2018 Review& 2019 Outlook French Property Markets Investment Offices Retail A record year Key role of large transactions The Greater Region: domination confirmed Historic record for offices Examples of office transactions >€400 million in 2018 Prime yields at their lowest level Investment A measured risk A Grand Paris effect? The regions and the international scene in the spotlight The appeal of the residential sector SCPI/OPCI and insurance companies: contrasting results Foreigners more present Key trends in 2019

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Change in French investment volumes, all asset types In billion euros A record year 2014-2018 26.6 € BILLIONS / YEAR At its highest level 2009-2013

After an excellent first half to the 28.5

year and a sharp slowdown in the 29 third quarter, activity picked up 2 7. 9 € 28,500 again in the fourth quarter. 12.3 13.2 billion euros were invested in € 29,000 France over the period, bringing the € BILLIONS / YEAR € 27,950 total amount invested in 2018 to 29 billion euros, compared with 27.9 billion euros in 2017 (+4%). After a fifth consecutive year 13 of growth, the French market recorded a historic performance, 2% higher than the previous record set in 2007. € 13,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Knight Frank Montants investis en France Moyenne 2009-2013 Moyenne 2014-2018 French investment volumes 2009-2013 average 2014-2018 average

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT A polarized market 743 Key role of large transactions Transactions Breakdown of French investment volumes 2018 (828 in 2017) by amount category

The 2018 result is all the more 19% remarkable given that the market did not benefit from the impact 33 > €200 M (20 in 2017) of any exceptional transactions, 25% Plus de 200 M€ whereas the sales of «Cœur Défense» and the Logicor 36% 100 à 200 M€ logistics portfolio accounted 43% = for a total of €3.5 billion in 2017. 50 à 100 M€ This was compensated by the 2017 sharp increase in the number € 12.4 B 18% Moins de 50 M€ of transactions over 100 million 15% 10.2 en 2017 euros, which increased from 67 deals in 2017 to 77 in 2018. The increase in volumes is also 24% = significant, and these 77 deals totalled 18.3 billion euros, an increase of 9% year-on-year. 43% 20% 36% in 2017

Source : Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT A polarized market

The Greater Paris Region: domination confirmed Breakdown of investment volumes in the Greater Paris Region, all asset types In million euros

21.4 billion euros (+6% year-on- € 25,000 80% year) were invested in the Greater 72 74% Paris Region in 2018, 85% of 78% which was in the office sector. The Greater Paris Region is thus € 20,000 76% increasing its leading position and accounted for almost three- 74% quarters of investment volumes in € 15,000 France, after 72% in 2017. 72%

70% € 10,000 68%

€ 5,000 66% 64% € 20,200 € 21,400 € 0 62% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Volumes investis en IDF Part de l'IDF Investment volumes in the Greater Paris Region Greater Paris Region share

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Historic record for offices Another record was broken in 2018, are 87% concentrated in the Greater Activity also benefitted from the A polarized market that of volumes invested in the Paris Region, a share fairly close dynamism of the regions where French office market. Totalling more to that of 2017 but whose stable Gecina, for example, sold two office than 21 billion euros, this exceeds the level masks significant disparities portfolios for a total of almost €800 peak level€ of 25,000 2007. These amounts between the various office sectors. million.

Breakdown of French investment volumes, Change in office investment volumes in France, in million euros by asset type €21,000

€ 20,000 100% 9% 12% 90% 16%

80% 22% 15% € 15,000 16% 70%

60% € 10,000 50%

40% 69% 68% 73% 30% € 5,000 20%

10%

0% € 0 Moyenne10-year average 10 ans 2017 20182018 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 OfficesBureaux CommercesRetail IndustrielIndustrial Greaterlle-de-France Paris Region RégionsRegions Source: Knight Frank Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Examples of office transactions > €400 million in 2018

th nd th Invesco Capital 8, Paris 8 CNP Assurances 85-89 Richelieu, Paris 2 Primonial Reim Quadrans, Paris 15 Batipart Office portfolio, Provinces

GIC Ariane Tower, La Défense Oxford Properties Window, La Défense Sogecap Kosmo, Neuilly-Sur-Seine Société Générale Insurance Pacific Tower, La Défense

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Prime yields at their lowest level

The trend is generally one of Change in prime yields Range of prime office yields, by geographic sector As a % As a % stability in the office segment, with prime CBD office yields remaining 6.50 around 3%. 9.00% 6.00 6.00 In the high street retail market, 8.00% yields for the best Parisian locations 5.50 are on a slight upward trend and 7.00% 5.00 5.50 now stand at 2.90%. 4.50 4.25 4.25 6.00% Finally, the logistics market, driven by strong investor demand, 4.00 5.00% 3.50 3.50 experienced a further compression 3.50 3.25 4.00 4.00 in yields in 2018, with rates reaching 4.50% a low of 4.50%. 4.00% 3.00 3.003.00 3.25 3.25 3.00% 3.00% 2.50

2.00% 2.90% Paris CBD Paris La Défense 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Inner Suburbs Outer Suburbs ParisQCA Paris excl. CBD excl. Paris La Défense 2e Couronne Bureaux (Paris QCA) Rues commerçantes (Paris) Crescent Western Offices (Paris CBD) Logistics (Greater Paris Region) Couronne 1ère ParisHors QCA Logistique (Ile-de-France) Ouest Croissant Source: Knight Frank High street (Paris)

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT A measured risk

The breakdown of investment Breakdown of Greater Paris Region investment volumes, by risk type Change in investment volumes of forward funding sales Greater Paris Region offices, individual asset transactions ≥ €20 M Greater Paris Region offices, individual asset transactions ≥ €20 M amounts by risk profile confirms In millions of euros the appeal of secured assets to investors. Core assets represent more than 60% of the volumes 3,500 € 25 invested in offices in the Greater 6% Paris Region, a share that has 10% 3,000 € risen sharply over the past year 20 (45% in 2017). 4% 2,500 €

Forward-funding sales accounted 15 53% 2,000 € for a little under 4 billion euros of investment in France in 2018 (of 19% 1,500 € which 3.1 billion was in the Greater 10 Paris Region), an increase of 35% 1,000 € year-on-year. This increase is not 8% 5 necessarily a sign of greater risk 500 € taking by investors, as 60% of this 2,159€ 3,073€ volume was for partially or fully Core Dont VEFA prélouées - € 0 pre-let assets. Core PlusCore Incl. pre-letDont forward VEFA partiellementfunding sales louées 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Volumes investis en VEFA Nombre de VEFA Value CoreAdded Plus / blanc Incl. partiallyDont letVEFA forward en blanc funding sales Forward funding sale Number of forward Value Added Incl. speculative forward funding sales investment volumes funding sales

