Market View Real estate markets
CB RICHARD ELLIS
Market View Real e stat e m ar ket s ILE-DE-FRANCE / FRANCE
1st quarter 2011
ECONOMIC CONTEXT The economy is still in a fragile condition and bad news is cumulating worldwide: a possible recession in Japan, potential insolvency of some European states, a rise in interest rates in Europe and accelerating inflation due to a rise in the price of raw materials and political unrest in Arab countries. World growth will no doubt shrink to a level below that seen in 2010.
TRENDS Investment France Investment Prime yields for offices
Office market Ile-de-France Take-up Immediate supply Average rent
Offices in regions* Take-up Immediate supply Average rent Industrial space and warehouses in regions Take-up Immediate supply Average rent
Logistics France Take-up Immediate supply Average rent
=
By contrast, the prospects for companies are brighter. The business climate in France improved in March and is now at its highest in 3 years. Order books are looking healthier and exploitation rates of production capacity are climbing. Entrepreneurs need to modernise their production tools. So unlike in 2010, investment should bolster growth in 2011. This is even more likely because money is still cheap and the conditions for obtaining credit have relaxed. Indeed the amount of credit given to non-financial companies rose again in February, by 1.7%.
In the 4th quarter 2010, GDP in France only rose by 0.4% which is virtually the same as in the previous quarter. Household consumption was, nevertheless, quite strong, rising by 0.9%. But this result is misleading because it was largely thanks to discounts given for the purchase of cleaner cars, a measure which came to an end at 1st January 2011. Spending will be kept in check this year – the forecast is for a rise of 1.5% – by the termination of government support measures, fewer tax incentives, high unemployment and rising
In this environment, French growth should consolidate with forecasts in the region of 1.7% for 2011. This rise will only enable a slight improvement in activity and the job market.
THE INVESTMENT MARKET IN FRANCE A cautious start to the year
inflation. Together these factors point to only modest improvements in purchasing power.
Slightly less than 2 billion euros were invested in standard commercial real estate in the 1st quarter 2011 in France. This relatively modest volume was due to a natural slowdown in activity after the usual pressure to close deals before the end of the year, which had made the 4th quarter 2010 particularly active. Another important element was the sale of Europe Avenue in Bois Colombes; this transaction alone represented more than 20% of investment. The investment market’s fundamentals have only changed slightly in recent months with the
market continuing to open, albeit at a very slow rate. The market for secondary or insecure assets was difficult as most investors remained very averse to risk. Even the slightest technical, legal, tenancy or other hitch found at the data room stage is unacceptable to investors. Nevertheless, the yearly growth in the quarterly volume of investment rose to 34%. In addition, investors are issuing instructions to sell assets and agents are being consulted more about good investment products, leading us to believe activity could pick up in the months ahead.
Quarterly trends in investment in standard commercial real estate in France (in billion euros) 8
Trend / 1st quarter 2010
6
* trend 2010/2009 based on a sample of 15 regional metropolitan areas
4 2 Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Sources: CB Richard Ellis and Immostat © 2011 CB Richard Ellis, Inc.
Market View Real estate markets
Quality offices and retail are the focus of attention Investors were mainly focussed on office assets (72% of investment), most
Geographic breakdown of investment excluding indivisible multi-city portfolios at 1st quarter 2011 (in volume)
of which were located in Paris Centre West and the Western Crescent, a market sector that was boosted by one very large transaction. The
Regional France 27%
Outer Rim 6%
importance attributed to the technical quality of buildings spurred on activity in this sector because almost 60% of the amount invested in offices involved the acquisition of new or recently completed buildings. Note that
Inner Rim 10%
while sales off plan were a small niche market, accounting for 12% of office sales, the proportion of speculative development rose sharply (4
Paris Centre West 18%
transactions took place in the 1st quarter, as many as the whole of 2010). Buyers also showed a preference for the retail sector (20% of total volume) with a high preference for quality products (43% of new or recent buildings) and shopping centres (54% of retail investment). Almost 70% of retail transactions took place in the provinces, which is why the share
Rest of Paris 4%
Western Crescent 35%
Sources: CB Richard Ellis and Immostat
of regional investment was so high in 1st quarter. The investment market for industrial space and warehouses, at 8%, is still sluggish. Indeed Gecina’s sale of a large diversified logistics portfolio accounted for the major share of transacted volumes in this sector.
Breakdown of sales / acquisitions by players at 1st quarter 2011 (in volume)
Investors with capital still dominate
SIIC property companies
Other property companies
So who have been buying? Domestic players – 75% of quarterly
Investment funds
Insurance companies
Open-ended funds
SCPIs
OPCIs
investment – continue to dominate buying and selling despite the timid
Other institutional investors
Private
Developers
Sales
reappearance of American and British investors (11% and 9.5%
10%
respectively). Yet the French market could soon benefit from the arrival 36.5%
7% 3% 1%
sovereign funds that have recently started showing genuine interest for high-grade secure assets.
12%
4% 3%
in the market at 53%, mainly due to the weight of insurance companies following the acquisition by Predica and Generali of Europe Avenue but Private players are also an important presence, as are real estate trusts
24% 2.5% 12%
For the moment institutional investors already account for the largest share
also due to the continued strong level of activity of SCPIs and OPCIs.
8.5% 14% 12%
3.5%
of newcomers, of large foreign institutional investors such as
Occupiers
Acquisitions
3% 10% 2%
26% 6% 50%
40%
30%
20%
10%
0%
10%
20%
30%
40%
50%
Source: CB Richard Ellis
that have made a come back in the retail sector.
Moderate growth prospects for investment The volume of investment that took place at the start of the year was modest reflecting the cautionary approach of investors. The latter have started to anticipate the future rise in the cost of lending that is inevitable now that the European Central Bank has raised interest rates. They are also questioning the timing and scale of any future rent increases. Prime yields are now stabilising and the gap is getting wider between buyers’
1st quarter 2011
intentions and sellers’, sometimes excessive, expectations. It is true that investors’ interest in core assets is strong, but the market is curbed by their extremely stringent search criteria and persistent financial constraints. Consequently, any growth in investment activity will no doubt be limited. Yet the arrival of newcomers could result in the conclusion of a few key transactions that will give a boost to investment volumes.
© 2011 CB Richard Ellis, Inc.
Prime yields at 01/04/2011 Offices Paris Centre West Offices La Défense Offices Western Crescent Offices Inner Rim Offices Outer Rim Offices Regions Class A Logistics France Light industrial France Industrial parks France Shops France Shopping centres France Retail parks France Source: CB Richard Ellis
2
4.75% - 6.00% 5.75% - 6.75% 5.50% - 8.50% 6.00% - 9.00% 6.75% - 12.00% 6.15% - 8.25% 7.15% - 8.00% 8.75% - 10.50% 8.50% - 10.00% 4.50% - 9.75% 4.75% - 6.90% 6.25% - 9.60%
(in million sq. m)
Occupier interest finally stabilises
3.2
In 2010 occupier interest fell incessantly but finally steadied in the 1st quarter 2011 to stand at the same level as in 4th quarter 2010, and even slightly higher than a year previously. Despite the justified belief that business activity was picking up, the flow of demand for space from occupiers has remained modest. By contrast, demands are very good quality with a clearly improved transformation rate showing that occupiers have real needs. Cutting costs is still a structural driver for demand, especially for large companies. And although expansion is far from being a generality, some SMEs are actually growing and need more space, especially in IT, consultancy and marketing sectors that have all seen business activity improve.
