The Covid-19 crisis is having a severe impact on the French real estate market but office rents in central Paris are still seeing double-digit growth, delegates heard at Real Asset Media’s European Outlook: France Investment Briefing, which took place online recently.
‘The rental market is an essential driver of investment, especially in the Paris region which is a barometer for the market,’ said Cyril Robert, Head of Research, France, Savills. ‘While take-up has seen a marked decline in the first half of the year, prime rents in the Paris CBD are up 10% on H1 2019 and the average rent is up 8%’.
Take-up in H1 2020 has been 670,000 m2, which means a 40% fall compared to last year. The lockdown in Q2 saw a steep decline, recording the worst quarterly results in a decade.
‘It could have been worse,’ said Robert. ‘Total took up a lease for 130,000 m2 in The Link, a building under construction in La Défense. This one transaction alone accounted for 20% of total take-up in the first half of the year, which is the clearest demonstration of the impact of the crisis’.
Investment volumes in the first half of the year fell by 17% to €11.8 billion, but it’s still above the 10-year average, which is €10,1 billion. However, it’s a tale of two halves: Q1 recorded the best start to the year ever recorded, but then there was a sharp fall in Q2 as the epidemic hit.
‘The slowdown due to Covid-19 could continue in Q3,’ said Robert. ‘This will really show the resilience of the market and the ability to generate new sales’.
Most investment has targeted core assets and central locations as capital looks for quality safe havens in an uncertain climate. Rents in the Paris CBD have increased significantly and reached over €930/m2 in Q2.
‘The rise was helped by Goldman Sachs signing up for €960/m2, which may turn out to be a high water mark’, Robert said. ‘We may be seeing the dying fires of rent increases’.
In early June the US bank signed a 12-year lease for a new 6,500 m2 HQ in a building near Arc de Triomphe that will be completed late next year, describing the move as a ‘sign of confidence in Paris as a financial centre’.
Missed the Real Asset Insight France Investment briefing webinar? You can watch it here: