Paris office market holds up despite weak economy

The Paris office sector remains strong despite the wider turmoil in the French real estate market, according to Knight Frank partner Luke Condon .

Speaking at the PropertyEU France Investment Briefing hosted in central London earlier this week by law firm Taylor Wessing, Condon said yields and rents remained stable in the capital’s office sector despite the fact that the weak French economic performance was undoubtedly affecting real estate investment.

‘Yes, the economy is not performing that well and that is having an effect on the occupational market. But the fact is that supply hasn’t really changed and the vacancy rate hasn’t really changed either.´

He added that the healthy occupier market was partly due to the nature of French lease structures compared with other countries in which the landlord holds more of the cards.

‘There are nine-year leases with breaks at three and six years for example. Theoretically that doesn’t look as attractive for investors, but it actually helps the market stay liquid, it keeps transactions moving. Tenants aren’t necessarily moving but they know they will have an opportunity to discuss the rent with their landlords and that keeps rents a little bit more in line’.

Also on the panel was Jean-Philippe Olgiati, MGPA country manager for France and Italy. He said that similar opportunities exist across the board in France, but that they remained sparse and only available to investors wiling to adapt to the climate.

‘The market is a bit tough, but if you have the right project, right location, right building you’ll find a tenant. We have to be more selective but we still have a take up which is quite stable. Most of the areas suffer because the rent they are expecting is not the right rent and they struggle to find a tenant at this rent. They get stuck with it because of the price they paid for it, but the rent they are charging is not right.'