2.8 2.4 2.0 1.6 1.2 0.8 0.4 00
01
02
03
Q1
A good level of take-up Take-up in the 1st quarter stood at 613,100 sq. m, i.e. 21% higher than for the same period last year and 15% higher than in the previous quarter. A combination of several factors resulted in this improvement. Thalès finalised a landmark transaction in Gennevillers, a project known since early 2010 but for which the conditions precedent have only recently been satisfied. This 70,000 sq. m transaction impacted total take-up for the whole of the Ile-de-France region. Another factor boosting the market was level of activity, on all sizes of offices, taking place in Paris. The capital accounted for 39% of take-up in the region. In total 13 transactions above 5,000 sq. m were identified involving a total volume of 231,700 sq. m. The total volume was substantial but fewer deals were signed than in 2010. Large transactions were spread relatively evenly across the Paris region. The Inner Rim trailed behind with only one transaction, as did La Défense where no large transaction has taken place for the moment. The market for small and medium premises (under 5,000 sq. m) was active across all the Paris region, but Paris city took the lion’s share – 44% in volume of small and medium transactions (1,000 sq. m) Industry 29%
Others 4% Transport - Logistics Distribution 8% Public sector 8% Real estate services 5%
Banking - Insurance 24%
Legal - Consultancy 4% Communication - Creation 10% Information and communication technologies 8%
Source: CB Richard Ellis / Immostat
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
Industry and the banking-insurance sectors were the most active, accounting for more than half of take-up volume. However, this share was skewed by a few large transactions. In numbers, all business sectors were active with industry, in the broad meaning of the word, ranking first with 17% of transactions. The public sector was also an important player, but in the small and medium bracket (5,000 sq. m (period end, in million sq. m, includes new, redeveloped, renovated and second hand space)
5
4
3
2
Definite
Source: CB Richard Ellis
Probable
Q1 11
Q4 10
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q4 07
Q1 08
Q3 07
Q2 07
Q1 07
1
Q4 06
So although speculative development is not yet common, some at least has been reappearing over the last two quarters. Whether this trend will be confirmed or not remains to be seen.
th
Northern Inner Rim
Q3 06
Probable supply rose, by 10% in 3 months, to stand at 3 million sq. m. While new projects continue to accumulate in supply and still represent the majority of the volume (78%), this quarter was marked by a rise in second hand space. Most of this second hand future supply is composed of buildings on which the lease is coming to an end but for which the owners have not yet decided when the building will be put back on the market and what kind of works, if any, will be carried out.
th
Q1 06
1st quarter 2011
1
Paris Centre West
The definite future supply increased to 1.8 million sq. m (all sizes of offices), a 6% rise on the previous quarter and an 11% rise on the same period last year. The share of definite future supply in large units >5,000 sq. m totals 1.2 million sq. m. On the scale of the Paris region, this change results from developments being confirmed that will be completed in more than twelve months, for even if speculative development has not got massively underway, a few large new developments and redevelopments have been launched all across the Paris region. The upturn can be seen in La Défense as well as in the Western Crescent and in the Inner Rim, where works started on a total of 7 buildings in the 1st quarter. The volume of renovated space also rose significantly up 36% in 3 months, for renovation programmes due to be completed within and beyond a year. Renovation is an alternative to complete redevelopment, which is much more consequential in scale, more costly and involves longer administrative procedures. It also replenishes the market with quality supply, which should help tide over the total lack of new or redeveloped buildings expected in the months ahead. La Défense stands out from other markets because the volume of renovated space there has almost tripled, followed by the Western Crescent.
© 2011 CB Richard Ellis, Inc.
2
Q1 09
Upturn in definite future supply
3
Q4 08
The quality of immediate supply was stable in the 1st quarter with 26% of space in new or redeveloped buildings. Nevertheless, some variations have been amplified from one district to the next. There is more pressure on quality supply in Paris with the share of new and redeveloped space falling by 4 points to 21%. Meanwhile, in the northeast of Paris there are no new buildings at all. In La Défense, the completion of Tour First (45,000 sq. m, of available space not pre-let) has resulted in the amount of redeveloped space rising slightly to 27% of immediate supply.
4
Q3 08
The vacancy rate has evolved differently from one geographic sector to another. In Paris the vacancy rate has stabilised at 5.3% while in La Défense and in the Western Crescent it rose significantly to 7.2% and 10.7% respectively.
(at period end, in million sq. m)
Q2 08
At 1st April 2011, the immediate supply of offices totalled 3.7 million sq. m, 4% higher than in the previous quarter. The vacancy rate in Ile-de-France has therefore increased slightly at the start of the year to 7%. Despite a good level of take-up, supply was fed by companies vacating space and by the completion of a few schemes after 5 quarters of stability.
Q2 06
Market View Real estate markets
Immediate supply rising
Trends in rents at period end (headline value, in current € net/sq. m pa)
Rises in prime rents in La Défense and in the Western Crescent combined with pressure on the supply of quality buildings in Paris
850 €716
have contributed to nudging up the average rent in the Paris region
750
for new, redeveloped or renovated space over the past 6 months. The
650
average was up 2% to stand at €312 net/sq. m pa at 1st April 2011.
550
By contrast, in some peripheral markets the average rent for new
450
€435
space again saw a slight downward correction. For second hand
350
€312
space, the average rent in the Paris region has not changed
250
significantly for 18 months, now standing at €228 net/sq. m pa. Following an annual rise of 11%, the average prime rent in Paris
€548
150 91
93
95
97
99
01
03
05
07
09 Q1 11
Centre West dropped 2% over the last three months to stand at €716.
Average prime* Paris Centre West
Average prime* La Défense
This trend should be confirmed in the quarters ahead given the
Average prime* Western Crescent
Average Ile-de-France (new, redeveloped, renovated)
shortage of quality space that can justify rents above €700. The average rent for prime space in La Défense has continued to follow
Source: CB Richard Ellis
Market View Real estate markets
Rents: end of the fall
the rising trend that started in 1st quarter 2010 to stand at €548, i.e. a level close to the one seen before the crisis. In the Western Crescent, the average prime rent fell for 12 months
* N.B. Since 2001, the prime rent corresponds to the weighted average of the 10 highest transactions in terms of rental values observed over the last six months involving floor areas of 500 sq. m or more.
but has started climbing again this quarter, up 3% to €435. Commercial concessions are still large despite signs that the current rent cycle is coming to a close. On average, rent-free periods are equal to
Average weighted rents by Immostat sector at 1st April 2011 (headline value, in € net/sq. m pa)
1 to 1.5 months of rent for each year in the lease, but they can be higher.
New / Redeveloped / Renovated Paris Centre West
€521
Southem Paris
€440
Second hand
The international geopolitical situation and unstable economy affects
North Eastern Paris
€318
the morale of all business players and tends to result in slower
La Défense
€500
decision-making processes. However positive signs are perceptible.
Western Crescent
€319
€228
=
In addition, as predicted in 2010, mergers and acquisitions picked
Inner Rim
€248
=
€164
up again in the 1 quarter and should continue for the rest of the year.
Outer Rim
€169
=
€113
=
In parallel, the upturn in the business activity of SMEs has continued
Average Ile-de-France
€312
€228
=
to the extent that some are planning on creating jobs.
Changes since 1 January 2011
These economic factors should lead to companies moving sites. Note
Source: CB Richard Ellis
Prospects: start of a new cycle
st
€398
€339
=
€265
€355
=
st
that more large transactions will probably be completed in the 2nd quarter considering the number of deals already in the pipeline.