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Le Mesnil-Amelot Office transactions >20M€ 2017-2018 in the Greater Paris Region (excluding inner Paris) Triangle de A Grand Paris Le Bourget Aéroport Saint-Denis Pleyel effect ? Mairie de Within the context of a shortage Ivanhoé Cambridge notably Saint-Ouen Le Bourget of prime offices and yield purchased the 90,000 sq m RER compression, the search for Cap Ampère building there: La Folie returns remains an important a symbolic deal because it Clichy - driver of investment activity. is the largest office property Many investors have thus sold in 2018 in France, but focused on office assets that also because it perfectly Val de need to be restructured and are illustrates investors’ appetite Fontenay located in established markets for the major Greater or in proximity to the future Paris Region development Grand Paris Express stations. areas. The Pleyel site is Noisy-Champs The increase in volumes benefiting from both the Pont de invested in 2018 in the future commissioning of the Sèvres Champigny Inner Northern Suburbs Grand Paris Express and the Centre (+105% year-on-year) is organisation of the 2024 a good illustration of the Olympic Games; others have attractiveness of certain been targeted in Saint-Ouen, Institut development areas. Clichy or outside the Inner Gustave Roussy Suburbs (South, East). 20€20-50 – 50 M€ million 50€50-100million – 100 M€ Timetable for the commissioning of the Grand Paris Express 100€100-200 – 200 M€ million 2020- 2024- Aéroport d’Orly 200 – 500 M€ 2021 2025 2027 2030 €200-500 million CEA Saint-Aubin > 500 M€ Source: Knight Frank > €500 million

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT The regions and the international spotlight Whilst some players have focused Change in regional investment volumes Geographic distribution of General Public OPCIs All asset types, in million euros By value, share as a % on office assets that need to be restructured or assets that are located in the Greater Paris € 9,000 30% Region development areas, others have also increased their € 8,000 19% exposure to regional markets, 25% € 7,000 but have favoured new or recent 20% 45% assets, generally secured on long € 6,000 20% 20% Foreign leases. Furthermore, the largest Etranger metropolitan areas have been € 5,000 Province targeted as a priority, with the Lyon 15% 12% ProvinceParis region region alone accounting for 40% of € 4,000 30% 13% office investment volumes outside RégionParis parisienne € 3,000 10% the Greater Paris Region. 22% Paris

€ 2,000 Diversification and the search 5% for returns also require greater 32% € 1,000 20% exposure of French investors to € 4,650 € 7,800 € 7,600 foreign markets, as shown by the € 0 0% Moyenne 10 ans 2017 2018 change in geographical distribution 10-year average 2017 2018 EndFin 2013 EndFin 2017 of the SCPI/OPCI assets. VolumesInvestment investis volumes en régions PartShare Rhône-Alpes of the in the regions Rhône-Alpes

Source: Knight Frank Sources: ASPIM / AFG

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT In addition to strategies favouring The latter (including hotels) thus In France, activity was notably greater investor exposure to assets accounted for more than 26% of driven by a few major transactions, The appeal of the to be restructured, development investment volumes in Europe in including the acquisition by Ampère areas or the regions, there has 2018, compared with 15% just ten Gestion and Swiss Life AM of a also been a significant increase in years earlier. portfolio valued at 1.4 billion euros. residential sector interest in residential assets.

Change in residential and hotel transaction volumes Some significant examples in France In billion euros

€ 80 30%

€ 80 30% € 70 € 80 30% 25% Year Asset Purchaser Price € 70 25% € 70 € 60 € 60 25% 80% 20% €1.4 billion € 60 € 50 201820% Vesta portfolio € 50 20% € 50 € 40 € 40 15% 15% € 40 15% Powerhouse portfolio € 30 € 30 €1 billion 10% 201710% France € 30 € 20 € 20 10% € 20 5% € 10 5% € 10 5% € 10 2017 Heritage portfolio €200 million € - 0% € - € - 2007 2008 20090%2010 2011 2012 20130%2014 2015 2016 2017 2018 2007 2008 20092007201020082011200920122010201320112014 20122015 201620132017201420182015 2016 2017 2018 Residential & Hotel Transaction Volumes (LHS) Residential & HotelResidential Transaction & HotelVolumes Transaction (LHS) Volumes% of (LHS)Total (RHS) % of Total (RHS) % of Total (RHS) Source: Knight Frank Sources: Knight Frank / RCA

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT SCPI/OPCI and insurance companies: contrasting results Life insurance net fund collection

The large savings collectors French investment volumes by investor type Change in net fund collection All asset types, in million euros In million euros 2017 remain very active, even if the activity of SCPI/OPCIs, based on €8.4 bn a much smaller number of large 12,000 € 12,000 € transactions and benefitting from lower collection levels in 2018, 10,000 € 10,000 € is on a downward trend. These 2018 players accounted for 18% of all 8,000 € volumes invested in France last 8,000 € €22.4 bn year, after 36% in 2017. 6,000 € On the other hand, the share of 6,000 € insurers rose from 14% in 2017 to 4,000 € 24% in 2018, boosted by the few 4,000 € large or very large acquisitions made by Generali, Sogecap, CNP 2,000 € Assurances and Covea. 2,000 € +167% 0 € year-on- - € 2011

2017 year 2013 2012 2015 2016 2014 2017 2018 2011 2012 2013 2014 2015 2016 2017 Q3 2018 Assureurs SCPI / OPCI SCPI OPCI grand public 1S 2018 Insurance SCPI/OPCI SCPI General Public companies OPCIs Source: Knight Frank Source: ASPIM Source: FFA

