French Property market 2015 - Cushman & Wakefield

2015
FRENCH PROPERTY
MARKET
A Cushman & Wakefield Research Publication

7
INVESTMENT
JANUARY 2015
3
EDITORIAL
5
ECONOMY
19
OFFICES
31
LOGISTICS
39
RETAIL
54
GLOSSARY
2

EDITORIAL
EDITORIAL
With levels of activity unseen since the crisis began, 2014 was the third-best year ever for the French property-investment market.While
French investors continued to dominate the sector,foreign investors also played a significant role,taking part in some of the largest deals ever
seen in France. Steady international demand and the constant arrival of newcomers from around the world bore witness to the breadth of
international capital flows and to their vital contribution to the rise of amounts invested in France and most European countries.
Occupier activity,on the other hand,remains tied to local realities.In 2014,France was the“sick man of Europe” in the eyes of many observers,
an image contrasting starkly with the UK’s revitalized economy and with signs of recovery in some of the countries hardest hit by the crisis.
Other strictly local conditions included the instability of the French fiscal and regulatory environment,illustrated by the uncertainty surrounding
the enactment into law of the ALUR and ACTPE bills.This environment weighed on the development of retailer and corporate real estate
projects, further delayed by the stubborn slump in business and by stagnant household consumption.
The dichotomy of the French market,where record-breaking investment lives side by side with uneven leasing activity,should persist into 2015.
However, several external factors—the sharp decline in oil prices, the weakening of the euro, and the ECB’s policy of quantitative easing—are
expected to breathe a little life into businesses and consumers.
French domestic policies could also be at a turning point.Because of the extraordinary circumstances under which France has been living since
the terrorist attacks of January 2015, and as a result of the national unity that has since prevailed, the government’s approval ratings have risen
considerably.The main political parties may now be able to work more closely together to set priorities for putting France back on the right
path.Although far from the radical proposals that many had hoped for, measures currently under discussion, such as those in the Macron bill,
would undoubtedly improve the image of France held by many foreign decision makers. If the bill passes into law, France will be seen as less
resistant to change and friendlier to business,whether the traditional blue chips of the CAC 40 or the numerous startups on view at high-tech
trade shows.
Although these problems are still far from being solved, France in recent years has rarely enjoyed such a combination of favorable conditions
as now.The investment market should continue to do very well in 2015, as investors seek alternatives to low interest rates and unattractive
bond yields.All the more reason to believe in a return to confidence more quickly than anticipated,the vital first step towards recovery in the
overall property market.
Olivier Gérard
President
3

ECONOMY
ECONOMY
In 2014,the weakness of the international economy was confirmed
by the slowdown in emerging economies and by sluggish business
in the eurozone. The BRIC1
countries are no longer the growth
engines they once were. China has slowed in recent months.
Structural cracks have appeared in Brazil and India, while the
Russian economy has been crippled by intervention in Ukraine and
the fall in oil prices.Growth has remained elusive in most eurozone
countries. Deteriorated by years of economic crisis, the business
climate and household morale failed to rally significantly.
Unemployment, meanwhile, hovered close to the record high
reached in 2013. Such stagnation was in stark contrast to the
momentum of theAmerican and British economies.With corporate
investment on the rise and household spending up, the United
States and Great Britain enjoyed annual GDP growth of 2−3%.The
job market also showed significant improvement in 2014, when
more than 220,000 jobs were created monthly in the United States.
Meanwhile the unemployment rate in the UK reached a six-year
low.
The uneven, modest recovery begun in 2014 is expected to
continue in 2015,resulting in global GDP growth of 3.8%,compared
with 3.3% in 2014.2
Business activity should benefit from numerous
positive shocks, starting with a sharp decline in oil prices.The price
per barrel3
has fallen to under $50 for the first time since 2009. In
addition to lowering energy costs for large consumers of oil, this
decline could help to boost private consumption in eurozone
countries. Furthermore, consumers will benefit from extremely
low inflation and from the softening of austerity measures.
European exports should get a boost from the weaker euro, the
ECB’s accommodative monetary policy of quantitative easing, and
the economic momentum of the United States. These elements
suggest that growth, estimated at 1.1% in 2015 and 1.7% in 2016,
will provide considerable improvement from the recession or
stagnation that has prevailed since the beginning of the crisis.
However, several risk factors could jeopardize this scenario:
uncertainty around the consequences of major elections in Greece
and Spain, unresolved conflict between Russian and Ukraine, and a
rise in oil prices in the short and medium term.
Despite recovery in the third quarter that was better than
expected, French GDP growth remained close to zero in 2014.
Nonetheless, after three years of nearly flat business activity, a
more robust turnaround has appeared on the horizon. Growth of
nearly 1% is forecast for 2015, and of 1.5% for 2016. Extremely low
inflation and a modest rise in purchasing power should continue to
bolster private consumption. Some households will benefit from
lower oil prices, while poorer families will receive tax breaks, a
consequence of the elimination of the lowest tax bracket.
Pronounced recovery in the eurozone and vigorous growth in the
US and UK are expected to stimulate French exports. However,
the benefits of a weaker euro will be minimized by the eurozone
trade structure—seven of France’s ten largest trading partners are
European—and by the automatic rise in the cost of imports and
the competitive weakness of French companies in certain market
segments. Although the future looks somewhat brighter, France’s
economic outlook remains cloudy.As in 2014, France is expected
to underperform its eurozone partners in 2015, with business
activity well under the long-term average. Despite the growing
number of government employment schemes and CICE (French
tax relief designed to boost competitiveness and job creation)
promises to reduce social security costs, unemployment is not
expected to improve significantly. Nor is the morale of the French
people, sapped by the tragic events of January 2015 and by the
growing terrorist threat in France.
*Estimate / **Forecast
Source:European Commission – November 2014.
1
Brazil, Russia, India, and China.
2
European Commission Economic Forecast, November 2014.
3
Barrel of light sweet crude.
FRENCH ECONOMIC ACTIVITY
-5.0
-2.5
0.0
2.5
5.0
-5.0
-2.5
0.0
2.5
5.0
2003 2005 2007 2009 2011 2013 2015 E
GDP growth (annual %) − left scale Inflation (annual %) − right scale
ECONOMIC OUTLOOK (IN %)
Source: INSEE
GDP INFLATION UNEMPLOYMENT
2014 2015 2014 2015 2014 2015
FRANCE 0.3 0.7 0.6 0.7 10.4 10.4
GERMANY 1.3 1.1 0.9 1.2 5.1 5.1
EUROZONE 0.8 1.1 0.5 0.8 11.6 11.3
UNITED
KINGDOM
3.1 2.7 1.5 1.6 6.2 5.7
UNITED STATES 2.2 3.1 1.8 2.0 6.3 5.8
CHINA 7.3 7.1 2.4 2.4 - -
JAPAN 1.1 1.0 2.8 1.6 3.8 3.8
5
-5.0
-2.5
0.0
2.5
5.0
-5.0
-2.5
0.0
2.5
5.0
2003 2005 2007 2009 2011 2013 2015 E
GDP growth (annual %) − left scale Inflation (annual %) − right scale

