TE LETTING MARKET Q3 2015 PARIS CBD · 2 RESEARCH PARIS CBD Q3 2015 Examples of transactions Transactions ≤ 1,000 sq m (Source: Knight Frank) Tenant Address Date Area Rent Quality

THE LETTING MARKET - Q3 2015

PARIS CBD

Take up in sq m

� +4%: transactional activity has proved dynamic in the CBD since the start of 2015. Its results continue to increase compared with 2014, which was in turn a good year, against a bleak regional backdrop (-1%)

� Results are encouraging across all segments of surface areas, including for large transactions (greater than 5,000 sq m), with four large transactions recorded since the start of the year in the CBD, although this is not normally a core segment of the market

� However, the small surface areas (less than 1,000 sq m) and medium-sized surface areas (1,000 sq m to 5,000 sq m) segments proved most dynamic, with respective increases in transactional activity of +30% and +16%

� The CBD accounted for 20% of regional transactional activity in the third quarter of 2015, much higher than the average of 16% observed since 2009

94,50070,800 62,700

94,600 99,400

100,700

79,500 79,400

101,800 95,800

115,500

75,000 85,100

91,200 103,500

85,200

119,80094,400

90,000

2011 2012 2013 2014 2015

321,600

377,600

298,700

395,900

345,100

Ile-de-France Paris CBD

40% 41% 42% 35% 41%

38% 43% 43%45%

45%

17% 10%15%

14%14%

5% 6% 6%

2011 2012 2013 2014 Q3 2015

25% 20% 25% 23% 26%

34%33%

39% 37%40%

19%24%

21%20%

22%

22% 23%15% 20%

12%

2011 2012 2013 2014 Q3 2015

Very large areas(≥ 20,000 sq m)

Large areas(from 5,000 to 20,000 sq m)

Medium areas(from 1,000 to 5,000 sq m)

Small areas(≤ 1,000 sq m)

Size of transactions

Take up

298,700 sq m

(Source: Knight Frank)


Q1 Q2

Q3 Q4

2

RESEARCH PARIS CBD Q3 2015

Examples of transactionsTransactions ≤ 1,000 sq m (Source: Knight Frank)

Tenant Address Date Area Rent Quality

Confidential 7 rue Copernic, Paris 8th Sept. 2015 930 sq mOwneroccupier sale

State of repair

Rouvier et Associés 9/13 avenue Myron Herrick, Paris 8th Sept. 2015 813 sq m €450 New

Etude NotarialePoisson et Gaillard

85 bld Haussmann - Paris 8th Sept. 2015 769 sq m €610 New

Formatlangues - Services et Séjours

10 rue du Colisée - Paris 8th Aug. 2015 927 sq m NA State of repair

IMG Models 20 rue de la Baume - Paris 8th July 2015 975 sq m €730 New

Lancaster 14 rue Auber - Paris 9th April 2015 880 sq m €550 State of repair

China Construction Bank Europe SA

86 bld Haussmann - Paris 8th April 2015 800 sq m NA Renovated

Confidential 37 rue de la Victoire, Paris 9th March 2015 993 sq m €460 State of repair

Ecovadis 43/47 ave. de la Gde Armée - Paris 16th March 2015 930 sq m NA State of repair

Tag Commander 3/5 rue Saint-Georges - Paris 9th March 2015 808 sq m €420 Renovated

Avenir Finance 12/14 rue de Médéric - Paris 17th Feb. 2015 861 sq m €475 New

Insurance company 38 avenue de l’Opéra - Paris 2nd Jan. 2015 897 sq m NA Renovated

Transactions from 1,000 to 5,000 sq m (Source: Knight Frank)


Confidential 81/83 rue de Richelieu, Paris 2nd Sept.2015 3,600 sq m €780 New

Groupe SMCP 150 bld Haussmann, Paris 8th Sept. 2015 2,600 sq m €630 New

Hays France 145/149 bld Haussmann, Paris 8th Aug. 2015 4,840 sq m NA New

Ralph Lauren France 19/23bis rue de Vienne, Paris 8th Aug. 2015 3,550 sq m €600 State of repair

Eurazeo 1 rue Georges Berger, Paris 17th July 2015 4,130 sq m €730 New

Marionnaud Parfumeries 111/119 rue Réaumur, Paris 2nd July 2015 4,000 sq m €565 Renovated