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Foreigners more present

Europeans in the lead Change in the share of foreign investors Breakdown of foreign investment volumes Above average Out of all French investment volumes, all asset types Out of all French investment volumes, all asset types The large deals of the 4th quarter, 100% including the sale of Capital 8 to 2018 Invesco, the sale of Ariane Tower 90% to GIC and Ivanhoe Cambridge’s 4% acquisition of Cap Ampère, 80% confirmed the return of foreign 14% 70% 8% 27% investors to the forefront. While 17% their share is still far from that of 60% Zone € the early 2000s, they accounted € Zone 50% Europe hors Zone € for 46% of investment volumes in Europe outside € Zone 2017 France in 2018, compared with 31% 40% 34% Amérique du Nord 20% in 2017 and an average of 40% over North America 30% the past five years. Asie / Moyen Orient 46% 20% 41% Asia / Middle East Autres French investors are still in the 31% 16% Others majority, but their share has been 10% 39% 21% falling for the past three years. They 0% accounted for 54% of the volumes 10-yearMoyenne average 10 a. 2017 20182018 invested in France in 2018, after Part des investisseurs étrangers Part des investisseurs Français 67% in 2016 and 69% in 2017. Share of foreign Share of French investors investors Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Foreigners more North America Europe Asia Others presents

A targeted appetite With a strong presence in the logistics sector, North American OFFICES investors have also made a name 34% 45% 18% 3% for themselves in the office and retail sectors, such as Oxford Properties’ recent acquisition of Window in La Défense and the Valentino flagship on rue Saint- Honoré. They accounted for 39% of the volumes invested by foreigners INDUSTRIAL in 2018, ahead of Germans (16%), 67% 19% 10% 4% who are fond of prime shops and offices in the Greater Paris and Lyon regions.

Asians accounted for 14% of investment volumes, due to a few logistics and office transactions of RETAIL 19% 71% 0% 10% more than €100 million signed on behalf of South Korean, Singapore and Hong Kong investors.

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK INVESTMENT Key trends in 2019

INCREASED QUESTIONS ACTIVITY RISKS DRIVERS

• Economic slowdown • Standardisation of monetary policies / Yield changes • Strength of international • Social and geopolitical • Collection levels (SCPI/OPCI, life insurance) investment flows tensions • Changes in the equity markets • Investor’s search for • Change in investor acquisition criteria diversification (risk level, asset types, etc.) • Will the lettings markets remain buoyant?

KNIGHT FRANK | ASSESSMENT2018 REVIEW & AND 2019 PROSPECTS OUTLOOK INVESTMENT Sustained activity Large transactions: less of a key role New offices: still highly sought-after Contrasting results Occupiers: greater mobility? Paris: the reasons for success Co-working: the expansion continues Offices Co-working: what now ? Brexit: Paris well positionned Brexit: effects that need to be put into perspective ? Immediate supply: lowest level Increase in pre-lettings Requests for urban projects: a third of offices Rents under pressure in Paris Key trends in 2019

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Sustained activity

Change in take-up in the Greater Paris Region A good year The Greater Paris Region office 3,500,000 120 market experienced a robust end to 2018, although it did not reach 3,000,000 -1% peak levels. Take-up amounted to 79 100 629,000 sq m in the 4th quarter, a decrease of 19% compared to the 2,500,000 80 same period in 2017. Year-on-year 2,000,000 Over the whole of 2018, take-up volumes totalled almost 2.54 60 million sq m, compared to 2.56 1,500,000 million sq m a year earlier. The overall trend remains positive: 2018 40 1,000,000 results are almost equal to the very good results of 2017, and are more +14% 20 than 14% higher than the ten-year 500,000 average.

0 2,535,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1 0-year average Take-upDemande (sq placée m) (m²) AverageConsommation office take-up moyenne since de bureaux 2008 depuis 2008NumberNombre of transactions de transactions > 5,000 > 5000 sq m m² Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Large transactions: 79 transactions less of a key role > 5,000 sq.m 93 in 2017 Take-up by area category, in the Greater Paris Region More evenly Out of total volume in sq.m distributed 9% The strength of the Greater Paris 16% 15% Region market is particularly noticeable with areas of less than 5,000 sq m. Areas comprised 27% between 1,000 and 5,000 sq m are 24% 32% 916,000 sq.m the most active, with volumes up 16% year-on-year. 1.2 million in 2017

Lettings of areas over 5,000 sq m 29% 35% recorded a decrease of 24% year- on-year. While their number is also 30% decreasing, it is mainly the size of large transactions that is behind the slowdown in the office market. Only six company movements of more 30% 29% 23% 36% than 20,000 sq m were recorded in 2018, of which five were signed in the first half of the year, compared Moyenne10-year average 10 ans 20172017 20182018 of volume to ten such deals in 2017. 47% in 2017 < 1,000 sq m 5,000 to 20,000 sq m Source: Knight Frank < 1 000 m² 1 000 à 5 000 m² 5 000 à 20 000 m² > 20 000 m² 1,000 to 5,000 sq m > 20,000 sq m Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES An increase in pre-lettings

The share of pre-lettings of new/redeveloped large areas also remains high at almost 80%, another indication of occupiers’ preference for the New offices: still most qualitative properties.

Change in pre-lettings in the Greater Paris Region highly sought-after % of number of transactions > 5,000 sq m undertaken on new or redevelopedPart des transactions supply en précommercialisation Take-up by building quality, in the Greater Paris Region Part des transactions à livraison ou après % volume of transactions > 5,000 sq m 80 Nearly 75% of total 77% take-up 60 État The shift in activity towards new/ Condition of 73% redeveloped premises remains d’usageuse 40 a constant in the Greater Paris 16% 51% Region market: such deals 48% accounted for 73% of take-up over 20 5,000 sq m in 2018 (72% in 2017). RefurbishedRénové 11% 0

-20

-40

NeufNew // RestructuréRedeveloped -60 73% 2015 2016 2017 2018

Share of pre-letting transactions -80 2015 2016 2017 2018 Share of transactions let upon completion or after

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Contrasting results

Share of each geographic sector in total take-up Paris, still on top In the Greater Paris Region, out of total volume in sq m Change in take-up The results of the different Greater By volume, between 2017 and 2018 Paris Region office sectors quite diverse. In the Inner Suburbs, the South stood out with a strong 45% 13% Paris CBD +11% increase in take-up. The Outer 15% Suburbs show an increase of 30%. 10% Paris CBD The results of the Western Crescent 16% Paris QCA Paris non CBD -1% and La Défense is more mixed. 18% Paris non CBD 16% ParisLa HQCA Défense Take-up volumes were stable La DéfenseWestern Crescent La Défense -21% in Paris in 2018 and exceeded one million sq m for the third CroissantInner SuburbsOuest 28% consecutive year. The driving force 1e couronneOuter Suburbs Western Crescent -9% behind this success? The excellent 25% 23% results of the CBD and Paris Centre 2e couronne 7% 23% West, whose take-up volumes Inner Suburbs -8% increased by 11% year-on-year. 6%

Outer Suburbs +30%

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Occupiers: greater

mobility? % of number of transactions ≥ 5,000 sq m in the Greater Paris Region, 2017/2018 An analysis of the movements of large occupiers over the 2017- 2018 period makes it possible to CompaniesCompany comingfrom... from… Have left the sectorHave to left go…. the area to go....Have stayedRemained in thein sector the sector distinguish the most attractive office markets from those subject Paris CBD ParisParis CBD CBD 60% 60 % to greater corporate mobility. Whilst the Outer Suburbs remain mainly driven by endogenous Negative balance movements, La Défense, which Paris non CBD ParisParis non non CBD CBD 4545%% 45% for the moment offers little new and redeveloped office space, has for example seen a majority La Défense LaLa Défense 43%43 % Negative balance of companies favour neighbouring 43% sectors.

