Economy act 1 to 4: The "double dip" is finally a fact in Europe … ...which is partly reflected on the office market in the Greater Paris region

1. The Paris office market
Overview & forecast 2013

3. 3  The Paris office market – Overview & forecast 2013
Editorial
Economy act 1 to 4: The "double dip" is finally a
fact in Europe …
In our previous issue of the “Overview and Forecast” in
December 2011, the economic outlook for the Euro zone
and France was darkening and this year had done nothing
to contradict this forecast. 2012 is the logical result of a
mechanics of economic and financial events which have
shaken the world since 2007 and which have led the
economies of the Euro zone into a "double dip" in 2012.
Act 1 started with the financial crisis in the summer of
2007 and culminated in 2008 with the bankruptcy of
LEHMAN BROTHERS. Act 2 began in 2009 with
developed countries slipping into a recession. The States
quickly implemented and coordinated social and economic
"buffer" policies at the expense of a sharp rise in public
debt. On the other hand, the "private" financial crisis was
also counteracted by the management of toxic debt from
banks by some states (e.g. Ireland). Act 3 concerns the
success of some of these coordinated proactive policies
with a rebound in economic growth in 2010. Nevertheless,
this improvement is short-lived since it is immediately
followed by the European sovereign debt crisis (Greece
and Ireland first then Spain, Portugal and Italy) in the wake
of the explosion of debt from Member States. Finally, act 4
started when, spurred on by international finance
operators and large international (IMF, OECD) and
European bodies, "peripheral" countries implemented
extremely severe austerity policies.
If in principle the "depressing" effect of austerity on growth
was already known, the impact on the economy was
largely underestimated. The current situation of European
countries is partly due to this error.
Initially, the commonly accepted equation was that a
reduction by 1 point of GDP of the structural deficit would
result in a fall in growth of 1/2 point. Last October, the IMF
reviewed this analysis as it recognised that the impact of
the austerity measures had been clearly underestimated
and that the growth reduction coefficient was actually 0.9
to 1.7 instead of 0.5. The result is that countries in
Southern Europe are back in recession and are suffering
the chain of events of the "austerity trap": attrition of
domestic demand, rapid deterioration of activity and
confidence indicators, unemployment, recession,
continuous increase in deficits and debt; and finally the
knock-on effect of other countries in the Euro zone into the
"double dip".
Since the end of 2011, a deterioration in economic growth
has been obvious in the Euro zone (stagnation followed by
a decline in GDP). We have noticed significant disparities
from one country to another since 2012: growth in the
Nordic countries and in Germany, and recession in the
South and France in a middle position of 0. This
deteriorated environment has resulted in a rapid fall of
business climate and activity indicators since the spring in
countries in Core Countries.
Indeed, with regard to international trade, the main
customers of European companies are primarily
European; Europe accounts for nearly 65% of the export
flows from Germany and 62% from France (including 15%
for Italy and Spain); the recession of some European
countries could not do anything else than affecting their
economic partners, which is the case this year.
In recent weeks, the publication of the European GDP
figures, although not as bad as expected, confirmed a
recession and forecasts for the 4th quarter suggest further
deterioration.
Along with this decline in economic activity, the current
financial situation has also been turbulent this year.
Another psychodrama almost took place this summer on
the financial markets in relation to the sovereign debt of
peripheral countries. In July, new rumours about Greece
leaving the Euro and the sharp rise in Spanish interest
rates led the ECB to make assertions to bring a certain
calm to the financial markets. At the same time, the
implementation of the Basel III regulations for banks,
coupled with their existing balance sheet problems, had a
pro-cyclical effect on the economy due to tighter access to
debt for all economic players.
In this European landscape, France holds the middle
ground. GDP has stagnated for a year but the economy
has not fallen into recession. Business climate and activity
indicators have deteriorated but less than the European
average.