French group 15 avenue d’Iéna - Paris 16th June 2015 2,500 sq m NA Renovated

Sungard Financial Systems 46/50 rue ND des Victoires - Paris 2nd May 2015 2,900 sq m NA Renovated

Lafourchette.com 70 rue Saint-Lazare, Paris 9th May 2015 2,290 sq m €450 State of repair

Korian 21/25 rue Balzac - Paris 8th March 2015 3,000 sq m €650 Renovated

Banque de France 111/119 rue Réaumur - Paris 2nd Jan. 2015 3,555 sq m €565 Renovated

3


Ile-de-France Paris CBD

11%

52%

21%

59%

45%24%

12%35%

26%

34%

40%

17%

10%

25%

15%

12%

7%11% 10%

7%

27%

2010 2011 2012 2013 2014

19%25%

7%

22%

37%

9%

11%

18%12%

26%

15%

8%

9%

32%

32% 46%

31%

26%

18%21%

12% 17% 6%

11%

2010 2011 2012 2013 2014

5%

4%

3%

3%

4%

3%

2%

4%

3%

Large occupiers (> 5,000 sq m)(Source: Knight Frank)

Industry TMT Luxury &Fashion

OthersPublic/Para-public/Professional andinternational organisations

Legal activities,Audit & Advices

Banks/Finance &Insurance

Transactions ≥ 5, 000 sq m (Source: Knight Frank)


Sisley 3/5 avenue de Friedland, Paris 8th Sept. 2015 10,000 sq mOwneroccupier sale

New

BPI - Banque Publique d’Investissement

24/30 rue Drouot, Paris 9th Aug. 2015 9,330 sq m NA New

Exane # Cloud - Paris 2nd March 2015 10,300 sq m €700 to 760 New

Cartier 33 rue La Fayette - Paris 9th Jan. 2015 12,000 sq m €680 State of repair

4


� Grade A supply (new or restructured) has fallen significantly in the last three months, following leases and sales to users of several new and restructured projects, such as 3/5 Friedland (bought by Sisley) as well as 24/30 Rue Drouot (leased by Bpifrance). Grade A supply therefore represents 14% of available supply recorded in the CBD, compared with 19% at the end of June 2015

� The CBD, even more than the rest of the Paris region, is clearly facing a shortage of Grade A supply. These types of properties are very popular with users, since they allow streamlining of real-estate costs and work organisation. In 2014, 81% of surface areas involved in large transactions were Grade A

� The lack of high quality supply therefore presents a potential hurdle to transactional activity in the CBD

Share of new or redeveloped areas in the available supply

14%

18%

Paris CBD

Ile-de-France

Grade Asupply

14%(Source: Knight Frank)

New or redeveloped

Second hand

� The CBD continues to record a very low vacancy rate, significantly below the regional average (7.3%)

� Vacancy has also fallen in the past six months, to the extent that the CBD is heading for a shortage of supply

� This is a sign of the CBD’s appeal to companies, with no increase in vacant surface areas recorded as a result of the economic crisis

� However, the current situation poses a threat to future transactional activity, with supply tending to create demand in a market such as the CBD, as demonstrated by the absorption capacity of the numerous real-estate projects delivered in 2014. Conversely, a lack of supply is likely to drive users away from this market

Vacancy rate in %

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011 2012 2013 2014 2015

Paris CBD Ile-de-France Western Crescent

4.9%

7.3%

12.4%

Available supply

4.9%Vacancy rate

(Sources: Knight Frank, ORIE)

5


€750

€300

€400

€500

€600

€700

€800

€900

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2011 2012 2013 2014 2015

Prime rent Average rent

€536

� High-end rent has remained at €750 since the end of 2013

� This value, established following the lease by Hermès in Rue d’Anjou, has since been confirmed, for example by the new Clifford Chance head office in 2014 and the Exane transaction for #Cloud in 2015 (the latter achieving values of €760 for some superior office spaces)

� This price stability, despite the strong performance of transactional activity, is one of the keys of the fine performance recorded by the CBD in the rental market in 2014 and 2015

� There are early signs of an upward trend, however, with the signing of some transactions at record levels of around €800

� The Exane transaction for #Cloud marked another significant milestone, as high-end values previously reserved for the West of the CBD (the Golden Triangle), now appearing in the Financial City, to the east of Opéra

