Paris-La Défense: a growing appetite for office space!

La Défense | 27 February 2017

2016 was another great year for office real estate in Europe's premier business district and Seine Arche area. While EPADESA continues to successfully pursue its policy of diversifying urban functions in residential, recreational and hotel real estate, the upward trend in office property shows no signs of stopping thanks to the strategy implemented by the public development authority. New locations, new development launches, large-scale investments and more: everything is looking up despite a market context that remains highly competitive.

Office leases on the rise: + 93% in 2016
For 2016 as a whole, 275,000 m² (2.96 million sq. ft.) of office space was marketed in Paris-La Défense. These volumes represent a 10-year record. The business district, which represents 7% of the Paris Region office property supply, accounted for nearly 10% of leased surface areas and 25% of leases on surface areas greater than 5,000 m² (54,000 sq. ft.). Examples include the 44,000 m² (473,500 sq. ft.) rented by RTE from Groupama in the Window Building in late 2016, as well as the confirmed arrival of Deloitte, which will take up 31,000 m² (333,500 sq. ft.) in Majunga Tower.

Rents have stabilized and remain much less expensive than in London
In terms of rental values, Paris La Défense makes the most of its attractive rents, which come in three times lower than those in London. Indeed, face values fluctuate between €450 and €500/m²/year compared to €1,200/€1,500 in the British capital. The average, which came to around €450/m²/year in 2015, rose to €480 in late 2016, climbing to above €500 in the newest buildings.

Extremely active investors and thoroughly confident users
2016 was also an exceptional year for real estate investments, with €2.3 billion in acquisitions carried out within the business district (i.e. 10% of the total amount invested in the Paris Region during the year). This volume testifies to the confidence expressed by international funds such as ADIA (Abu Dhabi Investment Authority), which is launching construction of Alto Tower without pre-marketing, as well as major corporations that are relocating in the area developed by EPADESA. Vinci is a prime example, with its plans to build its future 74,000-m² (796,000-sq. ft.) campus in the Les Groues neighborhood.

A 40% drop in empty offices over four years
With regard to the office occupancy rate, the decline in vacancy that began four years ago has continued, with vacant offices accounting for a mere 7.8% of the total supply (compared to nearly 13% in 2013). This level is nearly in line with the average in the Paris Region (6.6%) in a market segment that includes many large surface areas, generating greater variations than in a typical market.

“Paris La Défense is consolidating its status as a benchmark business hub on an international scale,”
says Jean-Claude Gaillot, Chief Executive Officer of EPADESA. “As the number one business address in the European Union, the neighborhood boasts intrinsic strengths and is generating ever greater interest among companies, from multinationals to small businesses. Development initiatives planned or underway, as well as the arrival of new lines of public transportation in the coming five years to better link the district to Greater Paris, will further enhance its appeal. International economic players are highly sensitive to these topics in the wake of Brexit…”

An extended perimeter
The business district's expansion provides further evidence of its robustness. Office developments secured or underway in Terrasses de Nanterre and along Boulevard de la Défense are coming ever closer to La Défense. Immostat, the organization  in charge of harmonizing statistics on the business real estate market, has decided, along with EPADESA, to pay particular attention to this area, located right on the edge of the business district. Note that Boulevard de La Défense starts at the Grande Arche and runs alongside the new Jardins de l'Arche neighborhood to Terrasses de Nanterre, where the Axa campus currently stands (with Icade's La Défense campus coming soon). The boulevard links the traditional business district with its natural extensions and Les Groues, which will be the key development hub of the area in the coming years with 200,000 m² (2.15 million sq. ft.) of offices.

And tomorrow?
Following Crédit Mutuel's take-up of 21,000 m² (226,000 sq. ft.) in the recently delivered D2 Tower in late 2016, the new year is exhibiting the same momentum, particularly with AG2R La Mondiale announcing its acquisition of the Belvédère project (nearly 18,000 m² or 193,750 sq. ft. of offices located at the foot of the Grande Arche) from Vinci Immobilier. The supply of new (or redeveloped) offices should continue to decline, as no office delivery is scheduled for 2017.

The figures mentioned in this press release are drawn from Immostat and CBRE data.

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