4. 4  The Paris office market – Overview & forecast 2013
The employment situation has deteriorated on a monthly
basis but with large regional disparities. In addition,
France, in spite of its high debt and the downgrading of its
rating (Standard & Poor’s in January and Moody's in
November), has a historically low debt cost with a return
on 10-year OAT bonds of between 2 and 2.30% since the
summer (i.e. a zero interest rate loan given inflation).
...which is partly reflected on the office market in
the Greater Paris region
As commercial real estate does not operate
independently, poor economic conditions affected the
market in 2012. Since the start of the year, the office
leasing market in the Greater Paris region has
experienced a slowdown of around 20% compared to
2011. Year-end forecasts have estimated the number of
square metres taken up in the Greater Paris region to
reach 2.1 million square metres, representing a decrease
of approximately 15% compared to 2011.
The economic crisis is reflected at two levels on the office
market in Paris. Firstly, in the inability of the market to
absorb the available supply which is stable for the 3rd
consecutive year. With 3.5 million square metres
immediately available, the vacancy rate in the Greater
Paris region is around 6.7%, which places Paris as one of
the cities with the lowest levels of availability in Europe.
The only significant change in terms of the available
supply is the slow but constant reduction in the number of
new square metres. The second concrete sign is the
change in rent in 2012. In most markets, headline rental
values have demonstrated a downward trend since the
start of 2012, particularly in sectors where there is an
abundant supply (Western Crescent). Such a fall in the
official values masks a pronounced change in economic
values which are tending to deviate further and further
from the rent displayed.
Companies, following a crisis management rationale focus
on costs, adopting opportunistic behaviours and looking
for bargains from owners who are increasingly inclined to
grant them substantial incentives to fill their buildings. .
More and more frequently, companies are also
renegotiating their leases, using every opportunity
available to them to reduce their rent (three-year periods,
end of leases, index-linking) whilst landlords are becoming
increasingly willing to make concessions to keep their
tenants.
In contrast, the investment market is playing its own much
happier part. Since the start of the year, the volumes
invested on the Paris market are ahead of 2011. It seems
unlikely that this advance will be retained in the 4th quarter
given the acceleration which occurred on the market in
2011 due to the end of the tax benefit under Article 210-E.
At the year end, the total investments in the Greater Paris
region should be between 10 and 11 billion euros.
The investment market for the past year has been marked
by several memorable events. Firstly, the real re-
internationalisation of the players, with a sharp increase in
investments by foreign investors.
Capital flows into France have diversified towards the
east, with a significant part coming from investors from
Asia and the Middle East.
On the other hand, the number of large transactions has
also increased, with no less than three transactions of
more than 500 million euros completed, the highest since
2007. Active investors on the Paris market are still focused
on prime assets. Fierce competition has even led to a
contraction in yield of the most sought after assets. Finally,
this year, we have noticed the emergence of new
financing channels such as those provided by insurance
companies and debt funds which are placed on "core" and
"core+" assets
Virginie Houzé
Head of Research France

5. 5  The Paris office market – Overview & forecast 2013
The leasing market
has adjusted to the
economic context
"Filling vacant buildings is the top
priority of owners, which even comes
before the amount of rent charged"
Jacques Bagge
Head of Leasing Paris
Large turnkey contracts have allowed the market to
get back on its feet
Almost sluggish since the start of the year, economic
growth has not been forthcoming. Even so, this year, the
leasing market for office space should still record
approximately 2.1 million sq m of take-up, although this is
down compared to last year.
Without any excessive optimism, the market mainly owes
this honourable result to the settlement of very large
transactions often initiated several months previously, the
last conditions precedent of which have been recently
lifted. Therefore transactions for more than 5,000 sq m
amounted to more than 40% of the area leased in the
Greater Paris region at the end of September.
In addition, two basic trends seem to have emerged on
this market segment. Firstly, the share of presales is
increasing. In 2009, 1/3 of leased surface area was pre-
sold, the remaining 2/3 was leased in existing buildings. In
2012, the ratio was reversed. More than half of large
surface areas are leased in new, undelivered
buildings. Another major trend is the increasing share of
turnkey properties. If pre-leasings are more numerous,
they now generally go through tailor-made operations. The
share of "standard" pre-leasings is less than half than in
2009 in favour of turnkey transactions, particularly rental,
which account for nearly half the large pre-leasing
transactions in 2012.
In the case of large transactions over 25,000 sq m, this
year they are exclusively concerned with turnkey leases
and individual user accounts; the main motivation of which
is the aggregation and consolidation of staff.
Breakdown of the take-up for individual transactions above 5,000 sqm *
Source : Jones Lang LaSalle
* as at end of Septembre