Western Crescent 66% In Paris, this is also the case for Western Crescent West Crescent 66 % office sectors outside the CBD, which at the same time attract occupiers from most of the major inner Suburbs Inner1st SuburbsCrown 70 70%% office sectors in the Greater Paris Region.

Outer Suburbs Outer2nd SuburbsCrown 84 84% %

Source: Knight Frank -100 -80 -60 -40 -20 0 20 40 60 80 100

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES FINANCE, LUXURY, LAWYERS: TRADITIONAL AND CAPTIVE OCCUPIERS Paris: the reasons for success Despite the limited number of new Examples of transactions ≥ 5,000 sq m in Paris in 2018 available premises, the rate of lettings has generally remained CO-WORKING, TECH: NEW DRIVERS OF THE PARISIAN MARKEt steady in Paris, which benefits from demand from a wide variety of companies, concerned about centrality and surroundings that are conducive to retaining or attracting talent.

The capital’s best supply is thus coveted by traditional occupiers, in fields such as consultancy, luxury or finance, but also by more recent HIGHLY SUCCESSFUL PERIPHERAL LOCATIONS: and fast-growing players such as WHEN THE ARRIVAL OF LARGE NEW/REDEVELOPED New Tech and Coworking. The OFFICE SPACE FEEDS DEMAND development of large, new and redeveloped office space on the outskirts of the capital has also helped to boost take-up.

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Geographic breakdown of co-working take-up volumes Paris way ahead In the Greater Paris Region, between 2015 andParis 2018 QCA

The increase in volumes is due to 1% Paris Centre Ouest (Hors the sharp increase in the number 4% QCA) of transactions and the strong Paris CBD Coworking: Paris Sud 10% increase in the average size of Paris Center West movements, from 1,500 sq m in (excl. CBD) Paris Nord Est the expansion continues 2015 to more than 4,000 sq m in 13% 41% Paris South 2018 due to the increase in lettings La DéfenseParis North-East of more than 5,000 sq m, and even Change in co-working take-up 5% La Défense 10,000 sq m. Croissant Ouest Almost 130,000 sq m in In the Greater Paris Region, between 2015 and 2018 Western Crescent 2018! 17% Inner Suburbs 9% 1ère couronne 140,000 m² 35 Outer Suburbs Take-up literally exploded from 2ème couronne 2016, reaching a volume of almost 120,000 m² 30 40,000 sq m in the Greater Paris Breakdown of co-working take-up volume, by operator WeWork increased In the Greater Paris Region, between 2015 and 2018 Region, which more than doubled 100,000 m² 25 a year later to reach more than its lead 120,000 m² 90,000 sq m in 2017. In 2018, WeWork accounted for 80,000 m² 20 100,000 m² most of the transactions signed in The trend continued last year, with this area segment of the market, the volume of sq m of office space 60,000 m² 15 allowing it to offer almost 100,000 80,000 m² let by Coworking players reaching sq m of office space in Paris, almost 130,000 sq m in 2018. 40,000 m² 10 Autres although this is still a long way off 60,000 m² Others the space it currently has in London

20,000 m² 5 (just over 250,000 sq m) and New 40,000 m² York (640,000 sq m).

0 m² 0 20,000 m² 2015 2016 2017 2018 Demande placée (m²) DemandeTake-up (sq.m) placée > 5000 m² 0 m² NombreTake-up de > 5,000transactions sq.m Paris QCA Paris hors QCA Source: Knight Frank Paris LaCBD Défense La DéfenseCroissant Ouest Others Number of transactions Paris Autresnon CBD secteurs Western Crescent

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Expansion Diversification Segmentation

Increased demand: 60% of Arrivals of new French or foreign More differentiated offer, from the millennials in companies in 2025 players / Creation of new concepts leading generalists (WeWork) to and an increase in the number of dedicated co-working operators self-employed people. (CIC), as well as the prime sector (The Bureau) Coworking: Large corporates will constitute an Crossover of uses: more innovative The main landlords are developing increasing proportion of co-working services to stand out in a booming an integrated co-working offer what now? space users. market. (Wellio, Nextdoor, Smartdesk…).

Co-working will continue to expand, Crossover of places: co-working Franchise expansion / Acquisition especially in Paris, which has spaces will be more prevalent of their real estate by certain co- concentrated more than 70% of in mobility areas (train stations, workers / Change in relationships the sq m leased in the Greater Paris airports, shopping centres). with landlords? Region since 2015.

Sources: Knight Frank / EY

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Paris and Frankfurt are neck and neck Geographic breakdown of Brexit-related movements in Europe Announced, actual or potential movements, by city

Brexit: Paris is well positioned Dublin, Luxembourg, Paris, Frankfurt and Amsterdam: the five cities that have welcomed, or are 60 likely to welcome, the most Brexit- DublinDublin Intensifying related job creation or relocation A few weeks before the UK’s Chronological change in the number of Brexit-related movements in Europe projects account for almost 80% Announced, actual or potential movements official exit from the EU, the of the total number of identified 43 «Brexodus» has not taken place projects. LuxembourgLuxembourg and there is no evidence at this time that it will happen. Indeed, companies favour a limited number of European markets, 34 Francfort That being said, the acceleration 155 2018 chosen for the strength of their Frankfurt in the pace of Brexit-related financial centre (Paris, Frankfurt), movements is undeniable: more a particularly attractive regulatory 33 than 150 certain or potential and fiscal framework (Luxembourg, Paris/IDFParis projects were identified in 2018, Dublin, Amsterdam), recognised a figure that doubled from that expertise in certain types of recorded in 2017, which speaks activities (Luxembourg and Dublin 24 Amsterdam volumes about the business in the field of fund management) Amsterdam 82 2017 environment in which companies or their cultural proximity to the operate. United Kingdom (Dublin). 10 MadridMadrid

