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Despite the difficult economic background in France, the Paris office market has turned in a strong performance over the first nine months of this year, according to a new report from Knight Frank. Office take up increased by 13.2% and investment volumes rebounding by 39% compared to the same period in 2013, the report shows. Occupier take-up reached 1.4 million square meters in the first nine months of 2014 and is expected to reach two million square meters for this year as a whole. The increase has been driven by a number of significant deals over 5,000 square meters to major corporates such as KPMG and L’Oreal. The overall office vacancy rate has stabilised and stood at 7.2% at the end of the third quarter, although there is a disparity between the city’s different submarkets. Vacancy rates in La Défense and Western Crescent are at 11%, while in the CBD the vacancy rate is less than 6%. The report suggests that the office investment market remains buoyant and somewhat decoupled from the leasing market, with the current strong interest in trophy assets expected to continue. Transaction volumes for 2014 look set to reach their highest since the peak of 2007, having surpassed €11 billion in the first nine months. With a strong final quarter in prospect, deal volumes for 2014 as a whole are expected to end up in the region of €15 billion. International investors remain very active in the market and are showing interest in higher-yielding assets outside the core, as well as prime opportunities. ‘The Paris office market has bucked the wider economic backdrop and, while the economic outlook remains somewhat uncertain, the recently released positive GDP figures for quarter three will provide a boost for both occupiers and investors as we move towards the year end,’ said Darren Yates, head of global capital markets research, Knight Frank. According to Luke Condon, partner, Knight Frank Paris, the size and on-going resilience and stability of the Paris occupier market provides comfort to investors, as demonstrated by the increasing proportion of international capital attracted to the market. ‘This, coupled with improved financing conditions, has also led to significantly improved demand for non-core products. Market sentiment is positive but more product is required to satisfy demand,’ he added. Continue reading →
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