6. 6  The Paris office market – Overview & forecast 2013
How is this phenomenon explained?
Firstly, this is an illustration of the professionalization of
the real estate function. The Corporate Real estate is now
much more professional with more detailed requirements
and very precise specifications. Moreover, if many
companies are turning towards this type of operation, it is
because the existing supply of office space on the market
does not necessarily correspond to their expectations or
their specific needs.
For example, at the moment, the campus model is very
popular with businesses, which are, to some extent,
abandoning the tower model which is sometimes
considered to be expensive and a bit arrogant. Therefore
this year, the companies which have completed the largest
transactions, EDF (33,000 sq m in Palaiseau), THALES
(49,000 sq m in Vélizy-Villacoublay) and SANOFI (50,000
sq m in Gentilly ) have chosen this type of building.
Attractive lease conditions for new buildings therefore
strengthen this interest and encourage some firms to build
a tailor-made operation.
In a constrained economic environment, sectors in the
inner and outer suburbs have therefore appealed to
businesses for which the price factor has been, and still is,
a determining factor.
In general, the sectors which, this year, have new supply
at competitive prices, have showed good levels of activity
at the expense of markets with unsuitable supply at high
rents.
Supply: torn between oversupply and shortage
For almost three years, the stock of office space available
in the Greater Paris region has remained at an equal level
of around 3.6 million sq m, which at the end of September,
represented a vacancy rate of 6.75% for the region. The
relative slowdown in demand has not therefore resulted in
a rise in the immediate supply this year.
The crisis has highlighted extremely marked differences
between geographical areas in terms of availability.
Overall we are seeing a two-tier market with Paris, on the
one hand, which is suffering from a lack of products and
quality supplies and the inner suburbs, on the other hand,
which is generally "supply-rich" or even "over-supplied" in
the western Paris region.
With a vacancy rate of 4.3%, the supply in Paris city
centre tends to fall faster than the average (-16% over 2
years) whereas it has steadily increased in the inner
suburbs (+13% in 2 years), mainly in the Western
Crescent (+15% in 2 years), where the bulk of the new
supply and completions are concentrated. In the Greater
Paris region, the share of available new buildings is
continuing to slowly decline with 22% of vacant stock
(compared to 26% one year earlier). Once again behind
this average, significant disparities are appearing among
the sectors. The inner suburbs (including La Défense)
have, to date, included most immediately available new
supplies with a total of 500,000 sq m, i.e. 57% of vacant
new supplies in the Greater Paris region, unlike in Paris
which includes four times less.
Vacancy rate as at 30th September 2012
Source : Jones Lang LaSalle

7. 7  The Paris office market – Overview & forecast 2013
This imbalance is not likely to improve since, in 2013,
almost 500,000 sq m, currently under construction and
available for leasing, could add to the vacant stock, if no
tenants are found by then. More than 80% of these areas
under construction are in the inner suburbs, which
represents no less than 410,000 sq m under development
and deliverable by the end of 2013 (including 120,000 sq
m in La Défense with the "Eqho" and "Carpe Diem"
towers).
In the Western Crescent, the Northern Loop (with
92,000 sq m launched speculatively mainly in La Garenne
Colombes) could mechanically see its vacancy rate
increase, which is already high at almost 14%. The same
applies for the Southern Loop which currently has 60,000
sq m of projects launched speculatively in Boulogne-
Billancourt, available within one year, awaiting marketing.
The same is true in the Southern inner suburbs, which has
become an area naturally sought after by
telecommunications companies, manufacturers and
pharmaceutical groups, where the new supply available
could double in 2013 (60,000 sq m currently under
construction).
Good news, however, for Péri-Défense where very few
new projects have been launched speculatively (25,000 sq
m), as the vacancy rate is already near 17% despite good
leasehold performance this year. The same is true in the
Northern Inner Suburbs, where few new transactions will
emerge speculatively in the course of next year (22,000 sq
m), as the vacancy rate is more than 11% in the sector.
In Paris, future new supplies expected in 2013 only
represent 70,000 sq m in total. They are mainly situated in
the 17th district (partly in the ZAC des Batignolles) and in
the 11th district with the "Parisquare" operation. In the
Central Business District, only the "Solstys" operation will
be delivered during 2013, with slightly more than 10,000
sq m remaining available.
The dichotomy of market supply should not therefore
diminish in 2013, as it is relentlessly putting continuous
pressure on rental values.
Projects under-construction to be completed within the next 12 months
Source : Jones Lang LaSalle
Partly of totally vacant projects
100% pre-let
Projects under construction by size

