active than in previous yearswith a greater number of products on the market. The arbitrageplans of investors have begun much earlier than usual, and shouldrollout at the start of the year.In an uncertain political and fiscal context, investors remain verycautious in their analysis, as long as rental values are underpressure. However, the attractiveness of the Paris market at theEuropean level and the resilience of its real estate market are allfactors that will continue to attract investors from around the world.We await the arrival of new investors from Asia, such as Korean andMalaysian investors, as well as Chinese insurance companies,which have recently been authorised to invest in overseas property.German investors should also be present.The enthusiasm of sovereign funds for the Paris market couldslowdown. After having invested in London and Paris, some fundsare looking to invest in other "core" European markets such asGermany or Switzerland.With regard to French investors, insurance companies should still beactive on the Paris market to acquire quality assets with fixed long-term leases.In terms of product typology, purchasers will undoubtedly beprimarily looking for quality assets, with secure yields. Prime yieldsare therefore likely to be maintained for the best assets.
  6. 6. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 6Key market indicators – Q4 2012(Source: Immostat/Jones Lang LaSalle)CBD 344 903 -13% 340 000 5,0% 770 520Paris Centre West (excl. CBD) 87 244 -5% 110 000 6,1% 595 401Total Paris Centre West 432 147 -12% 450 000 5,2% 770 502Paris 5/6/7 42 239 -30% 32 000 2,4% 705 464Paris 12/13 61 313 -57% 67 000 3,5% 470 399Paris 14/15 198 449 62% 83 000 4,1% 495 392Total Paris South 302 001 -7% 182 000 3,5% 705 418Paris 3/4/10/11 64 846 -28% 51 000 3,2% 425 338Paris 18/19/20 53 004 17% 54 000 4,4% 300 249Total Paris North East 117 850 -13% 105 000 3,7% 425 294Total Inner Paris 851 998 -10% 737 000 4,4% 770 395La Défense 162 522 39% 209 000 6,5% 530 417Northern Bend 63 060 -68% 267 000 14,3% 305 208Péri Défense 188 538 8% 312 000 13,3% 375 250Neuilly/ Levallois 77 676 -16% 172 000 12,0% 460 331Southern Bend 183 446 38% 227 000 8,6% 480 339Total Western Crescent 512 720 -14% 978 000 11,8% 480 282Northern Inner Suburbs 203 272 4% 244 000 10,2% 340 224Eastern Inner Suburbs 45 747 -7% 123 000 8,0% 315 224Southern Inner Suburbs 189 955 157% 171 000 8,6% 350 238Total Inner Rim 438 974 38% 538 000 9,1% 350 229RoissyPole 34 627 -3% 80 000 6,7% 205 141Saint-Quentin-en-Yvelines 54 250 -32% 159 000 11,1% 210 131Marne-la-Vallée 34 171 -20% 133 000 9,4% 210 151Southern Outer Suburbs 194 256 -6% 359 000 10,2% 240 152Rest of Outer Suburbs 97 120 -17% 392 000 3,5% 240 142Total Outer Suburbs 414 424 -14% 1 123 000 6,0% 240 143Paris Region 2 380 638 -3% 3 585 000 6,8% 770 319Immediatevacancy rate asat 31/12/2012Prime rent(€/sq m/yr)Average secondhand rent(€/sq m/yr)Immostat SectorTake-up as at31/12/2012 (sq m)Evolutiony O yImmediate supply asat 31/12/2012(sq m)
  7. 7. On Point • Greater Paris Region Office Market Overview – Q4 2012 Page 7Distribution of investment volumes by sector(Source: Immostat/Jones Lang LaSalle)Distribution of investment by asset classification(Source: Immostat/Jones Lang LaSalle)Prime yields(Source: Immostat/Jones Lang LaSalle)Immostat zoneInvestment volumesas at end of December 2008(in € million)%Investment volumesas at end of December 2009(in € million)%Investment volumesas at end of December 2010(in € million)%Investment volumesas at end of December 2011(in € million)%Investment volumesas at end of December 2012(in € million)%CBD 