In 2014, property investment in France amounted to €23.8 billion,
57% more than in 2013. After 2007 (€28.5 billion) and 2006 (€24.4
billion), 2014 was the third-best year ever and marked a return to the
kind of performances not seen since the crisis began.These excellent
results are attributable above all to large deals made by French and
international investors with deep pockets.The financial context, with
its low yields in the bond market and high volatility in the stock market,
was very favorable to property investment.The commercial-property
market has benefited from supply—growing but still limited—fed by
sales from property-investment firms and by liquidations of real-estate
funds (e.g., German open-end funds). Although investors continue
to exercise caution, their research criteria have moved beyond core
assets. Numerous investors today are searching for value-add asset
plays, tenant risk, or secure assets in less-established sectors.
INVESTMENT
FRENCH PROPERTY MARKET

JANUARY 2015
AMOUNTS INVESTED
Investment in France amounted to €23.8 billion in 2014, 57% more than
the previous year’s total and 48% more than the ten-year average.After
the first and second halves on 2007, H1 2014 was the third-best half-year
ever,with €12.8 billion invested.The second half of the year slowed slightly,
with €11 billion invested, though €7.5 billion of that came in the fourth
quarter alone.
In 2014 there were 416 transactions in France.Although better than the
previous year’s 393 transactions, this performance remains relatively
modest and is less than the 421 transactions in 2012.The slowdown is
attributable to a decline in the number of small operations. In 2014 there
were 312 transactions of less than €50 million, compared with 305 in
2013 and 343 in 2012. Medium-sized transactions were stable, at 50 deals
in the €50−100 million range, compared with 52 in 2013 and 39 in 2012.
However,it is the largest deals that drive the market,and last year was no
exception. Transactions of more than €100 million accounted for 68%
(54 transactions) of total amounts invested in 2014, compared with 48%
(36 transactions) the year before.Transactions of €100−200 million were
relatively stable, at 31 compared with 26 in 2013, while transactions of
more than €200 million rose significantly,from 10 (totaling €3.5 billion) in
2013 to 23 (totaling €11.9 billion) in 2014.Three transactions of more
than €200 million exceeded the €1 billion mark—Cœur Défense as well
as the Klepierre/Carmila and Risanamento portfolios—and were some of
the biggest ever seen in France.These large deals were made possible by
an abundance of raised capital and easier access to debt, with leverage
reaching as high as 70%. In addition, this year saw the involvement of
numerous types of investors—insurers, pension funds, property-
investment companies, listed real estate companies, private-equity funds,
etc.—whereas before the crisis the largest deals were done mainly by
North American funds.
HISTORIC INVESTMENT ACTIVITY IN FRANCE
50%
Half of total
investment in 2014
(23% in 2013) came
from transactions
of more than €200
million.
12,2
17,5
24,4
28,5
13,0
7,8
11,0
16,5
14,9
15,2
23,8
0
5
10
15
20
25
30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2004-2013 average (€16.1bn)
8

INVESTMENT
Portfolio disposals also boosted volume. 46 transactions, including
seven of more than €200 million, accounted for 31% of the total
amount (€7.4 billion) invested in all property-asset classes in
France.While a few trophy assets changed hands (e.g., the Étoile
portfolio sold by Risanamento for €1.2 billion), portfolio sales
often allowed investors to dispose of assets of less interest
individually.
INVESTMENTVOLUME BY LOCATION
Ile-de-France
Ile-de-France accounted for 71% of total investment in France in
2014, with €17 billion invested (+53% year on year). Paris is the
most desirable market for French investors and virtually the only
market in the eyes of foreigners, who have acquired 81% of their
French holdings in the Paris region.The large supply of office stock,
the presence of numerous corporate headquarters, and the
resilient local economy,less affected by the crisis than elsewhere in
France, all explain the appeal of the office market in Ile-de-France.
Office properties accounted for 77% of total investment in the
Paris region in 2014, virtually unchanged from the previous year
(78%). Activity in the retail sector also revived considerably, with
€3.3 billion invested (+71% year on year). This excellent
performance was due to seven transactions in Paris of more than
€100 million for several mixed-use buildings (Étoile portfolio, Le
Madeleine, 49−51 avenue George V, etc.) and iconic individual
assets (Beaugrenelle, Chanel flagship on avenue Montaigne,
Benetton flagship on boulevard Haussmann, etc.). Industrial
properties accounted for 4% of the Paris region’s overall market,
compared with 5% in 2013, despite an 8% rise in investments year
on year.
Provinces
Investment in the provinces amounted to €6.3 billion in 2014, 58%
more than the previous year’s total and 75% more than the ten-
year average. Once again large transactions and portfolio disposals
drove the market, particularly in the retail sector. Boosted by
several sales of shopping centers and malls, the retail market
accounted for 70% of total investment outside Ile-de-France.
Penalized by the weak economy, a sluggish lettings market, and
investor prudence, the office market totaled €1.3 billion and
accounted for only 21% of total investment in the provinces in
2014 (26% in 2013 and 28% in 2012).The distribution of amounts
invested in office properties was very uneven, with the Lyon
conurbation claiming almost half (€590 million).This imbalance was
attributable mainly to the acquisition of the Tour Incity by the
Caisse d’Epargne for more than €200 million,the largest transaction
in 2014 outside Ile-de-France.
KEY INVESTORS
French investors accounted for 66% of total investment in France
in 2014 and remained by far the country’s largest investors. The
French are active in all segments of the market and were behind
33 of the year’s 54 transactions worth more than €100 million.The
largest deal of 2014, the €1.4 billion acquisition by Carmila of a
portfolio of Carrefour shopping malls, was also led by French
investors.
As in 2013, institutional investors (i.e., insurers, private health
insurers, and pension funds, all with significant liquidity) led the
pack. These institutional investors focused on large new office
complexes and construction projects in the Paris region, such as
the SFR campus in Saint-Denis (sold to Predica andAviva Investors),
CityLights in Boulogne-Billancourt (sold to Cardif), and the A9B
building in the ZAC Rive Gauche in Paris (acquired by the CNP).
Increasingly cash-rich SCPIs and OPCIs were active in the office
INVESTMENTVOUMES BY ASSET TYPE AND LOCATION
% in volume/*excluding non divisible portfolios
7% 10% 9%
23%
32% 26%
70%
51%
61% 64%
21% 26%
0%
20%
40%
60%
80%
100%
2014
France
2013
France
2014
Provinces*
2013
Provinces
Office Retail Industrial
DEAL ANALYSIS IN FRANCE
9
% in volume, all products
0 2 4 6 8 10 12
€1-15m
€15-50m
€50-100m
€100-200m
>€200m
€ bn
2013 2014