8. 8  The Paris office market – Overview & forecast 2013
Rent: a balance of power in favour of tenants
Once again, we are finding a two-tier market in the
Greater Paris region. In Paris, we can see a dominant
trend in the stability of headline values (except the 5/6/7th
districts are down) given the limited supply and a
sustained level of demand for the capital which captures
more than one third of areas leased at the end of
September (although this level is in decline).
The Central Business District has returned to its initial
position as the most expensive market ahead of the left
bank market (5/6/7th districts) which had displaced it last
year following a series of transactions of around €830/ sq
m. It even confirms a slight increase in "prime" rent which
has gone from €770 to €795 /sq m (+3.25%) during the
third quarter. In the Golden Triangle, these values even
reach €805 / sq m due to a recorded scarcity of "prime"
buildings. Consultancy firms and law firms, in competition
for the few new buildings in the sector, are willing to pay
the high price.
In the Western Crescent, and particularly in the Inner
Suburbs, the high rental supply has instead put a
downward pressure on values. If headline rental values
have so far only recorded a limited fall, the fact of the
matter is that economic rents are becoming increasingly
disconnected from the values displayed. Commercial
incentives are tending to increase in some areas,
particularly in locations where risks have been taken by
owners and where the vacancy is high.
In general, rents are fiercely attacked by businesses which
are logically reducing their costs. Some owners have
started to adjust their values downwards, more in line with
market reality which has changed in the past 5 years.
Caution is still the order of the day for owners. Very
attentive to businesses, they are more imaginative than
ever and are willing to make significant efforts to fill their
buildings and to thereby reduce the vacancy rate of their
portfolio as well as through renegotiations to avoid any
departure of tenants.
In La Défense, "prime" rent is also experiencing its first dip
and during the 3rd quarter was positioned at €530/sq m,
due to a lack of large transactions recorded for new
buildings. Beyond that, since 2006 the business district
has been suffering a significant decline in its leasing
activity in an increasingly competitive environment, with
rents perceived as expensive. The dispersed, belated
repositioning of rents according to the strategies of the
owners, the aging of stock and the unsuitability of the type
of buildings to meet the current demand of business are all
factors which explain this difficult period for the sector. The
sharp increase in immediate supply expected in 2013 with
the first deliveries of the towers in the Renewal Plan for La
Défense will inevitably continue to influence "prime" rental
values.