5 2016 5 BrusselsBruxelles

Source: Knight Frank 33 OthersAutres

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES If all these projects were to streamlining movements, which space that they are able to densify materialise, they would represent could potentially erode jobs. to increase their staff numbers, only a modest share of the total Finally, several banks, particularly without necessarily having to lease take-up. Furthermore, the financial French ones, already occupy additional space. Brexit: effects that sector remains subject to major office space in the Paris region; need to be put into Finance dominates More Americans Breakdown by activity Breakdown by company origin perspective? Announced, actual or potential movements Announced, actual or potential movements In Paris, the demand for offices has not yet been boosted by 100% 8 Brexit. What will happen in the All movements 13 90% 17 coming months? 2 24 19 31 11% 80% Admittedly, the ongoing 21 negotiations indicate that other 70% 9% 3 companies will soon undertake 45 26 60% significant rental movements. 9% 33 16% Finance - which currently 50% 36 represents the vast majority 33 of projects identified in Paris - 9% 40% Paris should not become, thanks to 35 30% Brexit, THE future driving force of the office market. 62% 20% 40 40 11% 73% 30 29 10% 15 0% Dublin LuxembourgLuxembourg ParisParis FrancfortFrankfurt AmsterdamAmsterdam

UK USA/CanadaUK Asie (JaponAsia incl.)(Japan incl.)Autres Source: Knight Frank USA / Canada Others FinanceFinance FintechFintech AssurancesInsurers OthersAutres

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Lowest level for 10 years Down 12% year-on-year but by less 2014 (7.7%) but still well above the Immediate supply: than 1% over a quarter, the volume 2001 low. of available supply in the Greater Paris Region stabilised below The shortage situation is most lowest level the 3 million sq m threshold. The pronounced in Paris, with vacancy vacancy rate now stands at 5.4%, rates sometimes below 2% in some 16.0 % well below the previous high of areas of the capital. Very mixed situations 14.1 14.0 % 12.7

Historical vacancy rates by Change in supply and vacancy rate 12.0 % 10.3 geographic sector In the Greater Paris Region, as a % 10.6 In the Greater Paris Region, as a % 10.0 % 4,500,000 m² 9%9 8.0 % 6.4 8.0 6.8 7,7% 5.6 8.6 4,000,000 m² 8%8 6.0 % 6.9 3,500,000 m² 7%7 4.0 % 4.2 5,4% 4.7 3,000,000 m² 6%6 4.1 4,9% 2.0 % 2,500,000 m² 5%5 2.5 0.0 % 1.7 2,000,000 m² 4%4

1,500,000 m² 3%3

1,000,000 m² 2%2 Western Crescent Paris CBD Paris Paris QCA Paris La Défense La Défense

2e couronne 500,000 m² 1%1 Inner Suburbs Outer Suburbs 2,890,000 1ère Couronne Paris excl. CBD excl. Paris Paris Hors Hors QCA Paris Croissant Ouest 0 m² 0%0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Plus bas sur 10 ans 2018 Plus haut sur 10 ans 2007 10-year low 2018 10-year high Offre immédiate (m²) Taux de vacance Immediate supply (sq.m) Vacancy rate

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Long-term shortage in Paris Increase in Share of pre-lettings by geographic sector Supply of offices under construction to be completed by the end of 2021 pre-lettings Office completions in the Greater Paris Region Recovery of supply after 2019? 2,500,000 m² 38% 47% The shortage situation observed in several office sectors is unlikely 2,000,000 m² to change in the short term. As 62% 53% such, 47% of the 2.13 million sq m of offices currently under 1,500,000 m² Inner Paris Western Crescent construction in the Paris region for delivery by the end of 2020 are already pre-let. 1,000,000 m²

The remaining future space is 500,000 m² by far insufficient to satisfy the 54% appetite of large occupiers, and 26% 23% competition for the highest quality 0 m² assets will remain strong. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 70% 73% Livraisons disponibles Livraisons prélouées SurfacesAvailable livrées completions Pre-letConsommation completions moyenne de bureaux… Completed areas Average office take-up 30% 27% Inner Suburbs La Défense

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Requests for urban projects: A third of offices While not all the projects will Breakdown of volumes planned within the scope The mix of developments gives pride In the long term, supply should focus of “Inventons la Métropole du Grand Paris 1” and “Réinventer Paris” probably be implemented, the of place to offices, with 35% of the on future station districts and offer 600 000 By department and type, in sq m various competitions (Réinventer volumes dedicated to tertiary real transfer solutions within qualitative Paris, IMGP, Reinventing Cities, etc.) 600,000 estate and 7% to coworking spaces. and sometimes innovative buildings. could boost production in some 500 000 areas of the Greater Paris Region. Breakdown of developments out of a volume of almost 1.7 million sq m 500,000 The Val de Marne and Seine-Saint- 400 000 OFFICES Denis departments, which will also 400,000 benefit from the commissioning of the Grand Paris Express and 300 000 35% the organisation of the 2024 300,000 Olympic Games, are the big winners of these tenders for urban 200 000 200,000 COWORKING projects, accounting for 65% of all commercial developments. 100100,000 000 7%

0 Paris Seine-et- Essonne Hauts-de- Seine-St- Val de Val d’Oise OTHERS Marne Seine Denis Marne

Sources: Métropole du Grand Paris, Developers / Offices Coworking Others NB: Triangle de Gonesse = 88% of Val d’Oise developments Bureaux Coworking Autres 58%

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Rents under pressure in Paris

Prime rents: highest Change in prime and average rents in the Greater Paris Region level since 2007 In €/sq.m/year

Due to centrality and HR concerns, 900 €/m² the effects of the shortage in 840 810 supply should be felt mainly in inner 790 800 €/m² Rental incentives in the Paris, where the limited number of opportunities and the strength of Greater Paris Region 700 €/m² occupiers demand have already pushed rental values up in 2018. 600 €/m² In the new premises market sector, 500 €/m² 20 / 25% the prime rent thus increased to 405 408 410 €840/sq m/year in the CBD (+4% 400 €/m² over one year), while the average Rental incentives in the rent rose by 2%. Paris CBD 300 €/m² The increase in rental values, 200 €/m² combined with the long-term shortage in supply, could increase 8 / 17% 100 €/m² the number of Parisian companies moving to offices in the suburbs, 0 €/m² and to quality assets that are well 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 connected by public transport in particular. Loyer moyen Loyer prime Average rent Prime rent

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Key trends of 2019

ECONOMIC CONTEXT: STRUCTURAL AND MIXED SUPPORT QUESTIONS

• Slowdown in the economy • New working methods / Digitalisation • A Brexit effect? and job creations • Flex office / Co-working • Paris: results limited by the • Deterioration in the business climate • New employee aspirations shortage of supply? • Less buoyant international context • Obsolescence / stock renewal • La Défense: extent of take-up of future supply? • Inner Suburbs: increase in Parisian occupiers transferring to the suburbs?

