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The Paris office marketOverview & forecast 2013
3 The Paris office market – Overview & forecast 2013EditorialEconomy act 1 to 4: The "double dip" is finally afact in Europe …In our previous issue of the “Overview and Forecast” inDecember 2011, the economic outlook for the Euro zoneand France was darkening and this year had done nothingto contradict this forecast. 2012 is the logical result of amechanics of economic and financial events which haveshaken the world since 2007 and which have led theeconomies of the Euro zone into a "double dip" in 2012.Act 1 started with the financial crisis in the summer of2007 and culminated in 2008 with the bankruptcy ofLEHMAN BROTHERS. Act 2 began in 2009 withdeveloped countries slipping into a recession. The Statesquickly implemented and coordinated social and economic"buffer" policies at the expense of a sharp rise in publicdebt. On the other hand, the "private" financial crisis wasalso counteracted by the management of toxic debt frombanks by some states (e.g. Ireland). Act 3 concerns thesuccess of some of these coordinated proactive policieswith a rebound in economic growth in 2010. Nevertheless,this improvement is short-lived since it is immediatelyfollowed by the European sovereign debt crisis (Greeceand Ireland first then Spain, Portugal and Italy) in the wakeof the explosion of debt from Member States. Finally, act 4started when, spurred on by international financeoperators and large international (IMF, OECD) andEuropean bodies, "peripheral" countries implementedextremely severe austerity policies.If in principle the "depressing" effect of austerity on growthwas already known, the impact on the economy waslargely underestimated. The current situation of Europeancountries is partly due to this error.Initially, the commonly accepted equation was that areduction by 1 point of GDP of the structural deficit wouldresult in a fall in growth of 1/2 point. Last October, the IMFreviewed this analysis as it recognised that the impact ofthe austerity measures had been clearly underestimatedand that the growth reduction coefficient was actually 0.9to 1.7 instead of 0.5. The result is that countries inSouthern Europe are back in recession and are sufferingthe chain of events of the "austerity trap": attrition ofdomestic demand, rapid deterioration of activity andconfidence indicators, unemployment, recession,continuous increase in deficits and debt; and finally theknock-on effect of other countries in the Euro zone into the"double dip".Since the end of 2011, a deterioration in economic growthhas been obvious in the Euro zone (stagnation followed bya decline in GDP). We have noticed significant disparitiesfrom one country to another since 2012: growth in theNordic countries and in Germany, and recession in theSouth and France in a middle position of 0. Thisdeteriorated environment has resulted in a rapid fall ofbusiness climate and activity indicators since the spring incountries in Core Countries.Indeed, with regard to international trade, the maincustomers of European companies are primarilyEuropean; Europe accounts for nearly 65% of the exportflows from Germany and 62% from France (including 15%for Italy and Spain); the recession of some Europeancountries could not do anything else than affecting theireconomic partners, which is the case this year.In recent weeks, the publication of the European GDPfigures, although not as bad as expected, confirmed arecession and forecasts for the 4th quarter suggest furtherdeterioration.Along with this decline in economic activity, the currentfinancial situation has also been turbulent this year.Another psychodrama almost took place this summer onthe financial markets in relation to the sovereign debt ofperipheral countries. In July, new rumours about Greeceleaving the Euro and the sharp rise in Spanish interestrates led the ECB to make assertions to bring a certaincalm to the financial markets. At the same time, theimplementation of the Basel III regulations for banks,coupled with their existing balance sheet problems, had apro-cyclical effect on the economy due to tighter access todebt for all economic players.In this European landscape, France holds the middleground. GDP has stagnated for a year but the economyhas not fallen into recession. Business climate and activityindicators have deteriorated but less than the Europeanaverage.
