Parisian rentals to be driven by SMEs in 2012

Small to medium firms (SMEs) will drive the Ile-de-France office rental market in 2012 as they continue to rationalise costs and spur demand for Parisian office space, a Savills report has concluded.

Savills expects companies to remain cautious in light of European market uncertainties, limiting the number of large deals (over 20,000 sqm) over the coming year, which doubled from eight deals in 2010 to 16 deals in 2011.

It said this trend will drive both small and second hand property transactions across Paris markets and boost the number of lease extensions against an anticipated drop in consolidations and mergers.

“Business activity in 2012 will be driven by more opportunistic strategies. The supply and demand situation [in Paris] is expected to become more balanced this year with higher take-up of second hand properties. With the French economy set to improve in 2013, new developments may become very sought after,” said Hervé Blanchet, head of Savills France.

Savills forecasts take up across Paris markets will reach approximately 2.2 million sqm in 2012, representing a year on year drop of 10%. 2011 saw take up reach 2.44 million sqm, marking a 14% growth on 2010.

The group expects pressure on rental values to increase due to landlords offering incentives such as rent reductions, potentially triggering a 2-3% decrease in office rents over the coming months from €800 to €780 per sqm per year in Paris’ central business district.

According to Savills, end users could benefit from strained negotiations as there has been “no increase in new developments or office development completions in 2012” and due to the supply of second hand properties in Ile-de-France.

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