French economic outlook at 1st April 2011
We expect take-up at the end of 2011 to be in a range from 2.3 to
2010
2011 (f)
2012 (f)
+ 5.0%
+ 4.5%
+ 4.5%
World growth
Immediate supply should decline in the quarters ahead, with short-
GDP France
+ 1.5%
+ 1.7%
+ 1.8%
term definite supply being exhausted steadily. While in most markets
Household consumption
+ 1.7%
+ 1.5%
+ 1.6%
occupiers will still have a degree of choice of space, the scarcity of
Business investment
- 1.3%
+ 3.3%
+ 4.0%
new premises will become more and more of an issue. Prime rents are
Exports
+ 10.1%
+ 6.2%
+ 6.0%
not expected to change much but depend on available supply; in
3-month interest rate
1.02%
1.71%
2.27%
areas where supply falls, rents could increase. By contrast, the rest of
10-year public band rate
3.34%
3.76%
3.75%
the market should see rents stabilise. Commercial concessions will
Inflation (annual average)
+ 1.5%
+ 2.0%
+ 1.6%
Balance of trade (in billion euros)
- 51.4
- 49.9
- 48
no doubt be the first variable adjusted to adapt the rental cost and could be squeezed in the months ahead in some markets.
Sources: IMF, Consensus Centre de Prévision de l’Expansion, INSEE, Crédit Agricole, the French Customs
5
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
2.5 million sq. m.
Market View Real estate markets
Immediate supply and take-up in regional markets*
THE OFFICE MARKET IN REGIONAL FRANCE*
(in million sq. m)
Regional office markets in France were more consistent than in 2009. Take-up in the country’s 15 main metropolitan areas rose by 23% to total 1.3 million sq. m, benefiting from the determination of companies to cut costs and rationalise the use of workspace. Small and medium transactions were still the foundations of regional markets in France but the slight improvement in the economy also spurred on large transactions that have hitherto been put off or cancelled. New premises accounted for 41% of take-up, down 3 points since 2009. The appeal of new premises has not diminished, but its scarcity curbed occupiers’ choice. Supply fell slightly, by 3% to total 2 million sq. m. The share of new and redeveloped space, though, shrank considerably from 32% at the end of 2009 to 23% at the end of 2010. Indeed the slower rate of new development, together with the arrival of second hand (sometimes obsolete) space when companies vacate a building, suggest that outdated unsuitable premises will be a major issue in 2011. The average rent for new and redeveloped space in regional markets was €168 net/sq. m pa at the end of 2010, an annual rise of 5.2%. Prime rents stood at €200 or higher in 5 cities (Aix-Marseille, Lyon, Nice-Sophia, Rennes and Lille). Commercial concessions, which buffered rent decreases, remained stable in 2010. In 2011, landlords could become less generous with their concessions depending on the condition of supply.
Immediate supply at 31/12/ (in sq. m)
1,5 1.0 0.5 99
00
01
02
03
04
Take-up
05
06
07
08
09
Source: CB Richard Ellis
Trends in headline rents in regional markets* (in € net/sq. m pa) 300 250 €280 200
€168
150 €133
100 50 99
00
01
02
03
04
05
06
Average rent for second hand space
07
08
09
Average weighted rent for new / redeveloped space
Source: CB Richard Ellis
Take-up (in sq. m)
Share of new space
Rents of new or redeveloped space at 31/12 (in € net/sq. m pa)
Rents of second hand space at 31/12 (in € net/sq. m pa)
57,000
20%
48,000
35%
145 / 200
120 / 170
41,570
7%
24,800
22%
145 / 225
80 / 195
Avignon
24,000
30%
18,000
63%
135 / 190
80 / 150
Bordeaux
87,000
24%
100,400
49%
125 / 176
80 / 150
Caen
43,000
30%
18,000
N. D.
125 / 180
70 / 120
Chambéry
12,500
5%
15,000
40%
115 / 145
75 / 135
39,000
35%
25,000
52%
110 / 135
80 / 120
Grenoble
130,000
20%
67,900
26%
140 / 180
80 / 130
Le Havre
28,900
16%
20,000
10%
120 / 150
90 / 120
230,000
29%
185,000
50%
116 / 200
80 / 160
Lyon
382,000
18%
219,500
40%
135 / 280
110 / 210
Marseille
150,000
=
22%
82,000
40%
140 / 250
110 / 230
Metz
34,000
6%
32,000
35%
120 / 156
75 / 170
Montpellier
70,000
20%
62,000
30%
140 / 152
105 / 142
Mulhouse
53,050
17%
30,600
56%
110 / 160
50 / 150
Nancy
41,500
13%
33,500
22%
125 / 145
85 / 160
Nantes
120,000
38%
86,300
45%
135 / 175
110 / 150
Nice
50,000
40%
21,000
30%
180 / 215
110 / 160
Rennes
85,200
30%
95,200
55%
160 / 205
110 / 150
Rouen
72,000
14%
42,500
17%
120 / 150
58 / 130
Sophia Antipolis
49,000
14%
22,100
6%
160 / 220
125 / 175
Strasbourg
163,200
20%
58,100
=
27%
125 / 190
75 / 160
Toulouse
236,300
23%
140,600
54%
125 / 170
100 / 150
65,000
6%
37,200
59%
125 / 150
90 / 130
Tours Sources: CB Richard Ellis and observatories
© 2011 CB Richard Ellis, Inc.
10
Prime rent
Aix-en-provence
Lille
10
Immediate supply at 31/12
Annecy
Clermont-Ferrand
1st quarter 2011
Share of new space
2.0
*Sample: Aix-en-Provence/Marseille, Bordeaux, Clermont-Ferrand, Grenoble, Lille, Lyon, Metz, Montpellier, Nancy, Nantes, Nice/Sophia-Antipolis, Rennes, Rouen, Strasbourg, Toulouse
Indicators and trends of office regional markets in France in 2010 Regional cities
2.5
N.D: Non Determined
6
Immediate supply and take-up in regional markets*
For yet another year running the market for industrial space and warehousing was subdued. In 2010, take-up totalled 2,400,000 sq. m, shrinking 8% since 2009. New or redeveloped premises accounted for 25% of take-up compared to 39% in 2009, which is an average fall of 14 points for the 15 regional markets. However this average obscures a wide variation in results with the largest markets such as Lyon and Lille reporting the biggest reductions in the share of new space in take-up – respectively 77% and 53% – and secondary markets such as Nancy and Clermont-Ferrand reporting rises of 54% and 39%. In 2010, activity in the market for new space in all regions was hindered as much by the difficulty in getting hold of building land because it is too scarce, too expensive or both, as by the freeze on new development. At the end of 2010, immediately available space stood at 4,260,000 sq. m, just 4% higher than at the end of 2009. New available space, which accounts for 19% of supply, dropped for the second year running. The insufficient supply, in some instances total absence, of new premises or premises complying with current standards has become a real problem for the most popular industrial parks. When possible, ownaccount projects are considered (a few should be finalised in 2011) in order to compensate for the shortage of development and satisfy business owners’ aspirations of also owning their business premises. Future speculative supply in the 15 regional markets fell again in 2010. At the end of the year it stood at 150,000 sq. m. Semi-speculative supply totalled 1,600,000 sq. m at the end of 2010.
5
Prime rents were 14% higher than at the end of 2009 standing at €125 net/sq. m pa (in Sophia-Antipolis). Also up was the average rent for new or redeveloped space that increased by 9% to €62, slightly above 2008’s level.
