THE LETTING MARKET LA DÉFENSE
Q3 2016 THE LETTING MARKET LA DÉFENSE
Mapping Source : Knight Frank THE LETTING MARKET– Q3 2016 LA DÉFENSE
Take-up 205 200 sq m Source : Knight Frank
245 500 +106%: transactional activity in La Défense showed a remarkable performance, with a doubling of take-up over the first nine months of the 2016 compared to 2015 La Défense is structurally volatile, since its 119 800 market relies on a few large transactions: 10 leases for over 5000 sq. m were recorded in Q3 161 200 78 700
153 000 m
2016, representing 76% of take-up sq
The segment of space of less than 1000 sq. m, In 53 400 which had risen significantly in the first quarter, 105 500 returned to its lower level, to only represent 4% 101 600 28 000 of the 2016 activity 16 600 55 000 The recovery since 2014 has largely been due 36 400 to the discounts granted on headline rents, with 45 400 82 700 the price positioning remaining a decisive factor 17 000 45 100 in a market driven by cost-reduction objectives 13 200 15 700 71 500
29 300 27 800 15 000 18 100 2012 2013 2014 2015 2016
Q1 Q2 Q3 Q4 THE LETTING MARKET– Q3 2016 LA DÉFENSE
Size of transactions Source : Knight Frank
Ile-de-France (Greater Paris region) La Défense
15% 12% 16% 13% 23% 20% 21% 37% 21% 21% 54% 29% 20% 25% 57% 24% 28%
38% 39% 29% 39% 37% 33% 23% 47% 46% 29%
30% 25% 29% 18% 21% 20% 23% 12% 11% 5% 5% 2% 4% 2012 2013 2014 2015 3Q2016 2012 2013 2014 2015 3Q2016
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 (< or = 1,000 sq m) THE LETTING MARKET– Q3 2016 LA DÉFENSE
Transactions of over 5,000 sq m Source : Knight Frank
Tenant Building/Address Date Area (sq. m) Rent Building Condition
RTE Window Sept. 2016 44 000 NC New
Deloitte & Associés Tour Majunga Jan. 2016 31 000 550€ New
Crédit Mutuel ARKEA D2 Sept. 2016 17 800 NC New
Le Triangle de Bureau Véritas April 2016 12 000 NC New l’Arche
IMS Health France Tour D2 March 2016 11 400 460€ New
Nexans Le Vinci May 2016 10 000 390€ State of repair
INVIVO Tour Carpe Diem Febr. 2016 8 000 NC New
Pricewaterhouse Tour PB5 July 2016 7 900 390€ Renovated
Axway Software Tour W April 2016 7 200 390€ State of repair
GIE Logement Français Between March 2016 5 600 372€ New
Nota : The transaction for the Saint-Gobain headquarters (49.000 sq m) was already recorded by Knight Frank in 2015 THE LETTING MARKET– Q3 2016 LA DÉFENSE
Large occupiers > 5 000 sq m Source : Knight Frank
Ile-de-France (Greater Paris region) La Défense
4% 4% 3% 5% 9% 3% 5% 4% 11% 11% 8% 23% 12% 17% 6% 21% 21% 42% 40%
26% 24% 42%
31% 32% 46% 8% 42% 27% 15% 29% 77% 12% 26% 60% 3% 9%
26% 37% 4% 28% 31% 25% 22% 22% 13% 7% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
Others Luxuary and fashion TMT Industry Public, para-public, professional and international organisations Legal activity, audit and advice Bank, finance and insurrance THE LETTING MARKET– Q3 2016 LA DÉFENSE
Available supply 8,4 %
Sources : Knight Frank, ORIE 14,0 In % In The fall in available supply in La Défense that started in late 2014 continued from the start of 2016 12,0 The vacancy rate, at 8.4%, has not been at such a low level in La Défense since mid-2013. Il nevertheless remains a little higher than the regional average (6.8%) 10,0 This fall is explained by a scissors effect, with an 8,4 upswing in transactional activity at the same time as a 8,0 fall in construction activity: La Défense has entered a phase of gradual absorption of its available space 6,8 This phenomenon is expected to gain momentum over 6,0 the coming months A high level of supply is not an anomaly in a market dedicated to large users: an excessive fall in available 4,0 3,8 supply may become a factor that hampers transactional activity 2,0 The drop in available supply is likely to lead to a Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 change in the financial conditions for the marketing of buildings, benefiting owners 2012 2013 2014 2015 2016
Paris CBD Ile-de-France (Greater Paris region) La Défense THE LETTING MARKET– Q3 2016 LA DÉFENSE
Grade A Supply 12 % Source : Knight Frank