9. 9  The Paris office market – Overview & forecast 2013
Large transactions,
drivers of the
investment market
"Paris has enhanced its image with
international investors which were
traditionally positioned on the London
market"
Stephan von Barczy
Head of French Capital Markets Group
The buoyant activity of the Paris investment market
observed since the 2nd quarter of 2012 continued during
the summer, with a volume of transactions at the end of
September which is ahead of 2011. However, the 4th
quarter should not be as active as last year which was
deeply affected by an activity related to the end of the tax
benefit under Article 210-E. Dynamics and investor
appetite has led us to revise our initial forecast for 2012
upwards, with a total investment in the Greater Paris
region, which should be between 10 and 11 billion euros.
Three sales for more than 500 million euros have
boosted the market
This year, the investment market in the Greater Paris
region has been sharply boosted by very large
transactions, particularly by those for more than 500
million which made a comeback over the summer.
In general, Paris primarily attracts large investors, with
almost 70% of capital invested there. The location of the
three biggest sales of the year illustrates this: QATAR
INVESTMENT AUTHORITY (QIA) has purchased from
KANAM two office buildings in a portfolio: the "Néo" and
"Cité du Retiro" buildings for 622 million euros and "52-60
avenue des Champs-Elysées" (currently occupied by
VIRGIN MEGASTORE) from GROUPAMA for an
estimated amount of around 500 million euros. Finally, JP
MORGAN (for an Asian fund) purchased "52 avenue
Hoche" and "Avant Seine" from EUROSIC for 540 million
euros.
Overall, sales in the segment of more than 100 million
euros are rising and represent more than half of the
volume invested in the Paris region since January. If we
analyse the risk level of these sales, we can see that
investors are still cautious in this time of economic turmoil.
They are mainly positioned on secure or ultra-secure
products (57% and 28% respectively), in summary, on
assets without any vacancy, and with leases for a fixed
term of at least 6 years at the time of purchase.
Risk level of the investment transactions above €100 million in the Paris region
Source : Jones Lang LaSalle

10. 10  The Paris office market – Overview & forecast 2013
The capital of Sovereign Wealth Funds is dominant
Already started last year, the investment market has
continued its re-internationalisation throughout 2012, and
international investors accounted for more than half of the
capital invested since the beginning of the year.
Whether owned directly or indirectly by the State,
Sovereign Wealth Funds manage public financial assets
(foreign exchange reserves, surplus savings and revenue
from natural resources such as oil and gas). To invest
their large amount of liquidity, major Sovereign Wealth
Funds are turning to real estate, mainly distributed in
Europe between London and Paris.
The largest Sovereign Wealth Fund in the world1,
NORGES – which its government has authorised since
2011 to invest in real estate – made a prominent entrance
onto the Parisian market last year through the creation of
a joint venture over the summer with AXA REIM (50% of
1.4 billion euros). NORGES reconfirmed its interest in
Paris this year by creating another joint venture, this time
with GENERALI. The insurer gave the joint venture five
buildings in Paris worth 550 million euros, of which the
Norwegian pension fund takes 50%. It has, in total,
invested more than 1 billion euros in 18 months in the
Greater Paris region.
Finally, number two, ABU DHABI INVESTMENT
AUTHORITY (ADIA) purchased "90 boulevard Pasteur"
from CREDIT AGRICOLE for an estimated 250 million
euros.
The appetite of these investors, which is mainly focused
on beautiful Parisian stone and on the best locations,
holds true once again with two transactions signed on the
Champs Elysées this year. These are numbers 52-60 sold
to QIA and number 100 purchased by NORGES.
1 According to the Sovereign Wealth Fund Ranking (October
2012)
Source : Jones Lang LaSalle
Origin of the cross-border investment in France
2012
2009
2007

11. 11  The Paris office market – Overview & forecast 2013
And mid-size transactions?
In general, the capital for this asset band of between 50
and 100 million euros mainly comes from domestic or
European investors.
If the largest transactions have been won by international
buyers, the market of medium-sized transactions is still the
favourite hunting ground of French investors who are
responsible for more than 60% of the volumes invested in
this asset size. The share of French investors has become
larger than foreign investors, particularly in relation to very
good levels of collection from REITs in 2012, which allows
them to be positioned on larger unit-sized assets than in
the past.
German investors - historically active purchasers - were
absent during the first half of the year (only 3% of invested
capital) or were even net sellers. However, they
reappeared in the second half of the year, totalling 13% of
the capital invested on the Paris market. Of particular
importance is the purchase of the head office of
l’EXPRESS rue de Châteaudun in Paris by ALLIANZ and
the sale of "Forum 52" in Issy-les-Moulineaux to RREEF.
In contrast, open-end funds, which have begun to liquidate
their portfolios, are starting to market assets, such as
KANAM or AXA IMMOSELECT with the sale of the
"Liberté 2" building in Charenton-le-Pont for 255 million
euros.
Relative stability of prime yields
Prime yields have generally remained stable on secondary
markets in Paris and in the inner suburbs.
However, investors are still willing, in some cases, to
position themselves at lower yields for products, the cash
flow of which is secure over a long period, particularly
medium-sized products (50 million euros) which have the
characteristics of "trophy" buildings (situated in Paris, in
cut stone, with top of the range services).
Consequently, we have noticed a fall in yield by 25 basis
points on the best markets in Paris. Thus, in the Golden
Triangle, the prime yield is positioned in a range between
4.50% and 5.00%
Investment transactions above €100 million in the Paris region
Source : Jones Lang LaSalle
Single asset
Assets sold within a portfolio