(in million sq. m)
4 3 2 1 00
01
02
03
04
Take-up
05
06
07
08
09
10
Immediate supply at 31/12
Source: CB Richard Ellis
Trends in headline rents in regional markets* (in € net/sq. m pa) 125 €125 100
Market View Real estate markets
THE INDUSTRIAL AND WAREHOUSE MARKETS IN REGIONAL FRANCE *
75 €62
50 25
00
01
02
03
04
05
06
07
08
09
10
Average weighted rent for new / redeveloped space Prime rent
Source: CB Richard Ellis *Sample: Aix-en-Provence/Marseille, Bordeaux, Clermont-Ferrand, Grenoble, Lille, Lyon, Metz, Montpellier, Nancy, Nantes, Nice/Sophia-Antipolis, Rennes, Rouen, Strasbourg, Toulouse
Indicators and trends of industrial and warehouse markets in France in 2010 Regional cities Aix-en-Provence
Immediate supply at 31/12/ (in sq. m)
Share of new space
Take-up (in sq. m)
Share of new space
Rents of new or redeveloped space at 31/12 (in € net/sq. m pa)
Rents of second hand space at 31/12 (in € net/sq. m pa) 30 / 70
392,000
26%
102,000
45%
41 / 100
Annecy
95,000
N.S.
95,600
19%
70 / 90
42 / 67
Avignon
23,600 N.D.
N.S.
12,800
N.D.
25%
40 / 80
25 / 60
Bordeaux
185,100
77%
179,900
42%
43 / 75
35 / 69
Caen
170,000
5%
50,000
28%
45 / 55
30 / 50
51,000
N.S.
58,000
40%
55 / 75
30 / 65
Chambéry Clermont-Ferrand
1%
45,000
16%
60 / 70
40 / 55
4%
65,320
9%
70 / 85
35 / 65
Le Havre
187,900
48%
165,500
19%
57 / 72
30 / 60
Lille
595,000
30%
404,600
37%
40 / 55
28 / 45
Lyon
1,102,000
15%
564,300
11%
42 / 76
28 / 55
Marseille
108,000
14%
74,000
11%
60 / 120
40 / 60
Metz
210,000
4%
80,000
=
30%
50 / 70
25 / 55
Montpellier
42,000
15%
25,900
31%
75 / 85
50 / 80
Mulhouse
252,400
4%
131,800
31%
45 / 130
20 / 100
Nancy
165,000
20%
77,000
22%
42 / 75
25 / 65
Nice
75,000
N.S.
50,000
N.S.
N.S.
65 / 100
Rennes
145,000
20%
123,000
7%
35 / 70
25 / 60
Rouen
88,500 40,000 =
5%
127,000
20%
40 / 60
25 / 60
N.S.
22,000
7%
100 / 125
70 / 100
Strasbourg
615,400
11%
228,800
33%
46 / 95
25 / 85
Toulouse
132,300
19%
128,500
34%
45 / 75
33 / 75
N.D: Non Determined
N.S: Non Significant
Sophia Antipolis
Sources: CB Richard Ellis and observatories
7
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
85,000 180,000
Grenoble
Market View Real estate markets
THE LOGISTICS MARKET IN FRANCE (WAREHOUSES >10,000 SQ. M)
Reasonable results in the Paris Region While in 2010 few occupiers were looking for space in France, recorded requirements rose in 2011. The dynamism was particularly visible amongst logisitics companies and supermarket chains which, due to a shortage of suitably large or technically advanced facilities, turned to turnkey schemes. Nevertheless, take-up fell compared to the 1st quarter 2010 (down 51%). Regional markets were in difficulty and the Ile-de-France region bolstered the market as a whole with 43% of take-up volume (almost half of transactions). Approximately 22% of take-up took place in the north (all in Nord-Pas de Calais), while the Rhône corridor and the south were overtaken by the west and southwest where take-up was active. Take-up in the Paris region was 57% lower compared to the particularly strong 1st quarter 2010 (some operations that had been in the pipeline for many months were finally closed), but at 127,300 sq. m it can still be considered at a satisfactory level for the first three months of a year. Given the significant number of deals in the pipeline, take-up could be high at the end of 2011. Also, regional markets should start catching-up as numerous commitments have been made that should be confirmed in the 2nd quarter of the year.
Immediate supply and take-up in France
Geographic breakdown of take-up in sq. m at Q1 2011
(in thousand sq. m, at period end) Greater north 22%
4,000
West 18%
3,000 Greater south west 7% Greater south 6%
2,000 1,000
06
07
08
Take-up
09
10
Q1 11
Ile-de-France 43%
Rhône corridor 4%
Immediate supply
Sources: CB Richard Ellis and Immostat
Sources: CB Richard Ellis and Immostat
Supply down slightly Immediate supply stood at almost 3.8 million sq. m at 1st April 2011 and fell slightly, by 3%, during the quarter. It fell in all markets or stabilised, dropping 4% in Ile-de-France and 3% in regional France. Supply in France is composed of 61% of class A buildings (62% in Ile-de-France), a proportion that is tending to stabilise because of the freeze on development. But the quality of supply is falling, with the share of available new or recent class A warehousing tending to shrink. Speculative development has not yet recommenced and investors are not expected to take position on this type of scheme in the short or medium term. The volume of semi-speculative supply, however, is still fairly high (more than 4 million sq. m).
Headline rental values in France at 1st April 2011
1st quarter 2011
(in € net/sq. m pa - class A or B, new)
Burgundy / Franche-Comté Rhône corridor Greater centre Greater east Greater north Greater south Greater south west Ile-de-France Normandy West
€30/ €35 €43/ €45 €42/ €50 €37/ €50 €40/ €45 €40/ €45 €42/ €50 €46/ €52 €37/ €49 €40/ €45
Uneven values Headline rental values, after stabilising in 2010, have remained steady nationwide. Yet for outstanding sites, such as the Inner Rim, occupiers are now ready to go over market values. In addition, in some outlying markets that are oversupplied, where old buildings have only average facilities, some landlords who are having difficulty finding tenants are willing to lower their rents even more. Commercial concessions are stable, standing at about 1.5 months of rent-free period for each unbreakable year in the lease.
Source: CB Richard Ellis Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we make no guarantee, warranty of representation about it. It is your responsibility to independently confirm its accuaracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the future performance of the market. The reproduction of the whole or any part of this report is only authorised if its source is credited.
CB Richard Ellis Ressources - Economic Interest Group Head office: 145-151, rue de Courcelles 75017 PARIS - Siren: 412 352 817 - RCS Paris © 2011 CB Richard Ellis, Inc.
RESEARCH CONTACTS Aurélie LEMOINE Head of Research Tel.: 33 (0) 1 53 64 36 35 [email protected] Edouard de LABOULAYE Economy, Retail Tel.: 33 (0) 1 53 64 33 45 [email protected] Christelle BASTARD Investment Tel.: 33 (0) 1 53 64 37 30 [email protected] Sabine ECHALIER Ile-de-France offices Tel.: 33 (0) 1 53 64 37 04 [email protected] Etienne CHATENAY Regions Tel.: 33 (0) 1 53 64 34 02 [email protected] Erika LEONARD Logistics, industrial Tel.: 33 (0) 1 53 64 34 84 [email protected] Fax: 33 (0) 1 53 64 40 00 www.cbre.fr/fr_fr/etudes
Market View Real e stat e m ar ket s ILE-DE-FRANCE / FRANCE
1st quarter 2011
ECONOMIC CONTEXT The economy is still in a fragile condition and bad news is cumulating worldwide: a possible recession in Japan, potential insolvency of some European states, a rise in interest rates in Europe and accelerating inflation due to a rise in the price of raw materials and political unrest in Arab countries. World growth will no doubt shrink to a level below that seen in 2010.