Rents in €/sq m/year excl. taxes and charges

Rents

€750 /sq m/year excl. taxes and charges

Prime rent


1,000 sq m

2,000 sq m

3,000 sq m

4,000 sq m

5,000 sq m

6,000 sq m

7,000 sq m

8,000 sq m

9,000 sq m

10,000 sq m

11,000 sq m

12,000 sq m

13,000 sq m

€200 €300 €400 €500 €600 €700 €800 €900

€526

Rent (€/sq m/year excl. taxes & charges)

Rented area

Ave

rag

e re

nt f

or

Q3

201

5

€200 €300 €400 €500 €600 €700 €800 €900

€505€601

> 5,000 sq m

from 1,000 to 5,000 sq m

< 1,000 sq m

Average rents per area*

Size/rents ratio(Source: Knight Frank)

* Not enough references to propose an average rent for the >5,000 sq m office sector

6


(Sources: Knight Frank, ORIE)

Summary

Paris CBDQ3 2015

Paris CBDQ3 2014

Paris CBDAnnualchange

Ile-de-FranceQ3 2015

Paris CBD share in

Ile-de-France

Stock 6,652,381 sq m 6,781,473 sq m -1.9% 53,579,120 sq m 12.4%

Take up 298,700 sq m 287,646 sq m +3.9% 1,521,800 sq m 20.0%

Immediate supply 326,000 sq m 347,000 sq m -6.1% 3,933,000 sq m 8.2%

Vacancy rate 4.9% 5.1% - 7.3% -

Average rent €536/sq m/year €506/sq m/year +5.9% €324/sq m/year -

Prime rent €750/sq m/year €750/sq m/year - €750/sq m/year -

� The under-production of new or restructured supply seen since 2010 led to a decline in the average annual take-up of Grade A surface areas in the CBD to 59,000 sq m compared with 75,000 sq m two years ago

� The dominant model in the CBD remains marketing after delivery of the building. Out of the 68,100 sq m delivered in 2015, only 18,500 sq m (27%) are still available

� Marketing prior to completion remains the exception, amounting to 7% of projected volumes between now and the end of 2018

� The dip in the volume of surface areas delivered looks set to be confirmed in 2016 and 2017, accentuating the current shortfall in Grade A supply and pushing up rents for these types of properties

New or redeveloped areas in Paris CBD

36,800

56,700

37,900

58,100

85,800

68,100

68,100

8,400 6,100

49,300

116,900

20,000 sq m

40,000 sq m

60,000 sq m

80,000 sq m

100,000 sq m

120,000 sq m

140,000 sq m

2010 2011 2012 2013 2014 2015 2016 2017 2018

57,700

41,400

123,000

Average consumption of new or redevelopedoffice space (2009/2014): 59,000 sq m

Future deliveries

7%of new deliveries before Q4 2018 are pre-let


Delivered Pre-let Available

7


Map

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Avenue de Friedand

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RESEARCH

Contacts for market studies

Cyril RobertResearch+33 (0)1 43 16 55 [email protected]

Nadège PieczynskiAnalyst+33 (0)1 43 16 88 [email protected]

Contacts

Philippe PerelloCapital MarketsPartner Knight Frank LLP+33 (0)1 43 16 88 [email protected]

Aymeric SevestreOffice Agency+33 (0)1 43 16 88 [email protected]

Laurence KarsentiRetail+33 (0)1 43 16 88 [email protected]

Guylène BrossartProperty Management+33 (0)1 43 16 88 [email protected]

Aron ShadboltKnight Frank Valuation+33 (0)1 43 16 88 [email protected]

Arnaud CosnyL’Atelier Knight Frank+33 (0)1 43 16 56 [email protected]

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© Knight Frank SNC 2015This report is published for general information only. Although high standards have been usedin the preparation of the information, analysis, views and projections presented in this report,no legal responsibility can be accepted by Knight Frank Commercial Research or Knight FrankSNC for any loss or damage resultant from the contents of this document. As a general report,this material does not necessarily represent the view of Knight Frank SNC in relation to particularproperties or projects. Reproduction of this report in whole or in part is allowed with properreference to Knight Frank Commercial Research.

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Sources used in this report: ORIE, INSEE.

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Documents

TE LETTING MARKET Q3 2015 PARIS CBD · 2 RESEARCH PARIS CBD Q3 2015 Examples of transactions Transactions ≤ 1,000 sq m (Source: Knight Frank) Tenant Address Date Area Rent Quality