4 The Paris office market – Overview & forecast 2013The employment situation has deteriorated on a monthlybasis but with large regional disparities. In addition,France, in spite of its high debt and the downgrading of itsrating (Standard & Poor’s in January and Moodys inNovember), has a historically low debt cost with a returnon 10-year OAT bonds of between 2 and 2.30% since thesummer (i.e. a zero interest rate loan given inflation)....which is partly reflected on the office market inthe Greater Paris regionAs commercial real estate does not operateindependently, poor economic conditions affected themarket in 2012. Since the start of the year, the officeleasing market in the Greater Paris region hasexperienced a slowdown of around 20% compared to2011. Year-end forecasts have estimated the number ofsquare metres taken up in the Greater Paris region toreach 2.1 million square metres, representing a decreaseof approximately 15% compared to 2011.The economic crisis is reflected at two levels on the officemarket in Paris. Firstly, in the inability of the market toabsorb the available supply which is stable for the 3rdconsecutive year. With 3.5 million square metresimmediately available, the vacancy rate in the GreaterParis region is around 6.7%, which places Paris as one ofthe cities with the lowest levels of availability in Europe.The only significant change in terms of the availablesupply is the slow but constant reduction in the number ofnew square metres. The second concrete sign is thechange in rent in 2012. In most markets, headline rentalvalues have demonstrated a downward trend since thestart of 2012, particularly in sectors where there is anabundant supply (Western Crescent). Such a fall in theofficial values masks a pronounced change in economicvalues which are tending to deviate further and furtherfrom the rent displayed.Companies, following a crisis management rationale focuson costs, adopting opportunistic behaviours and lookingfor bargains from owners who are increasingly inclined togrant them substantial incentives to fill their buildings. .More and more frequently, companies are alsorenegotiating their leases, using every opportunityavailable to them to reduce their rent (three-year periods,end of leases, index-linking) whilst landlords are becomingincreasingly willing to make concessions to keep theirtenants.In contrast, the investment market is playing its own muchhappier part. Since the start of the year, the volumesinvested on the Paris market are ahead of 2011. It seemsunlikely that this advance will be retained in the 4th quartergiven the acceleration which occurred on the market in2011 due to the end of the tax benefit under Article 210-E.At the year end, the total investments in the Greater Parisregion should be between 10 and 11 billion euros.The investment market for the past year has been markedby several memorable events. Firstly, the real re-internationalisation of the players, with a sharp increase ininvestments by foreign investors.Capital flows into France have diversified towards theeast, with a significant part coming from investors fromAsia and the Middle East.On the other hand, the number of large transactions hasalso increased, with no less than three transactions ofmore than 500 million euros completed, the highest since2007. Active investors on the Paris market are still focusedon prime assets. Fierce competition has even led to acontraction in yield of the most sought after assets. Finally,this year, we have noticed the emergence of newfinancing channels such as those provided by insurancecompanies and debt funds which are placed on "core" and"core+" assetsVirginie HouzéHead of Research France
5 The Paris office market – Overview & forecast 2013The leasing markethas adjusted to theeconomic context"Filling vacant buildings is the toppriority of owners, which even comesbefore the amount of rent charged"Jacques BaggeHead of Leasing ParisLarge turnkey contracts have allowed the market toget back on its feetAlmost sluggish since the start of the year, economicgrowth has not been forthcoming. Even so, this year, theleasing market for office space should still recordapproximately 2.1 million sq m of take-up, although this isdown compared to last year.Without any excessive optimism, the market mainly owesthis honourable result to the settlement of very largetransactions often initiated several months previously, thelast conditions precedent of which have been recentlylifted. Therefore transactions for more than 5,000 sq mamounted to more than 40% of the