Renting market has profited from an excellent dynamism

Despite the slowdown of activity in comparison to the extremely active first quarter in the French market, the take-up was 6% higher in the first 9 months of 2018 with 1 874 000 m² transacted. In all French sectors, with the exception of the West Crescent, the take-up clearly advanced in this period.

Paris represents 42% of all the m² placed in Ile-de-France. Paradoxically (but logically), this strong dynamism reduces its margin for progress, as the available offers are becoming increasingly scarce. Note a very strong increase in the Paris Centre West sector (excluding CBD), which saw its rental market explode (+67%) with 145,000 m² sold in 9 months. After an already exceptional year in 2017, the Central Business District (CBD) is outperforming with a further 2.3% growth despite the lack of available space and very strong growth in rents.

Outside Paris, La Défense is making us forget its sluggish start to the year with an 18% increase. The periphery is not to be underestimated, with increases of 11 and 25% respectively for the inner and outer suburbs.

This dynamism should be considered in light of the economic environment, which is rather favourable to the rental market. Despite a slowdown in growth in the first two quarters, the 0.4% recovery in the third quarter made up for the delay. The recovery in household consumption, the increase in business start-ups (+17.9% in September 2018) and the stabilisation of unemployment have contributed to the renewed dynamism of the French economy and consequently of the rental market in Ile-de-France.

A historically low vacancy rate in the CBD

As a direct consequence of the dynamism of the rental activity, Savills notes that the immediate supply has fallen below the 3 million m² vacancy rate, down 15% year-on-year. This trend is widespread in all sectors of the region, with a few exceptions in the case of major new bid projects.

In the CBD, the vacancy rate is historically low (1.5%!). The trend extends to the other arrondissements of the Capital reaching the business district of La Défense. With a vacancy rate of 4.5%, the 200,000 m² of new supply expected within 2 years will not seem that much.

It is outside Paris, particularly in the Western Crescent and the Inner Suburbs, that the immediate supply is more generous. On the North and South Ends and in Péri-Défense, the vacancy rate exceeds 10%. But for how much longer?

A growing trend of rising rent prices

When supply cannot meet demand, prices rise. Thus, the dynamic rental activity coupled with the immediate decreasing supply is impacting rental values not surprisingly.

The most popular sectors are the first to see their rents soar. In the CBD, the average new rent reaches 750€/m2/year, so it is no longer surprising to see offers at more than 800€/m2/year for some buildings. Backed by the CBD, the Paris Centre West sector is following the trend with an average new rent of 683€/m2/year (+23% in one year). The sectors neighbouring the CBD also "benefit" from this upward trend, without discouraging users for the time being.