TRENDS Investment France Investment Prime yields for offices
Office market Ile-de-France Take-up Immediate supply Average rent
Offices in regions* Take-up Immediate supply Average rent Industrial space and warehouses in regions Take-up Immediate supply Average rent
Logistics France Take-up Immediate supply Average rent
=
By contrast, the prospects for companies are brighter. The business climate in France improved in March and is now at its highest in 3 years. Order books are looking healthier and exploitation rates of production capacity are climbing. Entrepreneurs need to modernise their production tools. So unlike in 2010, investment should bolster growth in 2011. This is even more likely because money is still cheap and the conditions for obtaining credit have relaxed. Indeed the amount of credit given to non-financial companies rose again in February, by 1.7%.
In the 4th quarter 2010, GDP in France only rose by 0.4% which is virtually the same as in the previous quarter. Household consumption was, nevertheless, quite strong, rising by 0.9%. But this result is misleading because it was largely thanks to discounts given for the purchase of cleaner cars, a measure which came to an end at 1st January 2011. Spending will be kept in check this year – the forecast is for a rise of 1.5% – by the termination of government support measures, fewer tax incentives, high unemployment and rising
In this environment, French growth should consolidate with forecasts in the region of 1.7% for 2011. This rise will only enable a slight improvement in activity and the job market.
THE INVESTMENT MARKET IN FRANCE A cautious start to the year
inflation. Together these factors point to only modest improvements in purchasing power.
Slightly less than 2 billion euros were invested in standard commercial real estate in the 1st quarter 2011 in France. This relatively modest volume was due to a natural slowdown in activity after the usual pressure to close deals before the end of the year, which had made the 4th quarter 2010 particularly active. Another important element was the sale of Europe Avenue in Bois Colombes; this transaction alone represented more than 20% of investment. The investment market’s fundamentals have only changed slightly in recent months with the
market continuing to open, albeit at a very slow rate. The market for secondary or insecure assets was difficult as most investors remained very averse to risk. Even the slightest technical, legal, tenancy or other hitch found at the data room stage is unacceptable to investors. Nevertheless, the yearly growth in the quarterly volume of investment rose to 34%. In addition, investors are issuing instructions to sell assets and agents are being consulted more about good investment products, leading us to believe activity could pick up in the months ahead.
Quarterly trends in investment in standard commercial real estate in France (in billion euros) 8
Trend / 1st quarter 2010
6
* trend 2010/2009 based on a sample of 15 regional metropolitan areas
4 2 Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
Q2 07
Q3 07
Q4 07
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Sources: CB Richard Ellis and Immostat © 2011 CB Richard Ellis, Inc.
Market View Real estate markets
Quality offices and retail are the focus of attention Investors were mainly focussed on office assets (72% of investment), most
Geographic breakdown of investment excluding indivisible multi-city portfolios at 1st quarter 2011 (in volume)
of which were located in Paris Centre West and the Western Crescent, a market sector that was boosted by one very large transaction. The
Regional France 27%
Outer Rim 6%
importance attributed to the technical quality of buildings spurred on activity in this sector because almost 60% of the amount invested in offices involved the acquisition of new or recently completed buildings. Note that
Inner Rim 10%
while sales off plan were a small niche market, accounting for 12% of office sales, the proportion of speculative development rose sharply (4
Paris Centre West 18%
transactions took place in the 1st quarter, as many as the whole of 2010). Buyers also showed a preference for the retail sector (20% of total volume) with a high preference for quality products (43% of new or recent buildings) and shopping centres (54% of retail investment). Almost 70% of retail transactions took place in the provinces, which is why the share
Rest of Paris 4%
Western Crescent 35%
Sources: CB Richard Ellis and Immostat
of regional investment was so high in 1st quarter. The investment market for industrial space and warehouses, at 8%, is still sluggish. Indeed Gecina’s sale of a large diversified logistics portfolio accounted for the major share of transacted volumes in this sector.
Breakdown of sales / acquisitions by players at 1st quarter 2011 (in volume)
Investors with capital still dominate
SIIC property companies
Other property companies
So who have been buying? Domestic players – 75% of quarterly
Investment funds
Insurance companies
Open-ended funds
SCPIs
OPCIs
investment – continue to dominate buying and selling despite the timid
Other institutional investors
Private
Developers
Sales
reappearance of American and British investors (11% and 9.5%
10%
respectively). Yet the French market could soon benefit from the arrival 36.5%
7% 3% 1%
sovereign funds that have recently started showing genuine interest for high-grade secure assets.
12%
4% 3%
in the market at 53%, mainly due to the weight of insurance companies following the acquisition by Predica and Generali of Europe Avenue but Private players are also an important presence, as are real estate trusts
24% 2.5% 12%
For the moment institutional investors already account for the largest share
also due to the continued strong level of activity of SCPIs and OPCIs.
8.5% 14% 12%
3.5%
of newcomers, of large foreign institutional investors such as
Occupiers
Acquisitions
3% 10% 2%
26% 6% 50%
40%
30%
20%
10%
0%
10%
20%
30%
40%
50%
Source: CB Richard Ellis
that have made a come back in the retail sector.
Moderate growth prospects for investment The volume of investment that took place at the start of the year was modest reflecting the cautionary approach of investors. The latter have started to anticipate the future rise in the cost of lending that is inevitable now that the European Central Bank has raised interest rates. They are also questioning the timing and scale of any future rent increases. Prime yields are now stabilising and the gap is getting wider between buyers’
1st quarter 2011
intentions and sellers’, sometimes excessive, expectations. It is true that investors’ interest in core assets is strong, but the market is curbed by their extremely stringent search criteria and persistent financial constraints. Consequently, any growth in investment activity will no doubt be limited. Yet the arrival of newcomers could result in the conclusion of a few key transactions that will give a boost to investment volumes.
© 2011 CB Richard Ellis, Inc.
Prime yields at 01/04/2011 Offices Paris Centre West Offices La Défense Offices Western Crescent Offices Inner Rim Offices Outer Rim Offices Regions Class A Logistics France Light industrial France Industrial parks France Shops France Shopping centres France Retail parks France Source: CB Richard Ellis
2
4.75% - 6.00% 5.75% - 6.75% 5.50% - 8.50% 6.00% - 9.00% 6.75% - 12.00% 6.15% - 8.25% 7.15% - 8.00% 8.75% - 10.50% 8.50% - 10.00% 4.50% - 9.75% 4.75% - 6.90% 6.25% - 9.60%
(in million sq. m)
Occupier interest finally stabilises
3.2
In 2010 occupier interest fell incessantly but finally steadied in the 1st quarter 2011 to stand at the same level as in 4th quarter 2010, and even slightly higher than a year previously. Despite the justified belief that business activity was picking up, the flow of demand for space from occupiers has remained modest. By contrast, demands are very good quality with a clearly improved transformation rate showing that occupiers have real needs. Cutting costs is still a structural driver for demand, especially for large companies. And although expansion is far from being a generality, some SMEs are actually growing and need more space, especially in IT, consultancy and marketing sectors that have all seen business activity improve.