area leased in theGreater Paris region at the end of September.In addition, two basic trends seem to have emerged onthis market segment. Firstly, the share of presales isincreasing. In 2009, 1/3 of leased surface area was pre-sold, the remaining 2/3 was leased in existing buildings. In2012, the ratio was reversed. More than half of largesurface areas are leased in new, undeliveredbuildings. Another major trend is the increasing share ofturnkey properties. If pre-leasings are more numerous,they now generally go through tailor-made operations. Theshare of "standard" pre-leasings is less than half than in2009 in favour of turnkey transactions, particularly rental,which account for nearly half the large pre-leasingtransactions in 2012.In the case of large transactions over 25,000 sq m, thisyear they are exclusively concerned with turnkey leasesand individual user accounts; the main motivation of whichis the aggregation and consolidation of staff.Breakdown of the take-up for individual transactions above 5,000 sqm *Source : Jones Lang LaSalle* as at end of Septembre
6 The Paris office market – Overview & forecast 2013How is this phenomenon explained?Firstly, this is an illustration of the professionalization ofthe real estate function. The Corporate Real estate is nowmuch more professional with more detailed requirementsand very precise specifications. Moreover, if manycompanies are turning towards this type of operation, it isbecause the existing supply of office space on the marketdoes not necessarily correspond to their expectations ortheir specific needs.For example, at the moment, the campus model is verypopular with businesses, which are, to some extent,abandoning the tower model which is sometimesconsidered to be expensive and a bit arrogant. Thereforethis year, the companies which have completed the largesttransactions, EDF (33,000 sq m in Palaiseau), THALES(49,000 sq m in Vélizy-Villacoublay) and SANOFI (50,000sq m in Gentilly ) have chosen this type of building.Attractive lease conditions for new buildings thereforestrengthen this interest and encourage some firms to builda tailor-made operation.In a constrained economic environment, sectors in theinner and outer suburbs have therefore appealed tobusinesses for which the price factor has been, and still is,a determining factor.In general, the sectors which, this year, have new supplyat competitive prices, have showed good levels of activityat the expense of markets with unsuitable supply at highrents.Supply: torn between oversupply and shortageFor almost three years, the stock of office space availablein the Greater Paris region has remained at an equal levelof around 3.6 million sq m, which at the end of September,represented a vacancy rate of 6.75% for the region. Therelative slowdown in demand has not therefore resulted ina rise in the immediate supply this year.The crisis has highlighted extremely marked differencesbetween geographical areas in terms of availability.Overall we are seeing a two-tier market with Paris, on theone hand, which is suffering from a lack of products andquality supplies and the inner suburbs, on the other hand,which is generally "supply-rich" or even "over-supplied" inthe western Paris region.With a vacancy rate of 4.3%, the supply in Paris citycentre tends to fall faster than the average (-16% over 2years) whereas it has steadily increased in the innersuburbs (+13% in 2 years), mainly in the WesternCrescent (+15% in 2 years), where the bulk of the newsupply and completions are concentrated. In the GreaterParis region, the share of available new buildings iscontinuing to slowly decline with 22% of vacant stock(compared to 26% one year earlier). Once again behindthis average, significant disparities are appearing amongthe sectors. The inner suburbs (including La Défense)have, to date, included most immediately available newsupplies with a total of 500,000 sq m, i.e. 57% of vacantnew supplies in the Greater Paris region, unlike in Pariswhich includes four times less.Vacancy rate as at 30th September 2012Source : Jones Lang LaSalle