12. 12  The Paris office market – Overview & forecast 2013
Outlook: 2013 a year
of opportunities
The economy in the continuation of Act 5: when will
it recover?
Growth prospects for the coming months have been
revised downwards and according to economists, the start
of 2013 will not announce the long-awaited recovery.
In France, 2013 will be the year when fiscal austerity
measures are in full effect in households and businesses
(the tax burden will be at its historical high), while at the
same time, employment prospects are poor. It is likely that
one of the main drivers of French growth, consumption,
will remain sluggish due to a decline in the standard of
living of households and job worries. The need to initiate
structural reforms in France is even more relevant, which
Moody's highlighted again in November when France's
rating was downgraded.
At international level, 2012 was the year of awareness on
the part of large organisations such as the IMF and the
OECD: austerity at all costs and at any price is a mistake,
in as much as its effects on the economy are negative.
There has been a change in tune in recent months. Yes to
the restoration of public accounts but at a reduced pace in
order to safeguard economic growth as much as possible.
In recent weeks, Europe and the markets have shown
greater tolerance on the subject: an easing of objectives
and of deadlines for budget compliance without the
markets being "up in arms" against these announcements.
Europe is seen as the sick man of the world and its weight
in the global economy makes its recovery even more
necessary for growth.
The new buzzword in France is commercial
competitiveness as the country must regain market share
which has been lost over the past ten years on
international markets. Companies have already been
given some signs in recent weeks: negotiations on jobs
and employment contracts between unions and employers
have started and the government has introduced an
unconditional tax credit for companies of approximately 20
billion euros. It remains to be seen if the negotiations will
lead to an agreement which is acceptable to all parties
and if the company tax credit will be enough to give them
the boost they need for recovery.
Therefore, if we can legitimately forecast that the first few
months of the year will still be marked by stagnation or
recession, decisions on changes during the second six
months are unpredictable. In any event, if activity should
pick up mid-year, the effects will not be immediate on the
job front or on company investments which shall first try to
restore their margins.
.

