New construction market, deciphering for companies

As it does every six months, Deloitte, in partnership with Explore and Business Immo, provides us with the trends in the real estate market of the Greater Paris region, through the launch and monitoring of construction sites in the IDF in its Paris Crane Survey**.

It is interesting to read these figures in the light of the new expectations of companies, reinforced by the health crisis, the development of teleworking and the demands of employees.

For a company it is important to know the volume of new construction and the level of empty space coming on the market.

We therefore propose an analysis of the situation in IDF from the point of view of the potential tenant company.

Deciphering.

Companies need less space

Between the development of telecommuting, the implementation of flex office, alternative solutions such as coworking spaces and the search for savings, most companies express an intention to reduce their office space.

Developers have understood this and caution is the order of the day with a drop in new housing starts in the IDF for the third consecutive time. The overall production pipeline is down with 1.85 million sq.m. under construction. It stands at 800,000 sq.m in the West, down 10% over 6 months, particularly in the Hauts de Seine, due to a lack of new projects

Paris is an exception in this context. It remains in a class of its own, with dynamic new housing starts, up 40% and representing 29% of launches. There are 400,000 square meters under construction, which is the usual average.
The most emblematic project launched in the first half of the year is the "Mundo" project, developed by Gecina, for more than 20,000 m². The largest delivery was the 90,000 m² Duo towers.

In addition to this drop in housing starts, there was a decline in new building deliveries.

The availability rate - the proportion of properties that have been delivered but not taken up - is still up at 77%, a level not reached since 2004. The areas concerned are mainly located in the west.

Newly delivered buildings in La Défense and the Péri-Défense area in particular are experiencing a decline in demand. Less demand in general, as explained above, but more particularly less demand per unit from large companies, which have historically consumed large areas in this sector.

In addition, the number of projects has remained stable at 132, representing an average of approximately 14,000 sq.m per project. The largest project currently under development in the IDF is the Arboretum project (112,000 m²).

A few geographic areas are exceptions

Some areas seem less affected by the new context of transformation of work modes, such as Seine Saint Denis and Val de Marne. The dynamics are different there and construction is still on the rise.

It is the development of the transport network (L 14, GPE...), and the prospect of the 2024 Olympic Games that support the significant renewal of the sector.

Governmental bodies and public actors have recently maintained their leaseholds in this sector (Ministry of the Interior in Saint-Denis, Ministry of Finance in Romainville, etc.).

The supply is already abundant and there are many projects. The vacancy rate is and will remain high, making it a sector where the balance of power will be in favor of potential tenants.

The international situation also has an important impact

Some projects are slowed down by external factors, such as the unavailability of materials, or the increase in their costs. We have thus noted delays in the launch of operations.
There is also a wait-and-see attitude on the part of certain players in the face of rising interest rates, tighter financing conditions and available inventory, which is at an all-time high.

Things to remember

As the real estate construction cycle is long, we are in a period of readjustment with a market situation that may prove favorable to companies.

Paris should be excluded from this context, as demand is high and the vacancy rate is very low.

Many new premises are and will be available, but not necessarily in geographical areas that interest companies at first sight.

However, within the framework of a short and medium term real estate reflection, a 360° approach can bring out great ideas.

This is the value of Parella 's consultants who are available to discuss the subject with you.

Louis Parrot Valuation Senior Expert

* All new and restructured office projects launched in the absence of a building permit, for surface areas of more than 1,000 m² in the Greater Paris region. Data from 10/31/2021 to 3/31/2022

** Paris Crane Survey available HERE