JANUARY 2015
market, as seen in the acquisition by Primonial Reim of the Grand Seine
office building in Paris and of the Ovalie office building in Saint-Ouen, the
acquisition by BNP Reim of Bord de Seine 2 in Issy-les-Moulineaux, and
the sale to La Française of the Jazz building in Boulogne. However, it was
the proportion of other investor profiles that increased the most in 2014.
Property-investment firms were active, particularly in the Carmila
acquisitions (nearly €3 billion). Private investors were also present, in the
acquisition of the Beaugrenelle shopping center by a consortium
comprising Apsys, Foncière du Rond Point, and Financière Saint James.
Large office tenants, mainly in the public sector as well as banking and
insurance, were behind some of the largest transactions on the French
market.Acquisitions were made by SMABTP (future headquarters in the
15th
), Caisse d’Epargne Rhône-Alpes (Tour Incity in Lyon), BRED
(Urbagreen in Joinville-le-Pont), and the Ministry of the Interior (Garance
in the 20th
).
Although still a minority in 2014, foreign investors were more active than
in the previous year, contributing 34% of total investment in France.Their
acquisitions totaled €8.2 billion, up 55% from a year earlier.The French
market’s liquidity and the quality and diversity of its assets make it a vital
target for all large international investors, as seen in the arrival of diverse
newcomers such as the Dutch Syntrus Achmea, the Canadian Oxford
Properties,the Korean IgisAsset Management,and the Japanese Mitsubishi.
An analysis of investment by nationality confirms the predominance of
Europeans (14% of acquisitions in 2014). The Dutch came in first place
thanks to two large transactions totaling nearly €1 billion: Wereldhave’s
purchase for €850 million of a portfolio of six shopping centers belonging
to Unibail-Rodamco, and the sale by Grosvenor to Syntrus Achmea of the
Verano portfolio (ground-floor shops in Paris, Toulouse, and Bordeaux).
The Germans came in second, mainly in the form of insurers and open-
end funds, and focused mostly on large office complexes and mixed-use
secure assets in Paris and the inner suburbs (Arc de Seine in the 13th
,
acquired by Allianz, Les Ateliers du Parc in Clichy, sold to Deka, and 49−51
avenue George V in the 8th
, acquired by Pramerica). Nevertheless, the
Germans were notable for their disposals, particularly by open-end
% in volume, all products, in France
PURCHASER NATIONALITY IN 2014
France
66%
Europe
14%
North
America
12%
Middle East
6%
Asia
2%
La France n’est pas le seul marché d’Europe à avoir enregistré
d’excellents résultats en 2014. Il en va de même pour de
nombreux pays, confirmant l’ampleur des flux de capitaux, la
volonté des grands investisseurs internationaux de diversifier
leur allocation d’actifs et le statut de valeur refuge de
l’immobilier à l’échelle de la planète. 215 milliards d’euros
ont ainsi été investis en Europe en 2014,soit une progression
de 26 % sur un an. Si les bureaux restent l’actif privilégié (45
% des volumes investis en Europe), les commerces ont,
comme en France, connu une augmentation plus importante,
passant de 40 milliards d’euros en 2013 à près de 50 milliards
en 2014 (+ 24 %).La hausse des volumes a été importante au
Royaume-Uni (74,6 milliards d’euros, soit + 15 %) et en
Allemagne (40 milliards d’euros, soit + 31 %), permettant à
ces deux pays de conserver leur position de leaders du
marché européen. Les performances exceptionnelles du
marché français lui permettent néanmoins de consolider sa
troisième place devant la Suède.
Focus sur le marché
européen
France was not the only country with excellent results in
2014. Many other countries benefited from massive capital
inflow, the diversification needs of large international
investors,and the safe-haven status worldwide of property as
an asset class. In Europe, €169 billion was invested in 2014,*
a rise of 22% year on year.While office properties received
the most attention (57% of total investment in Europe),retail
properties across Europe experienced an even sharper
increase, as in France, from €40 billion in 2013 to nearly €50
billion (+24%) in 2014. Investment rose 7% in the UK (€55.3
billion) and 9% in Germany (€30.6 billion), confirming the
European-leader positions of these two countries.Thanks to
its exceptional performance, the French market took third
place, ahead of Sweden.
Focus on the European
market
10
*In offices, retail and industrial.