2.8 2.4 2.0 1.6 1.2 0.8 0.4 00
01
02
03
Q1
A good level of take-up Take-up in the 1st quarter stood at 613,100 sq. m, i.e. 21% higher than for the same period last year and 15% higher than in the previous quarter. A combination of several factors resulted in this improvement. Thalès finalised a landmark transaction in Gennevillers, a project known since early 2010 but for which the conditions precedent have only recently been satisfied. This 70,000 sq. m transaction impacted total take-up for the whole of the Ile-de-France region. Another factor boosting the market was level of activity, on all sizes of offices, taking place in Paris. The capital accounted for 39% of take-up in the region. In total 13 transactions above 5,000 sq. m were identified involving a total volume of 231,700 sq. m. The total volume was substantial but fewer deals were signed than in 2010. Large transactions were spread relatively evenly across the Paris region. The Inner Rim trailed behind with only one transaction, as did La Défense where no large transaction has taken place for the moment. The market for small and medium premises (under 5,000 sq. m) was active across all the Paris region, but Paris city took the lion’s share – 44% in volume of small and medium transactions (1,000 sq. m) Industry 29%
Others 4% Transport - Logistics Distribution 8% Public sector 8% Real estate services 5%
Banking - Insurance 24%
Legal - Consultancy 4% Communication - Creation 10% Information and communication technologies 8%
Source: CB Richard Ellis / Immostat
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
Industry and the banking-insurance sectors were the most active, accounting for more than half of take-up volume. However, this share was skewed by a few large transactions. In numbers, all business sectors were active with industry, in the broad meaning of the word, ranking first with 17% of transactions. The public sector was also an important player, but in the small and medium bracket (5,000 sq. m (period end, in million sq. m, includes new, redeveloped, renovated and second hand space)
5
4
3
2
Definite
Source: CB Richard Ellis
Probable
Q1 11
Q4 10
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q4 07
Q1 08
Q3 07
Q2 07
Q1 07
1
Q4 06
So although speculative development is not yet common, some at least has been reappearing over the last two quarters. Whether this trend will be confirmed or not remains to be seen.
th
Northern Inner Rim
Q3 06
Probable supply rose, by 10% in 3 months, to stand at 3 million sq. m. While new projects continue to accumulate in supply and still represent the majority of the volume (78%), this quarter was marked by a rise in second hand space. Most of this second hand future supply is composed of buildings on which the lease is coming to an end but for which the owners have not yet decided when the building will be put back on the market and what kind of works, if any, will be carried out.
th
Q1 06
1st quarter 2011
1
Paris Centre West
The definite future supply increased to 1.8 million sq. m (all sizes of offices), a 6% rise on the previous quarter and an 11% rise on the same period last year. The share of definite future supply in large units >5,000 sq. m totals 1.2 million sq. m. On the scale of the Paris region, this change results from developments being confirmed that will be completed in more than twelve months, for even if speculative development has not got massively underway, a few large new developments and redevelopments have been launched all across the Paris region. The upturn can be seen in La Défense as well as in the Western Crescent and in the Inner Rim, where works started on a total of 7 buildings in the 1st quarter. The volume of renovated space also rose significantly up 36% in 3 months, for renovation programmes due to be completed within and beyond a year. Renovation is an alternative to complete redevelopment, which is much more consequential in scale, more costly and involves longer administrative procedures. It also replenishes the market with quality supply, which should help tide over the total lack of new or redeveloped buildings expected in the months ahead. La Défense stands out from other markets because the volume of renovated space there has almost tripled, followed by the Western Crescent.
© 2011 CB Richard Ellis, Inc.
2
Q1 09
Upturn in definite future supply
3
Q4 08
The quality of immediate supply was stable in the 1st quarter with 26% of space in new or redeveloped buildings. Nevertheless, some variations have been amplified from one district to the next. There is more pressure on quality supply in Paris with the share of new and redeveloped space falling by 4 points to 21%. Meanwhile, in the northeast of Paris there are no new buildings at all. In La Défense, the completion of Tour First (45,000 sq. m, of available space not pre-let) has resulted in the amount of redeveloped space rising slightly to 27% of immediate supply.
4
Q3 08
The vacancy rate has evolved differently from one geographic sector to another. In Paris the vacancy rate has stabilised at 5.3% while in La Défense and in the Western Crescent it rose significantly to 7.2% and 10.7% respectively.
(at period end, in million sq. m)
Q2 08
At 1st April 2011, the immediate supply of offices totalled 3.7 million sq. m, 4% higher than in the previous quarter. The vacancy rate in Ile-de-France has therefore increased slightly at the start of the year to 7%. Despite a good level of take-up, supply was fed by companies vacating space and by the completion of a few schemes after 5 quarters of stability.
Q2 06
Market View Real estate markets
Immediate supply rising
Trends in rents at period end (headline value, in current € net/sq. m pa)
Rises in prime rents in La Défense and in the Western Crescent combined with pressure on the supply of quality buildings in Paris
850 €716
have contributed to nudging up the average rent in the Paris region
750
for new, redeveloped or renovated space over the past 6 months. The
650
average was up 2% to stand at €312 net/sq. m pa at 1st April 2011.
550
By contrast, in some peripheral markets the average rent for new
450
€435
space again saw a slight downward correction. For second hand
350
€312
space, the average rent in the Paris region has not changed
250
significantly for 18 months, now standing at €228 net/sq. m pa. Following an annual rise of 11%, the average prime rent in Paris
€548
150 91
93
95
97
99
01
03
05
07
09 Q1 11
Centre West dropped 2% over the last three months to stand at €716.
Average prime* Paris Centre West
Average prime* La Défense
This trend should be confirmed in the quarters ahead given the
Average prime* Western Crescent
Average Ile-de-France (new, redeveloped, renovated)
shortage of quality space that can justify rents above €700. The average rent for prime space in La Défense has continued to follow
Source: CB Richard Ellis
Market View Real estate markets
Rents: end of the fall
the rising trend that started in 1st quarter 2010 to stand at €548, i.e. a level close to the one seen before the crisis. In the Western Crescent, the average prime rent fell for 12 months
* N.B. Since 2001, the prime rent corresponds to the weighted average of the 10 highest transactions in terms of rental values observed over the last six months involving floor areas of 500 sq. m or more.
but has started climbing again this quarter, up 3% to €435. Commercial concessions are still large despite signs that the current rent cycle is coming to a close. On average, rent-free periods are equal to
Average weighted rents by Immostat sector at 1st April 2011 (headline value, in € net/sq. m pa)
1 to 1.5 months of rent for each year in the lease, but they can be higher.
New / Redeveloped / Renovated Paris Centre West
€521
Southem Paris
€440
Second hand
The international geopolitical situation and unstable economy affects
North Eastern Paris
€318
the morale of all business players and tends to result in slower
La Défense
€500
decision-making processes. However positive signs are perceptible.
Western Crescent
€319
€228
=
In addition, as predicted in 2010, mergers and acquisitions picked
Inner Rim
€248
=
€164
up again in the 1 quarter and should continue for the rest of the year.
Outer Rim
€169
=
€113
=
In parallel, the upturn in the business activity of SMEs has continued
Average Ile-de-France
€312
€228
=
to the extent that some are planning on creating jobs.
Changes since 1 January 2011
These economic factors should lead to companies moving sites. Note
Source: CB Richard Ellis
Prospects: start of a new cycle
st
€398
€339
=
€265
€355
=
st
that more large transactions will probably be completed in the 2nd quarter considering the number of deals already in the pipeline.