7 The Paris office market – Overview & forecast 2013This imbalance is not likely to improve since, in 2013,almost 500,000 sq m, currently under construction andavailable for leasing, could add to the vacant stock, if notenants are found by then. More than 80% of these areasunder construction are in the inner suburbs, whichrepresents no less than 410,000 sq m under developmentand deliverable by the end of 2013 (including 120,000 sqm in La Défense with the "Eqho" and "Carpe Diem"towers).In the Western Crescent, the Northern Loop (with92,000 sq m launched speculatively mainly in La GarenneColombes) could mechanically see its vacancy rateincrease, which is already high at almost 14%. The sameapplies for the Southern Loop which currently has 60,000sq m of projects launched speculatively in Boulogne-Billancourt, available within one year, awaiting marketing.The same is true in the Southern inner suburbs, which hasbecome an area naturally sought after bytelecommunications companies, manufacturers andpharmaceutical groups, where the new supply availablecould double in 2013 (60,000 sq m currently underconstruction).Good news, however, for Péri-Défense where very fewnew projects have been launched speculatively (25,000 sqm), as the vacancy rate is already near 17% despite goodleasehold performance this year. The same is true in theNorthern Inner Suburbs, where few new transactions willemerge speculatively in the course of next year (22,000 sqm), as the vacancy rate is more than 11% in the sector.In Paris, future new supplies expected in 2013 onlyrepresent 70,000 sq m in total. They are mainly situated inthe 17th district (partly in the ZAC des Batignolles) and inthe 11th district with the "Parisquare" operation. In theCentral Business District, only the "Solstys" operation willbe delivered during 2013, with slightly more than 10,000sq m remaining available.The dichotomy of market supply should not thereforediminish in 2013, as it is relentlessly putting continuouspressure on rental values.Projects under-construction to be completed within the next 12 monthsSource : Jones Lang LaSallePartly of totally vacant projects100% pre-letProjects under construction by size
8 The Paris office market – Overview & forecast 2013Rent: a balance of power in favour of tenantsOnce again, we are finding a two-tier market in theGreater Paris region. In Paris, we can see a dominanttrend in the stability of headline values (except the 5/6/7thdistricts are down) given the limited supply and asustained level of demand for the capital which capturesmore than one third of areas leased at the end ofSeptember (although this level is in decline).The Central Business District has returned to its initialposition as the most expensive market ahead of the leftbank market (5/6/7th districts) which had displaced it lastyear following a series of transactions of around €830/ sqm. It even confirms a slight increase in "prime" rent whichhas gone from €770 to €795 /sq m (+3.25%) during thethird quarter. In the Golden Triangle, these values evenreach €805 / sq m due to a recorded scarcity of "prime"buildings. Consultancy firms and law firms, in competitionfor the few new buildings in the sector, are willing to paythe high price.In the Western Crescent, and particularly in the InnerSuburbs, the high rental supply has instead put adownward pressure on values. If headline rental valueshave so far only recorded a limited fall, the fact of thematter is that economic rents are becoming increasinglydisconnected from the values displayed. Commercialincentives are tending to increase in some areas,particularly in locations where risks have been taken byowners and where the vacancy is high.In general, rents are fiercely attacked by businesses whichare logically reducing their costs. Some owners havestarted to adjust their values downwards, more in line withmarket reality which has changed in the past 5 years.Caution is still the order of the day for owners. Veryattentive to businesses, they are more imaginative thanever and are willing to make significant efforts to fill theirbuildings and to thereby reduce the vacancy rate of theirportfolio as well as through renegotiations to avoid anydeparture of tenants.In La Défense, "prime" rent is also experiencing its first dipand during the 3rd quarter was positioned at €530/sq m,due to a lack of large transactions recorded for newbuildings. Beyond that, since 2006 the business districthas been suffering a significant decline in its leasingactivity in an increasingly competitive environment, withrents perceived as expensive. The dispersed, belatedrepositioning of rents according to the strategies of theowners, the aging of stock and the unsuitability of the typeof buildings to meet the current demand of business are allfactors which explain this difficult period for the sector. Thesharp increase in immediate supply expected in 2013 withthe first deliveries of the towers in the Renewal Plan for LaDéfense will inevitably continue to influence "prime" rentalvalues.