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK OFFICES Macro-economic context Fashion: a giant wose streght hides weakness New foreign brands: very specific target The new retail balance Recent examples in Paris Luxury: a long-term recovery Luxury: the most tought-after sector Retail Stable market rents Numerous and varied projects: significant examples in Paris Numerous and varied projects: significant examples in the Greater Paris Region Investment: deceptive stability Very targeted investor appetite Yield correction continues Key trends in 2019

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Tourism: a record in sight?

Less present in 2016 in France, in France, there is also a rise in foreign visitors returned en masse global risks, which are also likely to in 2017. This was still the case for weigh on activity in 2019. That being Macro-economic much of 2018, before the yellow said, the long-term trend remains vests movement stopped the positive, and Paris should, like other strong momentum, which should major destinations around the context nevertheless show a historic level world, continue to benefit from the of visitor numbers. In addition to the growth of international tourism. ups and downs of current events

Household opinion Decreased confidence Synthetic indicator - CVS-CJO data The yellow vests movement, its 130 Number of hotel arrivals consequences and their effects on In millions, in the Greater Paris Region, 2017/2018 change from January to October businesses amplified the slowdown 29,4 120 28,2 29.4 in the French economy and 28.2 tarnished the 2018 results. 110 In 2019, the expected easing of inflation, as well as purchasing 100 15.115,1 power support measures, suggest 13.813,8 14.414,4 14.314,3 that consumption could pick up. However, the changing social 90 climate will remain a key factor, while household confidence deteriorated sharply in December 80 juil-02 juil-09 juil-16 oct-00 oct-07 oct-14 avr-04 avr-11 avr-18 jan-13 feb-17 to its lowest level since 2014. nov-11 oct-14 july-16 juin-05 juin-12 feb-10 mai-01 mai-08 mai-15 déc-01 nov-04 déc-08 nov-11 déc-15 nov-18 févr-03 févr-10 févr-17 nov-18 oct-07 aug-13 dec-15 april-11 july-02 feb-03 janv-06 janv-13 july-09 dec-01 oct-00 sept-03 sept-10 sept-17 may-15 sept-17 août-06 août-13 june-12 nov-04 may-01 april-18 aug-06 sept-10 dec-08 janv-06

mars-00 mars-07 mars-14 2017 2018 may-08 june-05 april-04 sept-04 march-14 march-07 march-00 EnsembleCombined FrançaisFrench ForeignersEtrangers

Source: INSEE Source: CRT Ile-de-France

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Contrasting results Fashion: a giant Change in textile/clothing sales Change in textile/clothing sales As % By channel, cumulative January/October whose strength hides 0.6 Source : IFM 2018 weaknesses Return to +5.3 % a downward trend After the brief upturn in 2017, fashion sales declined again in -0.9 2018. Within this context, the sector’s traditional brands are Online now focusing on streamlining sales operations. -2.9

The fast-fashion giants are thus creating spectacular boutiques that offer an ever-increasing number of services, whilst at the same time sacrificing non-strategic shops. -4.3% By the end of 2019 and in just three years, H&M and Zara could, for example, have closed almost a quarter of their inner Paris shops, focusing their efforts instead on In-store other brands and their largest sales flagship stores.

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Share of fashion Between 2014 and 2016 Fashion: a giant whose strength hides

Breakdown of new foreign brands in weaknesses France by activity sector As % 5959%% 10% But a constant flow 52% of new entrants 5% Fashion remains a major player Share of fashion in the retail real estate market. A Between 2017 and 2018 central role that the analysis of the 10% movements of new foreign brands Mode that arrived in France between 2014 and 2018 illustrates perfectly.Alimentation / Restauration Over the period, fashion brands 52% accounted for just over half ofBeauté / Santé the total number of new arrivals. Accessoires 10% However, this share has tended to decrease over the years, to the 44% Sport / Loisirs benefit of increasingly dynamic sectors such as restaurants, sportsAutres and cosmetics. 13%

Fashion Health / Beauty Sport/Leisure Source: Knight Frank Food/Catering Accessories Others Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL New foreign brands: very Recent specific targets examples High Street Illustrating the very targeted Choice of location, Choice of location, by geographic sector by type appetite of brands, Paris and its Breakdown as a % between 2014 and 2018 Breakdown as a % between 2014 and 2018 retail streets are widely sought- after by foreign brands wishing to open their first shop in France. Among the most significant examples of 2018: Urban Outfitters, Suitsupply and Xiaomi who, before 10 28 their flagship store on the Champs- 30 Élysées, opened their first shop at 39 boulevard de Sébastopol, in 5 4 Shopping centres/ Paris’ 1st district. Retail parks

Aside from Paris and retail streets, shopping centres are the most targeted formats, with a strong Paris High street preference for the most established Greater Paris Region Shopping centres regional centres in the Greater Regions Paris Region or large regional cities. 60 Retail parks Others 63

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Producy segmentation

Urban formats Personalisation (products / services) Better Direct The new retail shopping relationship experience with the A consumer balance Upselling Customer service Growth of DNVBs* Mixed-use projects FLAGSHIP Single-brand stores Food and leisure Brands occasionally close their visibility, and opportunities their worst performing shops for historical brands to renew in response to the slowdown in their offer. Some formats are FOR certain traditional formats. They particularly strong in the retail are also multiplying concept tests real estate market: proximity and because the new expectations urban concepts of brands that are EVERYONE of customers, combined with firmly established in out-of-town the digital revolution, also offer locations, «single-brand stores» Streamlining of Phygital great opportunities: opportunities and single-brand stores that shop networks for new players to increase began on the internet. Pure play retailers opening stores Targeted closures Store digitisation Repositioning of Social networks fast-fashion

