The recovery expected in 2021 should bemuch faster than initially thought. France could see a rebound of between 4.5% (according to the Bank of France) and 6% (according to the Institut Montaigne). Many will be pinning their hopes on this scenario, which assumes that the unprecedented stabilisation measures introduced by many governments, particularly in the Eurozone, will spare us from the kind of prolongedeconomic torpor that followed 2009.
Following a lacklustre start to 2020, market activity came to a grinding halt in mid-March as social distancing measures kicked in, swiftly followed by full lockdown.
At the end of Q1 2020, office take-up in Île-de- France stood at 340,335 sqm. Marking a year-on- year drop of 37%, this figure has, of course, been heavily weighed down by March’s events, which effectively hit the pause button on the market. To give a full idea of the impact, the total take-up recorded for Q1 2020 is 35% lower than the ten- year average (526,950 sqm).
Every floorspace category has been hit by plummeting activity. What remains is still largely driven by small-scale transactions- representing 43% of the total, this segment is holding up better than the rest, with take-up down 24% y-o-y. The mid-range bracket (1,000–5,000 sqm) has fared less well; here, take-up has fallen by 41% y-o-y. It still plays a key role in the market, accounting for 33% of take-up in the Île-de-France region as a whole. It is the upper end of the scale (> 5,000 sqm) that has borne the brunt of recent events, with a sobering year-on-year decline of 47%. Just ten deals were recorded in Q1 2020, four of which were owner-occupier sales.
Geographically speaking, the entire Île-de-France region has seen a significant dip in activity, with the notable exception of certain Paris submarkets, where take-up has actually increased: Paris 5-6-7 has been given a 28% bump, Paris 12-13 is up 48% and Paris 18-19-20 is up 36%.
The stability of the CBD, where activity remains robust, is quite a feat given the circumstances, and owes much to three recent signings involving floorspace in excess of 5,000 sqm. Boston Consulting Group’s leasing of 20,000 sqm in the L1ve building in the city’s 16th arrondissement was especially helpful in this regard. These are, however, just a few specks of light in a sombre landscape — in the Paris market as a whole, take- up is down 20%.
La Défense also saw take-up fall 10% y-o-y. While La Défense appears to be outperforming the Paris average, it continues to fall well short of its potential, with only 21,000 sqm let in three months.
The Western Crescent, (down 51% y-o-y) and the Inner Suburbs (down 60%) have been hit hardest. Prior to the current crisis, the prevailing winds seemed to be blowing towards more outlying areas, but Q1 2020 put an abrupt stop to this trend. Only two transactions for floorspace of over 5,000 sqm were recorded this quarter, both for properties in the North Inner Suburb. As a result, take-up grew by 8% y-o-y — unspectacular, perhaps, but enough to lift this submarket above the rest.
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After shrinking steadily for five years straight, immediate supply in Île-de-France rose slightly in the first quarter of 2020, reaching a total of 2.9 million sqm. This puts it back on a par with early 2019 (stable y-o-y, but up 7% q-o-q). Still, this uptick is proving insufficient to ease the pressure on supply: the average vacancy rate for the region as a whole is still just 5.4%, too low to guarantee free-flowing activity on the lettings market.
Furthermore, most of the increase in immediate supply is attributable to existing property. The proportion of Grade A supply remained unchanged between Q4 2019 and Q1 2020. Accounting for just 20% of available space, there is still a sizeable gap between supply and demand.
This slight rebound is not uniform across the Île-de-France region. Vacancies are rising in Paris (up 9%), La Défense (up 16%) and the Western Crescent (up 5%) but starting to dry up in the Inner and Outer Suburbs (down 12% and 4%, respectively).
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