9 The Paris office market – Overview & forecast 2013Large transactions,drivers of theinvestment market"Paris has enhanced its image withinternational investors which weretraditionally positioned on the Londonmarket"Stephan von BarczyHead of French Capital Markets GroupThe buoyant activity of the Paris investment marketobserved since the 2nd quarter of 2012 continued duringthe summer, with a volume of transactions at the end ofSeptember which is ahead of 2011. However, the 4thquarter should not be as active as last year which wasdeeply affected by an activity related to the end of the taxbenefit under Article 210-E. Dynamics and investorappetite has led us to revise our initial forecast for 2012upwards, with a total investment in the Greater Parisregion, which should be between 10 and 11 billion euros.Three sales for more than 500 million euros haveboosted the marketThis year, the investment market in the Greater Parisregion has been sharply boosted by very largetransactions, particularly by those for more than 500million which made a comeback over the summer.In general, Paris primarily attracts large investors, withalmost 70% of capital invested there. The location of thethree biggest sales of the year illustrates this: QATARINVESTMENT AUTHORITY (QIA) has purchased fromKANAM two office buildings in a portfolio: the "Néo" and"Cité du Retiro" buildings for 622 million euros and "52-60avenue des Champs-Elysées" (currently occupied byVIRGIN MEGASTORE) from GROUPAMA for anestimated amount of around 500 million euros. Finally, JPMORGAN (for an Asian fund) purchased "52 avenueHoche" and "Avant Seine" from EUROSIC for 540 millioneuros.Overall, sales in the segment of more than 100 millioneuros are rising and represent more than half of thevolume invested in the Paris region since January. If weanalyse the risk level of these sales, we can see thatinvestors are still cautious in this time of economic turmoil.They are mainly positioned on secure or ultra-secureproducts (57% and 28% respectively), in summary, onassets without any vacancy, and with leases for a fixedterm of at least 6 years at the time of purchase.Risk level of the investment transactions above €100 million in the Paris regionSource : Jones Lang LaSalle
10 The Paris office market – Overview & forecast 2013The capital of Sovereign Wealth Funds is dominantAlready started last year, the investment market hascontinued its re-internationalisation throughout 2012, andinternational investors accounted for more than half of thecapital invested since the beginning of the year.Whether owned directly or indirectly by the State,Sovereign Wealth Funds manage public financial assets(foreign exchange reserves, surplus savings and revenuefrom natural resources such as oil and gas). To investtheir large amount of liquidity, major Sovereign WealthFunds are turning to real estate, mainly distributed inEurope between London and Paris.The largest Sovereign Wealth Fund in the world1,NORGES – which its government has authorised since2011 to invest in real estate – made a prominent entranceonto the Parisian market last year through the creation ofa joint venture over the summer with AXA REIM (50% of1.4 billion euros). NORGES reconfirmed its interest inParis this year by creating another joint venture, this timewith GENERALI. The insurer gave the joint venture fivebuildings in Paris worth 550 million euros, of which theNorwegian pension fund takes 50%. It has, in total,invested more than 1 billion euros in 18 months in theGreater Paris region.Finally, number two, ABU DHABI INVESTMENTAUTHORITY (ADIA) purchased "90 boulevard Pasteur"from CREDIT AGRICOLE for an estimated 250 millioneuros.The appetite of these investors, which is mainly focusedon beautiful Parisian stone and on the best locations,holds true once again with two transactions signed on theChamps Elysées this year. These are numbers 52-60 soldto QIA and number 100 purchased by NORGES.1 According to the Sovereign Wealth Fund Ranking (October2012)Source : Jones Lang LaSalleOrigin of the cross-border investment in France201220092007
11 The Paris office market – Overview & forecast 2013And mid-size transactions?In general, the capital for this asset band of between 50and 100 million euros mainly comes from domestic orEuropean investors.If the largest transactions have been won by internationalbuyers, the market of medium-sized transactions is still thefavourite hunting ground of French investors who areresponsible for more than 60% of the volumes invested inthis asset size. The share of French investors has becomelarger than foreign investors, particularly in relation to verygood levels of collection from REITs in 2012, which allowsthem to be positioned on larger unit-sized assets than inthe past.German investors - historically active purchasers - wereabsent during the first half of the year (only 3% of investedcapital) or were even net sellers. However, theyreappeared in the second half of the year, totalling 13% ofthe capital invested on the Paris market. Of particularimportance is the purchase of the head office ofl’EXPRESS rue de Châteaudun in Paris by ALLIANZ andthe sale of "Forum 52" in Issy-les-Moulineaux to RREEF.In contrast, open-end funds, which have begun to liquidatetheir portfolios, are starting to market assets, such asKANAM or AXA IMMOSELECT with the sale of the"Liberté 2" building in Charenton-le-Pont for 255 millioneuros.Relative stability of prime yieldsPrime yields have generally remained stable on secondarymarkets in Paris and in the inner suburbs.However, investors are still willing, in some cases, toposition themselves at lower yields for products, the cashflow of which is secure over a long period, particularlymedium-sized products (50 million euros) which have thecharacteristics of "trophy" buildings (situated in Paris, incut stone, with top of the range services).Consequently, we have noticed a fall in yield by 25 basispoints on the best markets in Paris. Thus, in the GoldenTriangle, the prime yield is positioned in a range between4.50% and 5.00%Investment transactions above €100 million in the Paris regionSource : Jones Lang LaSalleSingle assetAssets sold within a portfolio
12 The Paris office market – Overview & forecast 2013Outlook: 2013 a yearof opportunitiesThe economy in the continuation of Act 5: when willit recover?Growth prospects for the coming months have beenrevised downwards and according to economists, the startof 2013 will not announce the long-awaited recovery.In France, 2013 will be the year when fiscal austeritymeasures are in full effect in households and businesses(the tax burden will be at its historical high), while at thesame time, employment prospects are poor. It is likely thatone of the main drivers of French growth, consumption,will remain sluggish due to a decline in the standard ofliving of households and job worries. The need to initiatestructural reforms in France is even more relevant, whichMoodys highlighted again in November when Francesrating was downgraded.At international level, 2012 was the year of awareness onthe part of large organisations such as the IMF and theOECD: austerity at all costs and at any price is a mistake,in as much as its effects on the economy are negative.There has been a change in tune in recent months. Yes tothe restoration of public accounts but at a reduced pace inorder to safeguard economic growth as much as possible.In recent weeks, Europe and the markets have showngreater tolerance on the subject: an easing of objectivesand of deadlines for budget compliance without themarkets being "up in arms" against these announcements.Europe is seen as the sick man of the world and its weightin the global economy makes its recovery even morenecessary for growth.The new buzzword in France is commercialcompetitiveness as the country must regain market sharewhich has been lost over the past ten years oninternational markets. Companies have already beengiven some signs in recent weeks: negotiations on jobsand employment contracts between unions and employershave started and the government has introduced anunconditional tax credit for companies of approximately 20billion euros. It remains to be seen if the negotiations willlead to an agreement which is acceptable to all partiesand if the company tax credit will be enough to give themthe boost they need for recovery.Therefore, if we can legitimately forecast that the first fewmonths of the year will still be marked by stagnation orrecession, decisions on changes during the second sixmonths are unpredictable. In any event, if activity shouldpick up mid-year, the effects will not be immediate on thejob front or on company investments which shall first try torestore their margins..
