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Paris looks beyond Covid to a bright future for office sector

The debate over the future of home working has a particular resonance for Paris, which is Europe’s biggest office market, delegates heard at Real Asset Media’s France Investment Briefing, which took place online recently.

Didier Unglik, President, L’Etoile Properties

“Things always go back to normal after a crisis,” said Didier Unglik, president, L’Etoile Properties. “There will be more working from home but it won’t become the norm. Business can only get done when people get together and they want to go back to the office.”

There may well be a need for more space, as people will remain aware of social distancing norms even after the pandemic, experts agreed. The design of office buildings will change, with more individual offices or space between desks and more meeting rooms.

“Offices will become more like meeting places, with auditoriums and areas for video conferencing,” said David Rendall, managing director, La Française Real Estate Managers. “Covid-19 will accelerate the digitalisation of the workspace.”

In France, the impact of the crisis has been cushioned by government help, so there is a question mark over what will happen to leases and contracts next year.

So far the situation has been good. “It has been quite stable in France, except in the retail sector,” said Sabine Leuschner, partner in law firm Sagasser.“In future inevitably discussions will be opened up and letting contracts will be renegotiated, it will be a question of supply and demand.” 

At present in the office sector competition has reached a high which is making the situation unsustainable.

Correction imminent in France’s office letting market

“For every tenant looking for 5,000 sq m there will be ten landlords trying to attract them,” said Guillaume Unglik, head of acquisitions France, L’Etoile Properties. “Incentive packages have become ridiculous. There will have to be a correction. I predict that headline rents will have to decrease in the next few months.”

There are signs that companies are looking beyond Central Paris to the outskirts and to regional cities.  

“The backbone of Paris is changing and hubs are popping up around the new Grand Paris stations,” said Guillaume Turcas, managing partner, Faro Capital Partners. “Saint-Denis is a good example of this trend. Also outside the capital there are cities you have never heard of that are getting attention”.

Improvements in infrastructure and good transport links are driving the new trend.

“The markets that are performing well are the well-connected ones,” said Didier Unglik. “Cities like Bordeaux or Lyon are sparking new interest. Companies may choose to keep their headquarters in Paris but have co-working space in Nantes. It’s a trend for the future.”