INVESTMENT
funds, which have enhanced supply. Finally, British investors came in
third in France in 2014, thereby confirming their interest in a wide
variety of more or less secure assets in various regions.The largest
UK transaction was the sale to Hammerson of the Saint-Sébastien1
shopping center in Nancy. UK investors also targeted value-add
office opportunities,such as CapWest in Clichy (acquired by a fund
managed by Tristan Capital Partners) and several individual
industrial assets or portfolios (Phoenix portfolio acquired by MStar,
logistics platforms sold to Segro and Standard Life in Ile-de-France
and near Marseille).
More present than in 2013,NorthAmericans accounted for 12% of
investment in the French market and were behind the second-
largest transaction of 2014 (acquisition by Lone Star of Cœur
Défense for €1.3 billion).The North American players were mainly
US private equity funds, whose investment firepower allows them
to target large transactions of more than €100 million.These funds
sometimes aim for less-established locations and assets ignored by
core investors and therefore more difficult to finance, such as
secondhand industrial sites (Loren portfolio acquired by
Blackstone), speculative forward sales (Influence in Saint-Ouen
bought by Tishman Speyer), and large office buildings to be
renovated, some with high vacancy rates (Seine Office in the 12th
).
Middle Eastern investors, which account for 6% of total investment
in France, tend to focus on mixed-use assets in Paris with secure,
long-term leases, such as the purchase by the Olayan family of the
Étoile portfolio. As for Asian investors, their 2% share
underrepresents the growingAsian appetite for the French market.
A few new investors in search of core opportunities have turned
up in France (IGISAsset Management,Mitsubishi) and could inspire
others to follow in the months ahead.
OFFICES
Amounts invested
In 2014,€14.4 billion was invested in office properties,representing
61% of total investment in France,compared with 64% the previous
year.This decline was due not to a decline in investor interest, but
to the boom in retail. In fact, investment in office properties was
48% higher than in 2013 and 24% higher than the ten-year average
(a performance in line with asset and geographical diversification),
despite investors’ continued aversion to risk. Several forward sales
were recorded and most activity was in new complexes that are
mostly secure (A9B in the 13th
) and conveniently located in tertiary
sectors that either are large (CityLights in Boulogne), are highly
promising (Season in the ZAC Clichy-Batignolles), or have little
available space (Influence in Saint-Ouen). The Ile-de-France office
market was again the most active by far, with €13.2 billion invested
in 2014,representing 91% of the total investment in all French office
properties and a rise of 53% year on year.
Geographic distribution
Of the €6.4 billion invested in inner Paris in 2014,€4 billion went to
the central business district (CBD).This 71% rise from 2013 was
due largely to the completion of several major transactions
(12 worth more than €100 million), including sales of the Sanofi-
Aventis headquarters at 54−56 rue de la Boétie,the GrDF offices at
6 rue Condorcet,and the Galeries Lafayette headquarters at 44−48
rue de Châteaudun. Once again and without surprise the CBD
benefited from its prestigious supply, central location, and easy
access.Always targeted by well-funded French and foreign investors,
this submarket and its structurally limited supply enjoyed
opportunities created by disposals of mixed-use buildings (Le
Madeleine acquired by BlackRock,Étoile portfolio) and redeveloped
office complexes (32 Blanche,L’Astorg).In addition,the development
of a new district (ZAC Clichy-Batignolles in the 17th
) brought new,
% in volume, all products, in France
OFFICE INVESTMENT ACTIVITY IN FRANCE
10,2
14,0
18,2
19,5
10,3
5,3
6,7
12,3
10,0
9,7
14,4
0%
20%
40%
60%
80%
100%
0
4
8
12
16
20
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Office investments (€bn) % of sums invested in offices in France
PURCHASER TYPE IN 2014
Properties
companies/REITs
26%
Investment funds
21%
Insurer/pension funds
18%
SCPIs/OPCIs
16%
Private
10%
Owner
occupier
5%
SWFs
3%
Developers
1%
1
75% of the shopping center.
11

high-quality supply (Strato, Season) and completed the expansion of the
CBDbeyonditstraditionalborder.OutsidetheCBD,otherneighborhoods
under development contributed to the success of the Paris market.The
ZAC Rive Gauche (Paris 13th
) attracted investment of €1.04 billion in
2014 (see Focus opposite), a record amount and 29% higher than the
previous record in 2004.This outstanding performance explains the 30%
annual increase in investments in Paris Rive Gauche,a market underpinned
by the sale to SMABTP of the former Hôtel Pullman (Paris 15th
) and the
acquisition by Unofi Assurances of the Atlantique 34 building (Paris 14th
).
Beyond inner Paris,the Ile-de-France market was driven mainly by activity
of large tertiary sectors in the western suburbs. La Défense turned in its
best performance (€1.9 billion invested in 2014) since the beginning of
the crisis, with a correspondingly ebullient lettings market. The sale of
Cœur Défense,one of the biggest office complexes in Europe,was largely
responsible for this result, but several other transactions of more than
€100 million also contributed to the business district’s success (e.g.,
acquisition of the Tour Prisma by Invesco Real Estate on behalf of a
Malaysian pension fund, sale to LaSalle Investment Management and
Quantum Global Real Estate of theTour Blanche).Other tertiary sectors
in the Hauts-de-Seine department stood out, such as the southwestern
suburbs, where more than €1 billion was invested. After an excellent
2013, the southwestern suburbs repeated the performance in 2014
thanks to sales of large existing buildings (Bords de Seine 2 and Quai
Ouest in Issy-les-Moulineaux) and to investor enthusiasm for the sector’s
new stock (CityLights and Jazz in Boulogne). In contrast with the strong
rise in office space let in 2014,investment in the western business district
(WBD) decreased. Medium-sized transactions (Tour Aviso in Puteaux,
Cap West in Clichy, Seine Etoile in Suresnes) were the norm, and there
were few deals of more than €100 million (Les Ateliers du Parc in Clichy,
acquired by Deka).
Northern Ile-de-France was the liveliest market after those of Paris and
the Hauts-de-Seine department. Investment totaled €1.3 billion,
attributable to the completion of several transactions of more than €50
million in Saint-Ouen (Influence,Ovalie) and Saint-Denis (Spallis,Dyonis).
JANUARY 2015
Jazz - Boulogne-Billancourt (92)
The ZAC Rive Gauche,whose first buildings were completed
at the end of the 1990s, was initially designed to rebalance
Parisian economic activity, long concentrated in the western
part of the city.Since then this market has enjoyed unfaltering
success, mainly through large transactions in the banking,
insurance, and public sectors.At present the vacancy rate is
a very low 4% (approx.). Notable since 2009 for its steady
rental values and the rapid absorption of secondhand office
supply, the success of the ZAC Rive Gauche is also due the
enthusiasm of large tenants for new construction that pushes
the boundaries of the district (e.g., Le Monde’s decision to
build its new headquarters near the Gare d’Austerlitz, and
the SNI’s letting of the A9B project).The acquisition of the
A9B project by CNP was one of the five transactions of
more than €100 million in the ZAC Rive Gauche in 2014.The
other four include a development project (Panorama
acquired by Icade and La Mondiale) and three existing
buildings: Arc de Seine acquired by Allianz, Grand Seine
bought by Primonial Reim, and the France acquired by
Gecina.
Focus on ZAC Rive Gauche
A9B - Paris 13th
12