13 The Paris office market – Overview & forecast 20132013: the hunt for lease vacancies for owners, thehunt for costs for businessesThe harsh economic environment and risingunemployment could affect the commercial real estatemarket in 2013. SME activity is closely correlated to acountrys economic situation and the financial difficulties ofcompanies can be felt. For 2013, we expect the level oftake-up to be slightly down compared to 2012 between 1.9and 2 million square metres.Businesses are revising their real estate policy and thetype of demand is changing profoundly. For the last 5years, businesses have been in crisis managementdominated by the logic of reducing their costs. Themajority of this years transactions have been made withthat logic. Demand will remain essentially motivated by asearch for savings and a rationalisation of occupied areasby bringing together teams. Businesses will therefore try tovacate any unoccupied or under-occupied areas or will atleast try to find a subtenant.A lack of visibility on their own operating results does notinduce them to commit to costly relocation projects whichare most often accompanied by an internal reorganisationof the companys workforce. They are turning moretowards renegotiating their leases. Enjoying rapid growththis year, they will undoubtedly occupy a significant shareof the market next year, facilitated by successiveincreases in the construction index. All opportunities shalltherefore be exploited.If the renegotiations do not result in a favourable outcome,businesses will consider, in a second stage, relocation.They will have to face extremely constrained environmentsin terms of cost and geography. For social reasons, theywill often prefer a similar environment to their currentlocation, leading to endogenous movements. Establishedtertiary districts, which are currently offering attractivelease terms, could benefit from this dynamism as thedifference in rent between central sites and peripheralsites is tending to shrink.Finally, 2013 could be marked by several opportunisticmovements by businesses in a favourable market in orderto relocate to new buildings, close to public transport,which are directly connected to the capital.Supply is abundant, particularly in the inner suburbs andthere is no shortage in the supply of new properties. Inaddition, approximately 500,000 sq. m of new projectscurrently under construction in the Greater Paris Region,to be delivered by the end of 2013, will increase thenumber of new buildings available in some "supplier"sectors. In a slowed-down leasing market, we cantherefore examine the time taken to clear this new supplywhen, according to a study we conducted, on average30% of new office space programmes (excluding turnkeyor individual user account), delivered between 2009 and2011, were occupied at the time of delivery, 40% after 6months and 55% after one year.Within this context, rents will remain under a downwardprice pressure, particularly in areas where the availablesupply exceeds demand. The apparent resistance of rentsso far has started to crack, and the rental values displayedwill continue to fall in 2013 as economic values arealready low. According to owners, incentives couldbecome even more pronounced in some "over-supplied"sectors.In La Défense, the leasing market will only recover with areadjustment of the values. 2013 should therefore be ayear of transition, before a more pronounced recovery in2014-2015 once the values have been adjusted and thesupply of new properties has been renewed. Moregenerally, in the inner suburbs, the markets shouldprosper due to a high quality supply for competitive rents.In Paris city centre, particularly in the Central BusinessDistrict, the lack of supply should keep "prime" rentalvalues and second hand rents for the best products at ahigh level. However, this is a specific, isolatedphenomenon related to the lack of qualitative supply in thissector.
14 Le marché des bureaux en Ile-de-France – Bilan & Perspectives 2013A return to a conventional level?The outlook for the investment market in 2013 should beat a "conventional" level, observed for 10 years. We aretherefore forecasting an invested volume of between 8and 10 billion euros next year.If the first few months of the year are usually relativelyquiet, the first half of 2013 could be an exception. Thisyear, the arbitrage plans of investors have begun muchearlier than usual and should be released at the beginningof next year.In an uncertain political and fiscal context, investorsremain very cautious in their analyses even though rentalvalues are under pressure. However, the attractiveness ofParis at European level and the resilience of its real estatemarket are all factors which will continue to attractinvestors from around the world..We await the arrival of new investors from Asia, such asKorean and Malaysian investors, as well as Chineseinsurance companies which have recently been allowed toinvest in overseas property.German investors should also be present.With regard to French investors, insurance companiesshould still be active on the Paris market to acquire high-quality assets with fixed long-term leases.The interest of Sovereign Wealth Funds for the Parismarket could slow down next year. Having invested inLondon and Paris, some funds are looking to invest inother "core" European markets such as Germany orSwitzerland. NORGES, along with AXA, has invested 784million euros in Germany by purchasing the "Kranzler Eck"in Berlin and the "Neue Welle" in Frankfurt from RBS.They also acquired under a sale and leaseback, theheadquarters of CREDIT SUISSE in Zurich for 800 millioneuros.In terms of product typology, purchasers will undoubtedlybe primarily looking for quality assets, with secure yields.Prime yields are therefore likely to be maintained for thebest assets.The "value added" investors’ interest for "secondary"assets is real. However, this requires the market to havenon "prime" assets to arbitrate, that buyers and sellersagree on the asset valuation and that they are fundable.Note that investors are able to find funding for "core"assets. For "value added" assets, banks do not hesitatewith regard to their most loyal customers and high-qualityborrowers.