Source : Knight Frank / *Digital Native Vertical Brands

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Recent examples in Paris

Tediber | Rue Sainte-Croix de la Bretonnerie Rossignol | Boulevard des Capucines IKEA | Boulevard de la Madeleine

Salomon | Boulevard Saint-Germain Bande à Part | Boulevard des Capucines AMPM | Rue Étienne Marcel

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL 48 luxury store openings now opened, revealing how showcase, and Chanel has opened were recorded in 2018 in Paris the most prestigious brands a flagship store close to its historic Luxury: a long-term compared to 26 in 2017. A use their intangible assets as a address on rue Cambon. few major projects that were differentiating factor: Boucheron recovery initiated a long time ago have has renovated its Place Vendôme

More openings Slightly fewer new shop creations Saint-Honoré: proven success Number of store openings Breakdown by type of opening Breakdown of openings by streets Luxury boutiques in Paris Luxury boutiques in Paris Share as a % of total openings in Paris

51 2018-2019 48 16% 15%

13% 19% 19% 39 Rue Saint-Honoré 20% 30% Avenue Montaigne 18% 25% 18% Vendôme/Paix 26 8% Faubourg Saint-Honoré 2012-2017 12% 53% 4% Sèvres/Saint-Gemain er 48% 6% George V/François 1 11% Champs-Élysées 10% 12% 7% Others 11% 3% 11% 11% 2012-2017 2018-2019 Annual average 2016 2017 2018 2012-2017 Transfer Temporary store Rue Saint-Honoré Avenue Montaigne Creation Extension/Renovation Vendôme / Paix Faubourg Saint-Honoré Sèvres / Saint-Germain George V / François 1er Champs-Elysées Autres KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Among the iconic projects seen its rental values increase and 2017. Luxury is also evident on expected in 2019 are the Saint last year, continues to climb up the Champs-Élysées, where LVMH Luxury: The most Laurent project that will replace the Parisian luxury rankings: it has strengthened its position with the Colette concept store, as well accounts for 30% of completed the arrival of Bulgari at n°136, as as that of the Graff jeweller, both or planned luxury store openings well as the upcoming opening of a sought-after located on rue Saint-Honoré. over the 2018-2019 period in Paris, Dior flagship store at n°127. This street, one of the few to have compared to 20% between 2012 sectors Rue Saint-Honoré Triangle d’Or Place Vendôme

30% of openings 2018-2019 41% of creations 29% of openings 2018-2019 43% of creations 11% of openings 2018-2019 50% of creations Examples of openings / projects Examples of openings / projects Examples of openings / projects

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Stable market rents Saint-Honoré stands out Change in prime rental values In €/sq.m/year, Zone A

The booming Parisian market has not resulted in a general increase av. des 25,000 25,000 champs-élysées BD MALHRB in rental values. These occasionally even rue du fbg boulevard saint-honoré haussmann €20,000 capucines / increase on a limited number of €15,000 BD MAA madeleine €6,000 BD HAMA BD HAMA streets: as such, rental values on €4,000 20,000 20,000 20 00020,00020 000 A. D CHAMP L R D FABR AIDI rue Saint-Honoré are gradually A. D LPRA approaching the level observed in av. des A. D LA RPBLI 15,000 15 000 champs-élysées the historic heart of Parisian luxury. 15,000 15 00015,000 odd €4,000 marais €15,000 avenue rue €5,000 13 000 R D RILI 13 00013,000 montaigne saint-honoré €15,000 €13,000 R D BAPL Rental values may also be under R D MPL 10,000 rue de downward pressure on a few streets 10,000 passy €3,000 rue de sèvres / due to the streamlining strategies saint-germain des prés of brands and their increased 5,000 55,000 000 €6,000

BD RAPAIL profitability requirements. 5,000 5 000 BD ARIBALDI BD DIDR - R D LA CI BD MPARA

BD AIMICHL BD D BRC - R LCRB A. D MAI 2016 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2018 R D AIRARD 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Champs-Elysees Avenue Montaigne Rue Saint-Honoré Rue des Francs-Bourgeois Champs-Elysees Avenue Montaigne

Source: Knight Frank Rue Saint-Honoré Rue des Francs-Bourgeois R D LBIAC

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL 1 Nike 8 Etam/Undiz

2 Galeries Lafayette 9 Adidas Numerous 3 Dior 10 DFS 3 4 Saint Laurent 11 Eataly and varied 5 Graff 12 Ikea Gare du Nord projects 6 Huawei 13 Lancôme 7 3 Significant examples Bulgari 7 3 2 13 8 in Paris 1 Ateliers Gaîté Extension/Refurbishment 9 12 Recent / upcoming openings 4 1 6 5 2 Italik Italie 2 extension 3 4 2 11 3 My Cardinet 5 1 10 6 ITZ* Gare Gare d’Austerlitz Flagships Gare du Nord

1 Fondation Cartier Retail complexes 1 2 Collection Pinault Other 3 Hôtel So Sofitel / MK2 2

4 Hôtel Bulgari

5 Hôtel Costes (extension)

6 Hôtel Cheval Blanc Samaritaine

SourceSource: : KnightINSEE Frank / *International Tourist Zones

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Numerous 1 and varied V A L D ’ O I S E 1 Shopping Promenade Claye Souilly 5

2 Buchelay projects Open Sky 2 Significant examples 3 Eden 2 Servon in the Greater Paris 4 Woodshop Bois Sénart S E I N E - Region 1 Recent / upcoming openings 1 S A I N T - 5 Les Promenades de Brétigny Brétigny s/ Orge D E N I S 6 6 PA R I S Central Parc Valvert

7 Open Sky Plaisir H A U T S - Retail parks Y V E L I N E S 1 Cergy 3 Fontaines 7 D E - S E I N E 3 V A L D E Shopping centres 2 Vélizy 2 Vélizy - - 2 M A R N E Créteil Factory outlets 3 Créteil Soleil

4 Évry 2 Évry S E I N E - E T - M A R N E 5 Shop’in 4 3 6 Table Square La Défense 6

1 Paddock 5 4 Source: Knight Frank

E S S O N N E

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL While investor caution weighed on by a few large deals, including activity, the French retail market the sale to Generali and AG2R Investment: still totalled almost €4.5 billion in La Mondiale of two Monoprix 2018. This amount is down 14% portfolios for more than 750 compared to the average of the million euros. deceptive stability last five years and is slightly higher In total, the 11 transactions over than that of 2017 due to a very 100 million euros in 2018 account good 4th quarter. As in previous for 55% of investment volume in months, volumes were boosted the French retail market. + 1% Not so bad.... Change in French retail investment volumes In millions euros, all retail formats included

