Rental growth is coming back to Parisian real estate as the city's prospects are buoyed by an economic and political renaissance in France, delegates heard at the PropertyEU's recent Europe and France Outlook 2018 briefing.
'Nothing has happened on that front for a very long time, but finally rents are beginning to increase in Paris,' said Paul Raingold, President, Ge´ne´rale Continentale Investissements
'It is my firm belief that due to a combination of factors, such a more limited supply, a pro-business president with a majority in Parliament and big infrastructure projects underway, rents in the office market will go up quite considerably,' Raingold told the event which was held in Paris last week.
Economic growth in France and in general in the Eurozone is surprising on the upside, forecasts are being revised up and sentiment is positive. A growing economy is leading to more jobs being created, which is a clear positive for the office market.
'Employment growth will push up demand for offices and will lead to rental growth,' said Guy-Young Lame´, director of European research at Invesco Real Estate. 'We are already seeing real rental growth in the Western Crescent in Paris. It also helps that vacancy rates are very low in the capital and development activity remains subdued.'
Brexit will also play its part in boosting demand for office space in the capital. Paris unexpectedly got a boost when it was chosen over Frankfurt as the new headquarters of the European Banking Authority, which has to relocate from London after the UK leaves the European Union. In practical terms it means the transfer of just 200 jobs, but the prestige factor is huge.
The good news have kept coming. Goldman Sachs had opted for Frankfurt, but when CEO Lloyd Blankfein visited Paris recently, he announced that they will split the business and have two European hubs, one in Germany and one in France. Employees 'will probably prefer Paris,' he added.
The momentum now looks unstoppable, said Lamé: 'It has all just started: Bank of America has taken 10,000 m2 in Rue Boissy, HSBC is actively looking for offices, and there are many brokers going around looking for space.' The next couple of months will see an increase in activity, she said, 'because banks and companies cannot wait for the end of Brexit negotiations, they will have to make decisions on relocations early next year. And we are ready to welcome them to Paris.'
Any positive fall-out from Brexit is welcome, but Paris does not need to rely on that, said Raingold: 'It is just the cherry on the cake. The fact is that Paris is a real capital city again, and in the last few weeks you could feel the momentum building. I see significant rental growth ahead.'
Paris is ready also because ‘it has been leading Europe in providing new facilities and services,’ he said. In a fast-changing office market, the French capital can offer flexible space and incorporate services from fitness to concierge and from cafés to restaurants, as well as good infrastructure and a transport system that is being upgraded.
'We hear from our clients that Macron has changed the perception of the country,' said Alexandre Poupard, Partner, Dentons. 'The impression is that he knows how important it is to boost the image of Paris as a financial centre. The era of France-bashing is over.'