INVESTMENT
EXAMPLES OF OFFICE ACQUISITIONS IN 2014
However, it was the sale of the new SFR headquarters that
contributed the most investment.This complex was sold for nearly
€700 million, thereby becoming the largest deal ever in the
northern suburbs. Delivery of the second tranche is scheduled for
2015. This type of transaction also reaffirms investor preference
for campuses of high-quality new assets let to large tenants and
secured by long-term leases.After significantly boosting volume in
the southern suburbs in 2013 (Eco-campus Orange in Châtillon),
new campus sales in 2014 contributed again to the performance of
certain sectors in the outer suburbs (Carrefour campus in Massy
acquired by Predica for approximately 385 million). By contrast,
performances of other Ile-de-France tertiary sectors were less
remarkable. Investment in the southern suburbs in 2014 declined
by 55% year on year, to €403 million, while the eastern suburbs
received investment of only €262 million.
Elsewhere in France,office-property investment in 2014 was up by
18% year on year, to €1.3 billion, only 8% of total investment in
France for this class of property.The Lyon region accounted for
45% of total provincial volume,largely because of the acquisition of
the 40,000 m² Tour Incity. Other large transactions, for the most
part carried out by SCPIs and OPCIs, were generally in the range
of €20−70 million and usually in large French conurbations
(acquisitions of the Safran headquarters in Toulouse by Crédit
Agricole Assurances, of Europrogramme in Marseille by Primonial,
and of Arcuriales in Lille by Swiss Life Reim).
*Mixed-use assets
79-81 boulevard Haussmann - Paris 8th
PROPERTY LOCATION VENDOR PURCHASER PRICE (€ M) AREA (M2
)
Cœur Défense La Défense (92)
JV Lehman Bros Holdings,
Atemi, GE Pension Trust
Lone Star 1,280 182,000
Étoile portfolio* Paris (75008, 75009) Risanamento The Olayan Group 1,160 76,500
Campus SFR Saint-Denis (93) Vinci Immobilier, SFR Predica / Aviva Investors 680 134,000
Campus Carrefour Massy (91) Colony Capital Predica 380 (est.) 81,000
City Lights Boulogne-Billancourt (92) BNP Paribas Promotion Cardif 375 (est.) 40,000
54-56 rue de La
Boétie
Paris (75008) Kanam IGIS Asset Management 350 (est.) 21,000
32 Blanche Paris (75009) Carlyle Oxford Properties / Hines 263 21,000
A9B Paris (75013) Kaufman & Broad CNP / DTZ Investors Confidential 23,000
Incity tower Lyon (69) Sogelym Steiner / Dixence Caisse d'Épargne Rhône-Alpes 240 42,300
6 rue Condorcet Paris (75009) Blackstone SFL 230 25,600
Liberté & Coupole Charenton-Le-Pont (94) Natixis Foncière des Regions 162 38,000
Blanche tower La Défense (92) Perella Weinberg Real Estate
LaSalle Investment Management /
Quantum Global Real Estate
161 25,800
Ovalie Saint-Ouen (93)
Aviva Investors / Capital
Continental
Primonial Reim 100 15,100
Eastview Bagnolet (93) Pramerica HSBC Reim 98 26,900
Jazz Boulogne-Billancourt (92) Eurosic La Francaise AM 70 7,000
46 rue de la Boétie Paris (75008) Invesco Real Estate MEC (Mitsubishi) 35 2,400
13

RETAIL
Amounts invested
Investment in French retail assets in 2014 amounted to €7.7 billion, an
all-time high that smashed the previous record (+60%) established in
2007. Retail accounted for 32% of total investment in France, nearly
twice the average performance of the past ten years (18%). This
exceptional result reaffirmed the appeal of a class of property with a
sterling reputation as a safe haven for investors.The market also saw the
arrival of a wide variety of supply from sales by investors aiming to
rebalance their portfolios by means of larger assets (Unibail-Rodamco,
Klepierre) or classes of property other than retail (Gecina). In addition,
the boom of retail investment was also the result of huge restructuring
projects in the sector, such as the creation of Carmila and the merger of
Klépierre and Corio. Under the circumstances, it is unsurprising to see
so many large and very large deals being done. Fourteen transactions of
more than €100 million (compared with 7 in 2013) accounted for 78% of
total investment in retail properties. Five of these transactions were
larger than €500 million, for a total of €4.5 billion, and accounted for
nearly 60% of total activity.
Asset types
The five transactions of more than €500 million were for malls and
shopping centers.All transaction sizes considered, this market segment
accounted for 72% of total investment in retail assets in 2014.The high
proportion was due principally to sales by property-investment firms of
individual assets (Beaugrenelle sold by Gecina) and portfolios (acquisition
by Carmila andWereldhave of Unibail-Rodamco shopping centers).These
deals facilitated asset flow, from large regional shopping centers
(Beaugrenelle in Paris, Docks Vauban in Le Havre) to hypermarket
galleries (Carrefour portfolio sold by Klepierre to Carmila,Cotentin sold
to Ciloger) and smaller sites (Rivétoile in Strasbourg, Côté Seine in
JANUARY 2015
RETAIL INVESTMENT ACTIVITY IN FRANCE
1,2
1,9
2,3
4,8
1,2
1,9
3,6
3,3
3,6
4,0
7,7
0%
20%
40%
60%
80%
100%
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Retail investments (€bn) % of sums invested in retail in France
5
Five transactions of
more than €500 million
accounted for 60%
of total investment
in retail properties in
2014.
14