French economic outlook at 1st April 2011
We expect take-up at the end of 2011 to be in a range from 2.3 to
2010
2011 (f)
2012 (f)
+ 5.0%
+ 4.5%
+ 4.5%
World growth
Immediate supply should decline in the quarters ahead, with short-
GDP France
+ 1.5%
+ 1.7%
+ 1.8%
term definite supply being exhausted steadily. While in most markets
Household consumption
+ 1.7%
+ 1.5%
+ 1.6%
occupiers will still have a degree of choice of space, the scarcity of
Business investment
- 1.3%
+ 3.3%
+ 4.0%
new premises will become more and more of an issue. Prime rents are
Exports
+ 10.1%
+ 6.2%
+ 6.0%
not expected to change much but depend on available supply; in
3-month interest rate
1.02%
1.71%
2.27%
areas where supply falls, rents could increase. By contrast, the rest of
10-year public band rate
3.34%
3.76%
3.75%
the market should see rents stabilise. Commercial concessions will
Inflation (annual average)
+ 1.5%
+ 2.0%
+ 1.6%
Balance of trade (in billion euros)
- 51.4
- 49.9
- 48
no doubt be the first variable adjusted to adapt the rental cost and could be squeezed in the months ahead in some markets.
Sources: IMF, Consensus Centre de Prévision de l’Expansion, INSEE, Crédit Agricole, the French Customs
5
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
2.5 million sq. m.
Market View Real estate markets
Immediate supply and take-up in regional markets*
THE OFFICE MARKET IN REGIONAL FRANCE*
(in million sq. m)
Regional office markets in France were more consistent than in 2009. Take-up in the country’s 15 main metropolitan areas rose by 23% to total 1.3 million sq. m, benefiting from the determination of companies to cut costs and rationalise the use of workspace. Small and medium transactions were still the foundations of regional markets in France but the slight improvement in the economy also spurred on large transactions that have hitherto been put off or cancelled. New premises accounted for 41% of take-up, down 3 points since 2009. The appeal of new premises has not diminished, but its scarcity curbed occupiers’ choice. Supply fell slightly, by 3% to total 2 million sq. m. The share of new and redeveloped space, though, shrank considerably from 32% at the end of 2009 to 23% at the end of 2010. Indeed the slower rate of new development, together with the arrival of second hand (sometimes obsolete) space when companies vacate a building, suggest that outdated unsuitable premises will be a major issue in 2011. The average rent for new and redeveloped space in regional markets was €168 net/sq. m pa at the end of 2010, an annual rise of 5.2%. Prime rents stood at €200 or higher in 5 cities (Aix-Marseille, Lyon, Nice-Sophia, Rennes and Lille). Commercial concessions, which buffered rent decreases, remained stable in 2010. In 2011, landlords could become less generous with their concessions depending on the condition of supply.
Immediate supply at 31/12/ (in sq. m)
1,5 1.0 0.5 99
00
01
02
03
04
Take-up
05
06
07
08
09
Source: CB Richard Ellis
Trends in headline rents in regional markets* (in € net/sq. m pa) 300 250 €280 200
€168
150 €133
100 50 99
00
01
02
03
04
05
06
Average rent for second hand space
07
08
09
Average weighted rent for new / redeveloped space
Source: CB Richard Ellis
Take-up (in sq. m)
Share of new space
Rents of new or redeveloped space at 31/12 (in € net/sq. m pa)
Rents of second hand space at 31/12 (in € net/sq. m pa)
57,000
20%
48,000
35%
145 / 200
120 / 170
41,570
7%
24,800
22%
145 / 225
80 / 195
Avignon
24,000
30%
18,000
63%
135 / 190
80 / 150
Bordeaux
87,000
24%
100,400
49%
125 / 176
80 / 150
Caen
43,000
30%
18,000
N. D.
125 / 180
70 / 120
Chambéry
12,500
5%
15,000
40%
115 / 145
75 / 135
39,000
35%
25,000
52%
110 / 135
80 / 120
Grenoble
130,000
20%
67,900
26%
140 / 180
80 / 130
Le Havre
28,900
16%
20,000
10%
120 / 150
90 / 120
230,000
29%
185,000
50%
116 / 200
80 / 160
Lyon
382,000
18%
219,500
40%
135 / 280
110 / 210
Marseille
150,000
=
22%
82,000
40%
140 / 250
110 / 230
Metz
34,000
6%
32,000
35%
120 / 156
75 / 170
Montpellier
70,000
20%
62,000
30%
140 / 152
105 / 142
Mulhouse
53,050
17%
30,600
56%
110 / 160
50 / 150
Nancy
41,500
13%
33,500
22%
125 / 145
85 / 160
Nantes
120,000
38%
86,300
45%
135 / 175
110 / 150
Nice
50,000
40%
21,000
30%
180 / 215
110 / 160
Rennes
85,200
30%
95,200
55%
160 / 205
110 / 150
Rouen
72,000
14%
42,500
17%
120 / 150
58 / 130
Sophia Antipolis
49,000
14%
22,100
6%
160 / 220
125 / 175
Strasbourg
163,200
20%
58,100
=
27%
125 / 190
75 / 160
Toulouse
236,300
23%
140,600
54%
125 / 170
100 / 150
65,000
6%
37,200
59%
125 / 150
90 / 130
Tours Sources: CB Richard Ellis and observatories
© 2011 CB Richard Ellis, Inc.
10
Prime rent
Aix-en-provence
Lille
10
Immediate supply at 31/12
Annecy
Clermont-Ferrand
1st quarter 2011
Share of new space
2.0
*Sample: Aix-en-Provence/Marseille, Bordeaux, Clermont-Ferrand, Grenoble, Lille, Lyon, Metz, Montpellier, Nancy, Nantes, Nice/Sophia-Antipolis, Rennes, Rouen, Strasbourg, Toulouse
Indicators and trends of office regional markets in France in 2010 Regional cities
2.5
N.D: Non Determined
6
Immediate supply and take-up in regional markets*
For yet another year running the market for industrial space and warehousing was subdued. In 2010, take-up totalled 2,400,000 sq. m, shrinking 8% since 2009. New or redeveloped premises accounted for 25% of take-up compared to 39% in 2009, which is an average fall of 14 points for the 15 regional markets. However this average obscures a wide variation in results with the largest markets such as Lyon and Lille reporting the biggest reductions in the share of new space in take-up – respectively 77% and 53% – and secondary markets such as Nancy and Clermont-Ferrand reporting rises of 54% and 39%. In 2010, activity in the market for new space in all regions was hindered as much by the difficulty in getting hold of building land because it is too scarce, too expensive or both, as by the freeze on new development. At the end of 2010, immediately available space stood at 4,260,000 sq. m, just 4% higher than at the end of 2009. New available space, which accounts for 19% of supply, dropped for the second year running. The insufficient supply, in some instances total absence, of new premises or premises complying with current standards has become a real problem for the most popular industrial parks. When possible, ownaccount projects are considered (a few should be finalised in 2011) in order to compensate for the shortage of development and satisfy business owners’ aspirations of also owning their business premises. Future speculative supply in the 15 regional markets fell again in 2010. At the end of the year it stood at 150,000 sq. m. Semi-speculative supply totalled 1,600,000 sq. m at the end of 2010.
5
Prime rents were 14% higher than at the end of 2009 standing at €125 net/sq. m pa (in Sophia-Antipolis). Also up was the average rent for new or redeveloped space that increased by 9% to €62, slightly above 2008’s level.