1 551 18% 1 565 30% 1 648 19% 1 950 17% 2 796 26%Paris Center West (excl. CBD) 208 2% 89 2% 323 4% 725 6% 444 4%Southern Paris 574 7% 703 13% 303 3% 1 469 13% 1 831 17%North Eastern Paris 212 3% 86 2% 448 5% 432 4% 204 2%La Défense 854 10% 235 4% 557 7% 134 1% 234 2%Western Crescent 2 092 25% 737 14% 1 487 17% 2 664 22% 1 473 14%Inner suburb 1 201 14% 328 6% 1 487 17% 1 470 12% 1 068 10%Outer suburb 1 317 16% 625 12% 1 570 18% 1 455 12% 945 9%Greater Paris Region portfolio 444 5% 894 17% 832 10% 1 578 13% 1 911 18%Greater Paris Region 8 451 100% 5 262 100% 8 656 100% 11 878 100% 10 906 100%Immostat zoneInvestment volumesas at end of December 2008(in € million)%Investment volumesas at end of December 2009(in € million)%Investment volumesas at end of December 2010(in € million)%Investment volumesas at end of December 2011(in € million)%Investment volumesas at end of December 2012(in € million)%Office 7 687 91% 4 553 87% 7 213 83% 10 684 90% 8 797 81%Light industrial / Mixed 177 2% 202 4% 117 1% 206 2% 164 1%Warehouse 131 2% 123 2% 325 4% 203 2% 294 3%Retail 457 5% 384 7% 1 001 12% 785 6% 1 650 15%Paris region 8 451 100% 5 262 100% 8 656 100% 11 878 100% 10 906 100%Office prime yield rangein Q4 2009 (%)Office prime yield rangein Q4 2010 (%)Office prime yield rangein Q4 2011 (%)Office prime yield rangein Q4 2012 (%)Yearly evolutionGolden Triangle 5.75 - 6.25 4.75 -5.25 4.75 - 5.25 4.50 - 5.00 mFinancial district 6.00 - 6.50 5.00 - 5.50 5.00 - 5.50 4.75 - 5.25 mParis 5/6/7 6.00 - 6.50 5.25 - 5.75 5.25 - 5.75 5.00 - 5.50 mParis 12/13 6.25 - 6.75 5.25 - 5.75 5.50 - 6.00 5.50 - 6.00 gParis 14/15 6.25 - 6.75 5.25 - 5.75 5.50 - 6.00 5.50 - 6.00 gParis 3/4/10/11 6.25 - 6.75 5.50 - 6.00 5.75 - 6.25 5.75 - 6.25 gParis 18/19/20 7.00 - 7.50 6.25 - 6.75 6.25 - 6.75 6.25 - 6.75 gLa Défense 6.25 - 6.75 5.50 - 6.00 5.75 - 6.25 6.00 - 6.50 kNorthern loop 7.00 - 7.50 6.25 - 6.75 6.25 - 6.75 6.25 - 6.75 gPéri Défense 7.00 - 7.50 6.25 - 6.75 6.25 - 6.75 6.25 - 6.75 gNeuilly-Levallois 6.50 - 7.00 5.75 - 6.25 5.75 - 6.25 5.50 - 6.00 mSouthern loop 6.50 - 7.00 5.75 - 6.25 5.75 - 6.25 5.50 - 6.00 mNorthern Inner suburbs 7.00 - 7.50 6.25 - 6.75 6.25 - 6.75 6.25 - 6.75 gEastern Inner suburbs 7.25 - 7.75 6.50 - 7.00 6.50 - 7.00 6.50 - 7.00 gSouthern Inner suburbs 7.00 - 7.50 6.25 - 6.75 6.25 - 6.75 6.00 - 6.50 m
  8. 8. Jones Lang LaSalle in FranceParis40-42 rue La Boétie75008 ParisTél. : + 33 (0)1 40 55 15 15Fax : + 33 (0)1 46 22 28 28La DéfenseImmeuble Le Berkeley19-29, rue du Capitaine Guynemer92903 Paris La Défense CedexTél. : + 33 (0)1 49 00 32 50Fax : + 33 (0)1 49 00 32 59Saint-Denis3, rue Jesse Owens93210 Saint-DenisTél. : + 33 (0)1 40 55 15 15Fax : + 33 (0)1 48 22 52 83Le Plessis-Robinson“La Boursidière”BP 17192357 Le Plessis-RobinsonTél. : + 33 (0)1 40 55 15 15Fax : + 33 (0)1 46 01 06 37Lyon55, avenue Foch69006 LyonTél. : + 33 (0)4 78 89 26 26Fax : + 33 (0)4 78 89 04 76Contactswww.joneslanglasalle.frCOPYRIGHT © JONES LANG LASALLE IP, inc. 2013 - All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent ofJones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. Wewould like to be told of any such errors in order to correct them. Printing information: paper, inks, printing process, recycle directive.Printing information: paper, inks, printing process, recycle directive.Virginie HouzéHead of ResearchParis+33 (0)1 40 55 15 94virginie.houze@eu.jll.comSophie BenaïnousResearch ManagerParis+33 (0)1 40 55 85 15sophie.benainous@eu.jll.comManuela MouraResearch ConsultantParis+33 (0)1 40 55 85 73manuela.moura@eu.jll.com

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