€ 8,000 35% Year-on-year

€ 7,000 30%

€ 6,000 25%

€ 5,000 € 4,450 20% € 4,000 15% -14% 15% € 3,000

10% € 2,000 5-year € 1,000 5% average

€ 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Knight Frank Montants investis en commercesAmounts investeden France in retail in France Share of retailPart (%) des commerces (%)

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL The year of the of more than 100 million euros, Other types of assets are also and the dynamism of a few major doing well: retail parks are setting high street Very targeted Parisian streets. The Champs- a new historical record. In 2018, The high street accounted for Elysées and rue Saint-Honoré however, investment volumes 60% of all investment volume thus represented 34% of high in the shopping centre market investor appetite in the French retail market. street investment volume in reached their lowest point since This performance is due to the France in 2018. 2008. Key role of large transactions completion of seven transactions Share of high street transactions > € 100 M Out of all French retail investment volumes Champs-Élysées Investment volumes in French retail 2018 + Breakdown by asset type Rue Saint-Honoré

22% = 26% 29% 15%

39% 11%

44% 36% 2017 34%

60%

34% 38% of total investment volume in French

Moyenne10-year average 10 ans 20172017 20182018 high streets in 2018

Transactions supérieures à 100M€ en High street transactions > € 100 M Sums invested in retail RuesHigh commerçantes street CentresShopping commerciaux ParcsRetail d'activités Warehousing commerciales rues commerçantes centres Source: Knight Frank Volumes investis en commerces (total)

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL After the slight increase in the first were sold. The prime yield for 2009-2016 period allows the half of 2018, yields for shopping Parisian shops also stabilised below upward trend of 2018 to be put Yield correction centres (4.25%) and retail parks the 3.00% threshold, excluding into perspective, with yields for the (5.00%) did not change significantly exceptional transactions or assets various asset classes still remaining at the end of the year, although it with reversionary potential. at a very low level. continues should be noted that only a very However, the strong yield limited number of prime assets compression recorded over the 2009 - 2018 change Change in prime yields As a % Retail parks 10.00

9.00 -31%

8.00

7.00 Shopping centres 6.00 5.00 5.00 -23% 4.00 4.25

3.00 2.90 High street 2.00 2004 2009 2012 2016 2000 2001 2002 2003 2005 2006 2007 2008 2010 2011 2013 2014 2015 2017 2018 -39% Rues commerçantes Centres commerciaux régionaux Retail parks High street Regional shopping centres Retail parks

Source: Knight Frank

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Key trends in 2019

AN UNCERTAIN BRANDS / INVESTMENT ECONOMIC CONTEXT LETTING MARKET

• Economic slowdown and social • Winning sectors: F&B, leisure, luxury / high- • Increased investor selectivity tensions end, discount retailers, convenience stores • Preferred markets: Paris and the • Impact of protests on international sports, cosmetics top 10 regional cities tourism? • Ongoing arbitration at the expense of the • Recovery of investment volumes • Impact of tax at source system? least profitable locations in the shopping centre market? • Rebound in household • What is the future for megastore formats? • New yield correction? confidence? • Increasing rental incentives / Pressure on Market Rents

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK RETAIL Knight Frank is an international real estate advisor. Knight Frank Commercial Research provides strategic advice, consultancy services and Contacts Presse In France, the company operates in the corporate forecasting to a wide range of clients worldwide real estate market, mainly comprising offices, Ludivine Leroy including developers, investors, funding retail premises and industrial or logistics buildings. Philippe Perello Head of Marketing & Communication organisations, corporate institutions and the CEO Paris Office - Partner Knight Frank LLP +33 (0)1 43 16 55 93 Knight Frank France serves two separate groups public sector. All our clients recognise the need +33 (0)1 43 16 88 86 [email protected] of clients: owner investors and tenant companies. for expert independant advice customised to their [email protected] specfic needs. Knight Frank France was founded over 40 years ago and is organised into five business lines: Knight Frank Research Reports are also available Carol Galivel Offices, Retail, Capital Markets, Knight Frank at KnightFrank.fr David Bourla Galivel & Associés Valuation and Design & Delivery (a spatial design Chief Economist & Head of Research +33 (0)1 41 05 02 02 This report is published for general information consultancy). +33 (0)1 43 16 55 75 [email protected] only. Although high standards have been used in The Knight Frank France team includes 70 the preparation of the information, analysis, views [email protected] professionals working from Paris. Historically and projections presented in this report, no legal specialising in the real estate market in the centre responsibility can be accepted by Knight Frank Investissement of the capital, the company has gradually widened Commercial Research or Knight Frank SNC for any its field of expertise and is now a recognised loss or damage resultant from the contents of this Vincent Bollaert consultant in areas including La Défense and document. As a general report, this material does Head of Capital Markets the Western Suburbs of Paris. The Capital not necessarily represent the view of Knight Frank +33 (0)1 43 16 88 90 Markets department, along with the independent SNC in relation to particular properties or projects. [email protected] subsidiary Knight Frank Valuation, also support Reproduction of this report in whole or in part is their clients throughout France. allowed with proper reference to Knight Frank Commercial Research. Bureaux Knight Frank France is the French branch of Knight Frank LLP, a British company founded Knight Frank SNC is the french branch of Knight Philippe Perello more than 120 years and now operating in 60 Frank LLP. Knight Frank LLP is a limited liability CEO Paris Office - Partner Knight Frank LLP countries. It offers its clients the skills of its 18,170 partnership registered in England. +33 (0)1 43 16 88 86 professionals, working from 523 offices worldwide. Sources used in this report: ORIE, INSEE. [email protected] A global platform and an independent partnership, specialising in tertiary and residential real estate and employing professionals dedicated to their Commerces clients, Knight Frank enjoys a unique position in Antoine Grignon the world of real estate consultancy. Head of Retail Services Drawing on the constant support of its clients +33 (0)1 43 16 88 70 and its recognised integrity, Knight Frank is [email protected] increasingly establishing itself as the consultant of choice. Antoine Salmon Head of Retail Leasing +33 (0)1 43 16 88 64 [email protected]

KNIGHT FRANK | 2018 REVIEW & 2019 OUTLOOK