(in million sq. m)
4 3 2 1 00
01
02
03
04
Take-up
05
06
07
08
09
10
Immediate supply at 31/12
Source: CB Richard Ellis
Trends in headline rents in regional markets* (in € net/sq. m pa) 125 €125 100
Market View Real estate markets
THE INDUSTRIAL AND WAREHOUSE MARKETS IN REGIONAL FRANCE *
75 €62
50 25
00
01
02
03
04
05
06
07
08
09
10
Average weighted rent for new / redeveloped space Prime rent
Source: CB Richard Ellis *Sample: Aix-en-Provence/Marseille, Bordeaux, Clermont-Ferrand, Grenoble, Lille, Lyon, Metz, Montpellier, Nancy, Nantes, Nice/Sophia-Antipolis, Rennes, Rouen, Strasbourg, Toulouse
Indicators and trends of industrial and warehouse markets in France in 2010 Regional cities Aix-en-Provence
Immediate supply at 31/12/ (in sq. m)
Share of new space
Take-up (in sq. m)
Share of new space
Rents of new or redeveloped space at 31/12 (in € net/sq. m pa)
Rents of second hand space at 31/12 (in € net/sq. m pa) 30 / 70
392,000
26%
102,000
45%
41 / 100
Annecy
95,000
N.S.
95,600
19%
70 / 90
42 / 67
Avignon
23,600 N.D.
N.S.
12,800
N.D.
25%
40 / 80
25 / 60
Bordeaux
185,100
77%
179,900
42%
43 / 75
35 / 69
Caen
170,000
5%
50,000
28%
45 / 55
30 / 50
51,000
N.S.
58,000
40%
55 / 75
30 / 65
Chambéry Clermont-Ferrand
1%
45,000
16%
60 / 70
40 / 55
4%
65,320
9%
70 / 85
35 / 65
Le Havre
187,900
48%
165,500
19%
57 / 72
30 / 60
Lille
595,000
30%
404,600
37%
40 / 55
28 / 45
Lyon
1,102,000
15%
564,300
11%
42 / 76
28 / 55
Marseille
108,000
14%
74,000
11%
60 / 120
40 / 60
Metz
210,000
4%
80,000
=
30%
50 / 70
25 / 55
Montpellier
42,000
15%
25,900
31%
75 / 85
50 / 80
Mulhouse
252,400
4%
131,800
31%
45 / 130
20 / 100
Nancy
165,000
20%
77,000
22%
42 / 75
25 / 65
Nice
75,000
N.S.
50,000
N.S.
N.S.
65 / 100
Rennes
145,000
20%
123,000
7%
35 / 70
25 / 60
Rouen
88,500 40,000 =
5%
127,000
20%
40 / 60
25 / 60
N.S.
22,000
7%
100 / 125
70 / 100
Strasbourg
615,400
11%
228,800
33%
46 / 95
25 / 85
Toulouse
132,300
19%
128,500
34%
45 / 75
33 / 75
N.D: Non Determined
N.S: Non Significant
Sophia Antipolis
Sources: CB Richard Ellis and observatories
7
© 2011 CB Richard Ellis, Inc.
1st quarter 2011
85,000 180,000
Grenoble
Market View Real estate markets
THE LOGISTICS MARKET IN FRANCE (WAREHOUSES >10,000 SQ. M)
Reasonable results in the Paris Region While in 2010 few occupiers were looking for space in France, recorded requirements rose in 2011. The dynamism was particularly visible amongst logisitics companies and supermarket chains which, due to a shortage of suitably large or technically advanced facilities, turned to turnkey schemes. Nevertheless, take-up fell compared to the 1st quarter 2010 (down 51%). Regional markets were in difficulty and the Ile-de-France region bolstered the market as a whole with 43% of take-up volume (almost half of transactions). Approximately 22% of take-up took place in the north (all in Nord-Pas de Calais), while the Rhône corridor and the south were overtaken by the west and southwest where take-up was active. Take-up in the Paris region was 57% lower compared to the particularly strong 1st quarter 2010 (some operations that had been in the pipeline for many months were finally closed), but at 127,300 sq. m it can still be considered at a satisfactory level for the first three months of a year. Given the significant number of deals in the pipeline, take-up could be high at the end of 2011. Also, regional markets should start catching-up as numerous commitments have been made that should be confirmed in the 2nd quarter of the year.
Immediate supply and take-up in France
Geographic breakdown of take-up in sq. m at Q1 2011
(in thousand sq. m, at period end) Greater north 22%
4,000
West 18%
3,000 Greater south west 7% Greater south 6%
2,000 1,000
06
07
08
Take-up
09
10
Q1 11
Ile-de-France 43%
Rhône corridor 4%
Immediate supply
Sources: CB Richard Ellis and Immostat
Sources: CB Richard Ellis and Immostat
Supply down slightly Immediate supply stood at almost 3.8 million sq. m at 1st April 2011 and fell slightly, by 3%, during the quarter. It fell in all markets or stabilised, dropping 4% in Ile-de-France and 3% in regional France. Supply in France is composed of 61% of class A buildings (62% in Ile-de-France), a proportion that is tending to stabilise because of the freeze on development. But the quality of supply is falling, with the share of available new or recent class A warehousing tending to shrink. Speculative development has not yet recommenced and investors are not expected to take position on this type of scheme in the short or medium term. The volume of semi-speculative supply, however, is still fairly high (more than 4 million sq. m).
Headline rental values in France at 1st April 2011
1st quarter 2011
(in € net/sq. m pa - class A or B, new)
Burgundy / Franche-Comté Rhône corridor Greater centre Greater east Greater north Greater south Greater south west Ile-de-France Normandy West
€30/ €35 €43/ €45 €42/ €50 €37/ €50 €40/ €45 €40/ €45 €42/ €50 €46/ €52 €37/ €49 €40/ €45
Uneven values Headline rental values, after stabilising in 2010, have remained steady nationwide. Yet for outstanding sites, such as the Inner Rim, occupiers are now ready to go over market values. In addition, in some outlying markets that are oversupplied, where old buildings have only average facilities, some landlords who are having difficulty finding tenants are willing to lower their rents even more. Commercial concessions are stable, standing at about 1.5 months of rent-free period for each unbreakable year in the lease.
Source: CB Richard Ellis Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we make no guarantee, warranty of representation about it. It is your responsibility to independently confirm its accuaracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the future performance of the market. The reproduction of the whole or any part of this report is only authorised if its source is credited.
CB Richard Ellis Ressources - Economic Interest Group Head office: 145-151, rue de Courcelles 75017 PARIS - Siren: 412 352 817 - RCS Paris © 2011 CB Richard Ellis, Inc.
RESEARCH CONTACTS Aurélie LEMOINE Head of Research Tel.: 33 (0) 1 53 64 36 35 [email protected] Edouard de LABOULAYE Economy, Retail Tel.: 33 (0) 1 53 64 33 45 [email protected] Christelle BASTARD Investment Tel.: 33 (0) 1 53 64 37 30 [email protected] Sabine ECHALIER Ile-de-France offices Tel.: 33 (0) 1 53 64 37 04 [email protected] Etienne CHATENAY Regions Tel.: 33 (0) 1 53 64 34 02 [email protected] Erika LEONARD Logistics, industrial Tel.: 33 (0) 1 53 64 34 84 [email protected] Fax: 33 (0) 1 53 64 40 00 www.cbre.fr/fr_fr/etudes
