Small to medium firms will drive the Ile-de-France office rental market in 2012 as they continue to rationalize costs and spur demand for Parisian office space, according to Savills. The international real estate advisor expects firms to remain cautious in light of European market uncertainties and this will limit the number of large deals (over 20,000 m²) over the coming year, which doubled from eight to 16 deals in 2011 compared with 2010. Savills suggests 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.
Savills forecasts take up across Paris markets will reach approximately 2,197,618 m² in 2012, representing a year on year drop of 10%, however 2011 saw take up reach 2,441,798 m², marking a 14% growth on 2010. With no increase in new developments or office development completions in 2012, and given the importance of the supply of second hand properties in Ile-de-France, the firm expects end users will continue to benefit from strained negotiations. Vacancy rates remain stable at 7%.
Hervé Blanchet, head of Savills France, says: "Business activity in 2012 will be driven by more opportunistic strategies. The supply and demand situation 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."
Pressure on rental values is expected, due to landlords offering incentives such as rent reductions, and Savills estimates this will cause a 2-3% decrease in office rents over the coming months, from 800 to 780 per m² per year in Paris CBD.