Focus on Office Supply in Ile-de-France

For the past three years, the Île-de-France office market has been faced with a series of issues that have affected take-up levels. Among concerns about remote working, office flexibility and the ever-increasing need for centrality, major decisions have had to be delayed during this period. However, 2021 saw a recovery in take-up, with renewed interest in small and medium surfaces, a robust market in the 5,000-to-10,000 sq.m market, and a concentration of companies in the better established Île-de-France submarkets, especially within Paris and in the West CBD.

The outbreak of the war in Ukraine and the uncertainty regarding its impact on both the global and the French economy could cloud the prospects for a rebound in take-up in 2022. Nevertheless, the positive market indicators from 2021 could persist, or even grow stronger. The increasingly pressing need for more energy-efficient buildings will strengthen demand for compliance-certified buildings. With so many energy concerns, the need to reduce buildings’ carbon footprints should also continue to favour established, centralised business districts that have good public transportation links.

With these considerations in mind, two market trends appear to be of particular importance in our following analysis:

Firstly, new supply is plentiful. Its generally high quality and competitive economic rents should, however, encourage absorption of excess space, especially as construction starts have been lower. The speed of this absorption will depend on resumed take-up activity, especially for large surfaces. The submarkets with the most developed business districts, especially those having the best public transport networks, should experience market recovery ahead of their less established competitors.

Secondly, second-hand supply has experienced unprecedented growth. Since this is of mixed quality and has been driven by a high level of releases, it risks having a negative impact on vacancy rates throughout Île-de-France if no action is taken in the long term. Among possible measures, the transformation of some obsolete office buildings into housing or other types of businesses is an increasingly appealing option. A growing number of building owners appear ready to pursue these alternatives, and the success of the first reconversions is an encouraging sign, both for the absorption of existing stock and for the urban renewal of neighbourhoods in many cities.