As competition for office space and investment assets in Paris remains strong, annual take-up and investment volumes are both on course to match totals achieved last year.
Following a relatively weak performance in H1 2015, office leasing in Île-de-France recovered in the third quarterly, with annual take-up forecast to again exceed 2 million sq m. This comes on the back of healthy economic growth, whereby GDP in the country is expected to grow by 1.1% this year, and a further 1.4% in 2016, following three years of very subdued growth.
Though demand remains high, rents have been left unaffected, further increasing the desirability of the market. However, limited development will continue to restrict occupier activity – the development pipeline for the next two years has reduced, with much of the new stock likely to be pre-leased before completion.
Similar to the occupier market, office investment in Île-de-France recovered in Q3, after a weaker first half of the year. Investment demand will remain strong, although some investors may be deterred by the continued pressure on pricing, and as a result, full-year office investment in Paris is forecast to match last year’s total of c. €16 billion.
Prime yields are expected to maintain stability until the end of the year, but could harden by at leae 25 bps in the CBD by mid-2016.
Heena Kerai, International Research Analyst at Knight Frank, commented: “GDP growth in France is gathering significant momentum, with forecasts of 1.1% expected for 2015, compared to just 0.2% last year. Consequently, occupier and investor confidence will remain positive and despite stock limitations, we can expect both markets to put in a strong performance in the coming quarters.”