Argenteuil). Investor enthusiasm for value-add assets has not
waned,as illustrated by the acquisition by KKR/Seefar of a portfolio
of four shopping centers in the Paris region and the provinces (Ivry
Grand Ciel, Espace du Palais in Rouen) and the sale to Orion
Capital Manager of Domus in Rosny-sous-Bois.
Total investment of €1.5 billion in high streets in 2014 was
unchanged from the previous year, although the number of
transactions increased to 66, compared with 54 in 2013.
Unsurprisingly, Paris was the recipient of most investment (82%) in
this market segment. Several iconic deals marked the past year and
reaffirmed French and foreign investor appetite for core assets in
Paris, such as mixed-use buildings in the western suburbs (e.g., the
Madeleine building, the Rossini building, 49−51 avenue George V,
and mixed-use buildings in the Étoile portfolio). Flagship stores on
the busiest and most prestigious high streets remained retailers’
preferred format for enhancing their visibility and image. Demand
for flagships was strong in 2014, as illustrated by the sale to Thor
Equities of the Benetton store at 51−53 boulevard Haussmann and
by transactions in the luxury sector (Louis Vuitton in Saint-
Germain-des-Prés, Étoile portfolio). Even in a weakening market,
the scarcity of prime retail slots continued to encourage the largest
luxury groups to expand their networks by acquiring new boutiques
(Chanel at 51 avenue Montaigne).Key high streets were also sought
after in the provinces,as illustrated by the acquisition of theVerano
portfolio by Dutch asset manager Syntrus Achmea as well as by a
few smaller transactions (New Yorker and La Halle on rue
Serpenoise in Metz, Armand Thiery on rue Sainte-Catherine in
Bordeaux, Sandro on rue Édouard Herriot in Lyon, etc.).
In 2014, €590 million was invested in French retail parks, 40% less
than in 2013. This decline was due mainly to a drop in sale-and-
leaseback operations. Despite investor enthusiasm for retail parks,
acquisitions in this property class were also in decline because of a
shortage of quality supply.The largest transactions of 2014 included
several existing, secure assets, such as the Realis acquisitions in the
Croix Blanche zone and several recent (or under-development)
complexes located in well-established peripheral areas (White Parc
in Orgeval, Saint-Max Avenue in the Creil-Saint-Maximin zone).
INVESTMENT
Rivétoile - Strasbourg (67)
15
Avenue des Ternes - Paris 17th
(Verano portfolio)

INDUSTRIAL
Amounts invested
Investments in industrial assets in 2014 amounted to €1.7 billion,or
7% of total investment in France.This annual rise of 13% continued
a positive trend that began in 2009.As in 2012 and 2013, portfolio
disposals played a crucial role, totaling €1.05 billion (62% of all
investment in industrial assets) and 14 transactions, including a few
pan-European portfolios.Among the largest portfolios exchanged in
2014 were the logistics sites sold by Foncière des Régions to
Blackstone (Loren portfolio) and light industrial premises acquired
by MStar fromTamar Capital (Phoenix portfolio).There were seven
transactions in the €50−100 million range, totaling €512 million,
(e.g., the acquisition by Etche and KKR of the Cloud portfolio and
the portfolio of three logistics platforms sold by Internos Global
Investors to CBRE Global Investors), compared with four in 2013
for a total of €230 million.
Solid performances in the industrial-property market reaffirm the
interest shown by the sector’s pure players. Attracted by higher
yields, US and UK funds (Blackstone, KKR, MStar, CBRE Global
Investors, etc.) were behind the largest deals in 2014.Their activity
explains the preponderance of foreign investment (60%) in total
investment in industrial assets.NorthAmericans accounted for 32%
of total acquisitions,particularly from German funds (SEB Immobilien
Investment) and French investors (Foncière des Régions). French
players were less active in acquisitions than in sales and accounted
for only 40% of total investment, primarily by property-investment
firms (Argan, Foncière Atland, Etche), SCPIs and OPCIs (Amundi,
BNP Paribas Reim, Corum AM), and private investors.
JANUARY 2015
INDUSTRIAL INVESTMENT ACTIVITY IN FRANCE
*Mixed-use asset
EXAMPLES OF RETAIL ACQUISITIONS IN 2014
TYPE PROPERTY LOCATION VENDOR PURCHASER PRICE (€M) AREA (M2
)
Gallery Portfolio (56 galleries) France Klépierre Carmila 1,400 −
Shopping center
Portfolio (6 shopping
centres)
France Unibail-Rodamco Carmila 931 128,000
Shopping center
centres)
France Unibail-Rodamco Wereldhave 850 202,500
Shopping center Beaugrenelle Paris (75015)
Gecina, SCI Pont
de Grenelle
Apsys, Foncière du Rond
Point, Financière Saint-James
700 50,000
High street retail Le Madeleine* Paris (75001) Blackrock NBIM 425 29,700
High street retail Chanel flagship store Paris (75008) Private Chanel 140 600
Shopping center Saint-Sébastien (75%) Nancy (54) Axa Real Estate Hammerson 130 24,000
High street retail Verano portfolio
Paris, Bordeaux,
Toulouse
Grosvenor
Syntrus Achmea / BNP
Paribas Reim
130 9,400
Shopping center
centres)
France Corio Seefar / KKR 104 55,300
High street retail Rossini* Paris (75009)
Inovalis, Pitch
Promotion
Aviva Investors 98 6,300
Shopping center Domus mall
Rosny-sous-
Bois (93)
Rabo Real Estate Orion Capital Managers 70 62,000
Gallery Grand Cap (extension) Le Havre (76) Immochan Amundi 50 (est.) 13,000
Retail park White Parc
Villennes-sur-
Seine (78)
Codic DeAWM 35 11,600
0,8
2,6
2,1
3,2
1,5
0,6
0,7
0,8
1,3
1,5
1,7
0%
20%
40%
60%
80%
100%
0
1
2
3
4
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Industrial investments (€bn) % of sums invested in industrial in France
16
**