13. 13  The Paris office market – Overview & forecast 2013
2013: the hunt for lease vacancies for owners, the
hunt for costs for businesses
The harsh economic environment and rising
unemployment could affect the commercial real estate
market in 2013. SME activity is closely correlated to a
country's economic situation and the financial difficulties of
companies can be felt. For 2013, we expect the level of
take-up to be slightly down compared to 2012 between 1.9
and 2 million square metres.
Businesses are revising their real estate policy and the
type of demand is changing profoundly. For the last 5
years, businesses have been in crisis management
dominated by the logic of reducing their costs. The
majority of this year's transactions have been made with
that logic. Demand will remain essentially motivated by a
search for savings and a rationalisation of occupied areas
by bringing together teams. Businesses will therefore try to
vacate any unoccupied or under-occupied areas or will at
least try to find a subtenant.
A lack of visibility on their own operating results does not
induce them to commit to costly relocation projects which
are most often accompanied by an internal reorganisation
of the company's workforce. They are turning more
towards renegotiating their leases. Enjoying rapid growth
this year, they will undoubtedly occupy a significant share
of the market next year, facilitated by successive
increases in the construction index. All opportunities shall
therefore be exploited.
If the renegotiations do not result in a favourable outcome,
businesses will consider, in a second stage, relocation.
They will have to face extremely constrained environments
in terms of cost and geography. For social reasons, they
will often prefer a similar environment to their current
location, leading to endogenous movements. Established
tertiary districts, which are currently offering attractive
lease terms, could benefit from this dynamism as the
difference in rent between central sites and peripheral
sites is tending to shrink.
Finally, 2013 could be marked by several opportunistic
movements by businesses in a favourable market in order
to relocate to new buildings, close to public transport,
which are directly connected to the capital.
Supply is abundant, particularly in the inner suburbs and
there is no shortage in the supply of new properties. In
addition, approximately 500,000 sq. m of new projects
currently under construction in the Greater Paris Region,
to be delivered by the end of 2013, will increase the
number of new buildings available in some "supplier"
sectors. In a slowed-down leasing market, we can
therefore examine the time taken to clear this new supply
when, according to a study we conducted, on average
30% of new office space programmes (excluding turnkey
or individual user account), delivered between 2009 and
2011, were occupied at the time of delivery, 40% after 6
months and 55% after one year.
Within this context, rents will remain under a downward
price pressure, particularly in areas where the available
supply exceeds demand. The apparent resistance of rents
so far has started to crack, and the rental values displayed
will continue to fall in 2013 as economic values are
already low. According to owners, incentives could
become even more pronounced in some "over-supplied"
sectors.
In La Défense, the leasing market will only recover with a
readjustment of the values. 2013 should therefore be a
year of transition, before a more pronounced recovery in
2014-2015 once the values have been adjusted and the
supply of new properties has been renewed. More
generally, in the inner suburbs, the markets should
prosper due to a high quality supply for competitive rents.
In Paris city centre, particularly in the Central Business
District, the lack of supply should keep "prime" rental
values and second hand rents for the best products at a
high level. However, this is a specific, isolated
phenomenon related to the lack of qualitative supply in this
sector.

14. 14  Le marché des bureaux en Ile-de-France – Bilan & Perspectives 2013
A return to a conventional level?
The outlook for the investment market in 2013 should be
at a "conventional" level, observed for 10 years. We are
therefore forecasting an invested volume of between 8
and 10 billion euros next year.
If the first few months of the year are usually relatively
quiet, the first half of 2013 could be an exception. This
year, the arbitrage plans of investors have begun much
earlier than usual and should be released at the beginning
of next year.
In an uncertain political and fiscal context, investors
remain very cautious in their analyses even though rental
values are under pressure. However, the attractiveness of
Paris at European level and the resilience of its real estate
market are all factors which will continue to attract
investors from around the world..
We await the arrival of new investors from Asia, such as
Korean and Malaysian investors, as well as Chinese
insurance companies which have recently been allowed to
invest in overseas property.
German investors should also be present.
With regard to French investors, insurance companies
should still be active on the Paris market to acquire high-
quality assets with fixed long-term leases.
The interest of Sovereign Wealth Funds for the Paris
market could slow down next year. Having invested in
London and Paris, some funds are looking to invest in
other "core" European markets such as Germany or
Switzerland. NORGES, along with AXA, has invested 784
million euros in Germany by purchasing the "Kranzler Eck"
in Berlin and the "Neue Welle" in Frankfurt from RBS.
They also acquired under a sale and leaseback, the
headquarters of CREDIT SUISSE in Zurich for 800 million
euros.
In terms of product typology, purchasers will undoubtedly
be primarily looking for quality assets, with secure yields.
Prime yields are therefore likely to be maintained for the
best assets.
The "value added" investors’ interest for "secondary"
assets is real. However, this requires the market to have
non "prime" assets to arbitrate, that buyers and sellers
agree on the asset valuation and that they are fundable.
Note that investors are able to find funding for "core"
assets. For "value added" assets, banks do not hesitate
with regard to their most loyal customers and high-quality
borrowers.

16. Contacts
Virginie Houzé
Director
Research Deparment
Paris
+33 (0)1 40 55 15 94
virginie.houze@eu.jll.com
Sophie Benaïnous
Research Manager
Research Department
Paris
+33 (0)1 40 55 85 15
sophie.benainous@eu.jll.com
Manuela Moura
Consultant
Research Department
Paris
+33 (0)1 40 55 85 73
manuela.moura@eu.jll.com
www.joneslanglasalle.fr
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