La Défense Ile-de-France (Greater Paris region) Although the supply of Grade A in La Défense (new or restructured space) has been abundant for a long time, it has decreased significantly over the past few months: in one year it fell from 36% to 12% for the first time below the regional 12% 17% average This is an advantage that is disappearing for La Défense: amid a regional lack of quality supply, the abundant supply of Grade A had become an opportunity for La Défense. These spaces, which enable real gains in terms of efficiency and charges, are preferred by users (76% of spaces taken up in large transactions in 2015 in the Paris region corresponded to Grade A). The prolonged lethargy of the La Défense market, then its sudden revival, shows that the question of the positioning of the Grade A offer is as crucial for users: very large users, particularly when they concern housing a large back office, have returned when the owners have lowered the New or Redeveloped Second Hand letting values THE LETTING MARKET– Q3 2016 LA DÉFENSE
Rents
530€ per sq. m/year excl. taxes and charges Prime rent Source : Knight Frank
Deloitte’s new lease in the Majunga tower was signed on Rents evolution :
the basis of a headline rent of €550
600 Such a value nevertheless remains too exceptional to be considered representative for high-end rents in La Défense: most transactions continue to be signed at 550 values markedly lower than €500, including for Grade A 530 space 500 After some lean years and given the competition from the Western Crescent markets, a drastic price review 450 started in 2014, which since then has contributed to the 410 success of La Défense in the rental market 400
This adjustment is over and rents probably bottomed out charges and taxes excl. m/year sq. already in late 2015/early 2016: the outlook is now a In 350 gradual fall in incentives (which are still often around 25% of the headline rent) and a rise in values 300 However, this phenomenon will probably remain modest and gradual, at least initially: the users' determination to 250 Prime rent Average rent make cost savings and streamline remains a key criterion 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 2015 2016 THE LETTING MARKET– Q3 2016 LA DÉFENSE
Future completions 35% Rate of pre-lets by the end of 2019 Source : Knight Frank
2015, 2016 and 2017 will be lost years in terms of New or redeveloped areas in La Défense : construction: only the restructuring of the new Allianz
head office (former Athéna tower) was the highlight of 200 000 2015, the delivery of E+ (future Sogeprom head office) will 186 900
play that role in 2016 m²En 180 000 This stagnation followed the fears as to the market 160 000 imbalance that resulted from the La Défense renewal plan: it has taken a long time but most of the space 140 000 134 300 concerned is now let 120 000 104 900 Window, the sole speculative programme launched, is not 101 300 expected to be delivered before the end of 2017: its 100 000 44,000 sq. m have just been leased by RTE. During the 80 000 coming months, supply (particularly Grade A) is therefore 56 000 57 100 likely to become scarcer in La Défense 60 000 117 300 Pre-lets, which barely existed in La Défense before 2014, 40 000 35 200 now represent 35% of the volumes expected to be 14 200 48 900 delivered before the end of 2019: all the indications are 20 000 38 500 that they will continue to increase in the short term 6 400 0 7 800 In the longer term, the managing body of La Défense has 2011 2012 2013 2014 2015 2016 2017 2018 2019 expressed a strong desire to regulate and stagger delivery volumes, to avoid phenomena of peaks and troughs in Delivered areas Pre-let deliveries Available deliveries marketing THE LETTING MARKET– Q3 2016 LA DÉFENSE
Summary Sources : Knight Frank, ORIE
Ile-de-France Market share of La Annual Q3 2016 Q3 2015 (Greater Paris region) Défense in Ile-de- Change Q3 2016 France
Stock 3 536 818 sq m 3 536 818 sq m = 54 232 320 sq m 6,5%
Take up 205 200 sq m 99 600 sq m +106% 1 763 600 sq m 11%
Immediate supply 296 000 sq m 405 000 sq m -27% 3 675 000 sq m 8%
Vacancy rate 8,4% 11,5% -310bp 6,8% -
Average rent 410 €/sq m/year 390 €/sq m/year +5% 320 €/sq m/year -
Prime rent 530 €/sq m/year 540 €/sq m/year -0,2% 770 €/sq m/year -