Country Spotlight: France

The French economy is currently growing at a 2 percent rate and unemployment has hit a 9 year low! This has increased business confidence and has led to an increase in demand for office space. The average cost for renting a new or refurbished space has increased by 5%, reaching €381 per sqm – this is the highest since Q3 of 2012, reflecting the strong leasing activity and somewhat limited supply.

The office market is looking strong with the last 6 months resulting in impressive take-up figures. Catella has reported that Q4 2017 resulted in 871,000 sqm of office take-up, a number that hasn’t been seen since 2000. 2018 continues to show positive signs with Q1 totalling 718,000 sqm of office take-up, the best first quarter in 10 years!

Knight Frank has reported supporting statistics and comments to those of Catella, reiterating that Q1 2018 has shown the occupier market off to a flying start! Knight Frank has reported figures which demonstrate the Ile de France market has enjoyed an abundance of large deals, with 24 transactions for more than 5,000sqm.

It was highlighted at MIPIM 2017 that the tech sector is having a major impact on office demand. Co-star reported last year, that since the French government initiated a campaign to promote France as a new ‘Digital Republic’ and big names such as Google, Amazon and Apple all occupying space in central Paris, demand for workspace from tech occupiers has been rising consistently over the past 3 years.

Co-working spaces are proving prevalent and a growing trend, accounting for 23% of all lettings in Q1 2018. The co-working trend has spread all across Europe as tenants are starting to demand new styles and more flexible workplaces. This is true not only for tech companies but all industries, especially common in start-ups who may be undergoing rapid headcount growth.

With the demand in office space rising, it is not surprising that it has brought investor interest to the region. Investors can anticipate a solid rental market, especially in core central markets. Almost 3.7 billion Euros has been invested in France during Q1 2018 – 2.8 billion of which dedicated to office space – this is 5% more than the same period in 2017. Some of the most significant transactions in Q1 2018 are Linkcity’s sale of Chapelle International (33,000 sqm) to Blackstone, AXA IM’s sale of Green Walk /Suresnes (24,000 sqm) to M&G Real Estate and Carlyle’s sale of Tour Aurore  (27,000 sqm) to Aermont Capital.

The office market in France is enjoying great momentum with reports showing positive signs that it will continue throughout the year.