INVESTMENT
EXAMPLES OF INDUSTRIAL ACQUISITIONS IN 2014
TYPE PROPERTY LOCATION VENDOR PURCHASER PRICE (€M) AREA (M2
)
Logistics Loren portfolio France Foncière des Régions Blackstone 380 619,000
Industrial park Phoenix portfolio France Tamar Capital Mstar 103 167,000
Light industrial Cloud portfolio France BNP Paris Reim Etche / KKR 87 (est.) 174,000
Logistics Portfolio Ile-de-France, Lyon Carval Investors IDI Gazeley 83 200,000
Light industrial Portfolio* France Groupe Elis
Foncière Atland,
Groupe Tikehau
80 267,000
Logistics
Maisons du Monde
turnkey scheme
Saint-Martin de Crau (13) Tristan Capital Partners Segro 69 116,000
Logistics Portfolio
Mer (41), Satolas & Saint-
Priest (69)
Internos Global Investors
CBRE Global
Investors
59 104,000
Assets and geographic distribution
Logistics accounted for €1.1 billion (65%) of total investment in
industrial assets in 2014. The logistics market received steady
demand for new and recent large platforms located for the most
part in large consumer populations and near major roads and
transport infrastructure.The four principal markets on the north-
south axis (Lille, Paris, Lyon, and Marseille) are the main recipients
of this activity (e.g., the acquisition by CBRE Global Investors of a
25,000 m² platform let to Rexel in Saint-Vulbas, and the sale to
Goodman of a 20,500 m² logistics platform at the Port of
Gennevilliers). Nonetheless, 2014 was also the year of light
industrial sites, whose volume grew 72%, a rebound due mainly to
several portfolios (Phoenix, Cloud, etc.) and to a few sale-and-
leaseback operations (sale by the Elis group of 17 assets totaling
270,000 m²).
YIELDS
Prime yields fell again in 2014, with Paris office and retail assets
paying 4% and 3.5% respectively.Yields also declined for assets in
several large tertiary sectors of the outer and inner suburbs
(Hauts-de-Seine, northern suburbs).
Interest rates also declined at the end of 2014, with three-month
Euribor rates averaging 0.08% in December. Yields of long-term
bonds (10-year FrenchTreasuries) fell below the symbolic threshold
of 1%, averaging 0.92% in December. Even though low interest paid
by government bonds and competition among investors combined
to accelerate the decline in yields, the return on property assets
remains largely superior to that of risk-free assets.
OUTLOOK FOR THE INVESTMENT MARKET
The economic outlook for France and the eurozone calls for only
slight improvement in 2015. Regulatory and fiscal uncertainty
incites prudence among investors, particularly occupiers hesitating
to embark on real-estate projects. However, the French property-
investment market is expected to remain buoyant. Strong demand
from investors already present in France, the steady arrival of
newcomers, and significant levels of available capital guarantee that
2015 will be a lively year, with volume well above the ten-year
average.
JANUARY 2014 JANUARY 2015
OFFICES
Paris (CBD) 4.25 4.00
Provinces (Lyons) 5.90 5.75
RETAIL
Shops 3.75 3.50
Shopping centres 5.00 4.50
Retail parks 6.00 5.75
INDUSTRIAL
Logistics 7.25 6.75
Light industrial 8.25 7.75
AVERAGE 5.77 5.43
PRIMEYIELDS IN FRANCE %
*Sale and leaseback / **Estimation
17
**

The office market in Ile-de-France recovered slightly in 2014, when
take-up was 15% higher than in 2013 but 8% lower than the ten-year
average.After a lively first half, market activity faded. Occupiers took
longer to make decisions, no doubt wary of the lackluster economy.
Other factors came into play, such as the uncertainty surrounding the
ACTPE bill and the extent of incentives offered by landlords.Although
lease negotiations may have deteriorated, occupiers ultimately
managed to upgrade their properties while lowering costs. These
factors explain the success of certain tertiary poles in the western
suburbs, where there is a supply of high-quality office assets that are
affordable and conveniently located.
OFFICES

