Paris has a well-positioned commercial property market. The buildings are well designed, well leased and the latest figures show that they are selling like hotcakes.
With a total of €20bn, the Paris commercial property market is expected to exceed 2013’s result by at least 30%. Topping the list for 2014 are shopping centers purchased by Klépierre Carmila, the new land for Carrefour, Coeur Défense tower acquired by the Texas Lone Star Funds for €1.2bn.
The Beaugrenelle shopping center bought by the owner of Apsys and his two associates for more than €700m and the headquarters of SFR in Saint-Denis, acquired by Predica for more than €500m are other notable transactions.
In total, the number of transactions above the €200m mark has increased by at least 50% in one year. Once again it shows that whilst the country’s economy may still be stuttering, the market of bricks and mortar never sleeps.
As the adage goes, “Paris will always be Paris,” and as these figures would suggest, much of the world has its eyes on the French office market, second on the European podium after London, yet still much more affordable than its British neighbor.
Amongst these deep-pocketed buyers are both regulars and newcomers. French insurance companies, driven by new solvency standards have enabled them to increase their allocation of Parisian commercial real estate; their Chinese counterparts have done the same.
Sovereign funds have also been anxious to put their assets away in politically stable countries; pension funds are doing the same believing that the crisis will soon end; wealthy industrialists, like the happy new owner of the “Gherkin” in London, paid €726m.
So its not just Paris, but more Europe, where commercial markets are hot. Yet aside from the competitive price per square metre it’s the yields where the real movement lies.
If the fall in London rents were brutal in 2008 on the London market, ithe drop has been less strong and more concealed in France. Landlords for large scaled commercial tenants have chosen to negotiate contracts and decrease rents by up to 20 or 30%, instead of opting to hold rates or increase them and then run the risk of dealing with long (and expensive) vacant periods.
On balance, those who were in the market pre-2008 have now recognised that in six years rents have finally lost between 25 and 30% and show no sign of recovery.