Our commercial valuation team values offices all over France and has been particularly active over the last few weeks whilst #workingfromhome. Our team has continued to work on both fund reporting and secured lending valuations for acquisitions. We are now delighted to be able to physically inspect properties wherever possible, ensuring that all appropriate precautions are taken.
We are in constant contact with our clients; investors, developers, banks, and of course our Knight Frank transactional and pan-European teams. Naturally it will take time to restore confidence and to gain visibility, but we are keeping at the forefront of the market to closely monitor the outlook as it evolves.
Knight Frank Research produces excellent articles and publications, and these provide insight into how our research teams and agents see the market. We have rounded up the most relevant to the French office sector from the last few weeks below :
These are the 10 key points we feel are important to take away:
- The office letting market has effectively been frozen and decisions paused, but several large and high-profile transactions – well advanced before the outbreak – are still expected to complete.
- Large companies’ behaviour will be decisive due to the scale of their strategic real estate decisions; this may help the resilience of the Paris office letting market, potentially mitigating the difficulties of smaller business tenants.
- The effect on occupiers will vary by business sectors: tourism and industrial sectors are high impact while agriculture, food retail companies, pharmaceutical, healthcare and public administrations are low impact, or indeed net benefiters.
- Streamlining decisions may actually help sustain office market activity – even if it involves downsizing – as businesses can be motivated to move by the softening of rents.
- Suburban office hubs may increase in attractiveness with competitive rents and good public transport (Péri-Défense, Inner Suburbs – Saint Ouen & Saint-Denis). Mature towns with limited supply (Boulogne, Issy) should remain resilient.
- Central Paris could benefit from structural changes in demand (search for centrality, urban amenities) for captive occupiers (luxury, consulting, finance etc.) in a market already characterised by very low vacancy rates.
- Potential shift in landlord / tenant relationship balance; in recent times the former have held the upper hand, particularly in areas of low supply.
- 1.5 million sqm office space is under construction in Greater Paris, a historical high. Any potential over-supply should be mitigated since over 50% of this space is pre-let, and some developers may choose to postpone or suspend developments.
- Office design and layout will be reassessed for many occupiers due to sanitary requirements, and the trend towards densification of office space may also be called into question. The balance between homeworking and officeworking will be readdressed, but the physical office remains essential for most businesses.
- China’s first signs of recovery provides some hope with recorded increases in occupier requirements.
MRICS, CIS HypZert (MLV), Partner, Head of Commercial Valuations
MRICS, REV, CIS HypZert (MLV), Partner, Commercial Valuations
REV, Associate, Commercial Valuations