JANUARY 2015
OCCUPIER DEMAND
Trends in take-up
In 2014, 2,010,003 m² of office space was let or sold to occupiers
2014, 15% more than in 2013 (1,743,102 m²). This volume is far
from the record performances of the mid-2000s and is 8% less than
the average of the past ten years (2,179,962 m²).The 9% rise in the
number of transactions should not be taken to suggest that market
conditions have improved.The 2,213 transactions recorded in 2014
represent the second-worst performance in a decade, better only
than 2013.What’s worse,the traditional motor of large transactions
seems to have stalled. Only 74 deals of more than 4,000 m² were
recorded in 2014, compared with 66 in 2013 and 89 over the past
ten years. Large transactions totaled 911,730 m² in 2014 and
accounted for 45% of total take-up, compared with 41% in 2013.
Except for the project developed by Veolia in Aubervilliers, large
turnkey transactions were almost nonexistent in 2014, as in the
previous year.Such operations were what drove volume during the
period 2009−2012 (Crédit Agricole in Montrouge, Thales in
Gennevilliers, Carrefour in Massy, SFR in Saint-Denis, etc.).
Sales to occupiers were not enough to revive market activity. Even
with the completion of large deals, such as the 45,000 m² acquired
by Safran in Châteaufort or the acquisition by SMABTP of its new
headquarters in the 15th
arrondissement, transaction volume of
office assets declined by 14% year on year, mainly because of the
collapse of small and medium-sized transactions. The historically
low level of interest rates and the safe-haven status of property
investment were not enough to compensate the wait-and-see
attitude of very small enterprises and SMEs. Smaller companies
often face financing problems,which can prove fatal when combined
with high prices in real estate in certain parts of the Paris region
and with the unreasonable expectations of sellers.
Trends in take-up according to supply quality
In 2014, occupiers showed an increased appetite for large
refurbished office complexes, which allowed many companies to
lower costs without compromising on the quality of assets or
locations. Such transactions accounted for 24% of total take-up of
more than 4,000 m²,compared with 14% in 2013.The success of this
type of transaction enlivened several large business sectors in the
western suburbs, such as the WBD (Henner at 14 boulevard du
Général Leclerc in Neuilly-sur-Seine, SNCF-Geodis in Espace Seine
in Levallois-Perret) and La Défense (Dalkia in theTour Europe).
TAKE-UP IN ILE-DE-FRANCE (M²)
1 937 638
2 049 452
2 791 622
2 656 443
2 357 403
1 752 665
2 091 864
2 321 082
2 098 351
1 743 102
2 010 003
44% 43%
51%
42% 49%
45%
51% 45% 50%
41%
45%
2 317
2 498
2 893
3 306
2 784
2 314 2 264
2 590
2 271
2 033
2 213
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Take-up (m²) Take-up > 4,000 m² (share in %) Number of deals
BREAKDOWN OF TAKE-UP ACCORDING TO SUPPLY
QUALITY*
64% 61%
69% 67%
77%
65% 66% 66% 67%
73%
64%
12% 21%
15%
27%
13%
23%
15% 11%
15%
14%
24%
24%
18% 16%
6% 10% 12%
19% 23%
16%
13% 12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
New-Redeveloped Refurbished Second-hand
Tour Europe – La Défense (92)
20
*Transactions of more than 4,000 m2
.

The increase in the proportion of refurbished buildings automatically
lowered the share of new and redeveloped buildings. Nonetheless new
and redeveloped buildings remain by far the most sought after and still
account for 64% of take-up of more than 4,000 m² (73% in 2013).Related
to the completion of several turnkey projects (Veolia in Aubervilliers,
Eiffage inVélizy,etc.),the success of this property type is also due to early
lettings of large complexes of more than 20,000 m², such as the letting by
the Ministry of the Interior of the Garance building in the 20th and
L’Oréal’s letting of Ecowest in Levallois. Several office projects in
conjunction with new or continuing urban-development projects have
also been successful: the second phase of Le Trapèze in Boulogne-
Billancourt (Carrefour Property in Ardeko) and the ZAC Clichy-
Batignolles (Klesia in Rezo and Strato), Rungis (Mutuelle Générale in
Pushed Slab), and Rive Gauche (SNI in A9B) projects in Paris.
Occupier strategies
Those counting on recovery of the French economy in 2014 were quickly
disillusioned.The absence of growth, estimated by INSEE at 0.4% for the
year, brought further job destruction and persistent unemployment to
Ile-de-France.
Under the circumstances, the low number of expansion projects was
unsurprising. Comprising only 6% of transactions of more than 4,000 m²
in 2014, the few expansion projects were usually in dynamic sectors such
as new technologies (Aldebaran Robotics in Nouvel Air in Issy-les-
Moulineaux, Salesforce in Alcatel’s former headquarters on 3 avenue
Octave Gréard in the 7th
). Market transactions revealed that the trend
was for businesses not to lease additional office space, but to consolidate
and streamline sites in order to cut costs and protect profitability. Such
transactions accounted for 88% of total take-up of more than 4,000 m² in
2014. However, the cost per work station is by no means the only factor
taken into consideration for relocation, as demonstrated by the very
small number of relocations outside the center of the Paris region and by
the very small number of lettings of large secondhand complexes.
Études & Recherche Cushman & Wakefield
OFFICES
49%
39%
6%
3% 3%
Consolidation
Cost-Cuttings
Extension
Merger
Other
TAKE-UP (> 4,000 M²) ACCORDING TO REASON FOR
RELOCATING
24%Proportion of
refurbished office
space in total take-
up > 4,000 m² in
2014
(14% in 2013)
21

JANUARY 2015
Companies are applying a more global approach to their real estate,
with which they endeavor to raise the productivity of their teams,
to improve their corporate image, and to attract the most talented
workers. As a result, human factors are taken into greater
consideration and human resources plays a larger role.The work
space, neighborhood, and convenient access all take on a new
importance for the company.
Some occupiers have taken advantage of mergers to regroup their
teams in Paris (Klesia in Rezo & Strato, Paris 17th
, Public System/
Hopscotch at 23−25 rue Notre-Dame-des-Victoires, Paris 2nd
) and
others have moved towards the city center (Wolters Kluwer in
Colisée IV). By contrast, some companies have gone the other
direction, eliminating numerous smaller sites in favor of large office
complexes that are farther away but of higher quality, like the new
Veolia headquarters in Aubervilliers and the La Mutuelle Générale
headquarters in the 13th
(Pushed Slab). Decisions by companies to
leave the CBD were relatively numerous in 2014 and have become
symbolic of a new, opportunistic approach to real estate and to the
compromises required by relocation. Moves from prestigious,
centrally located neighborhoods were compensated by lettings of
efficient, less expensive office space with a desirable address
(Groupe Henner and Groupe M in Neuilly, Fimalac/Webedia in
Levallois, Fromageries Bel in Suresnes, Euronext in La Défense) and
sometimes in Paris (Ministry of the Interior in the Garance building).
Take-up according to geographical sector
The Paris office market experienced uneven results in 2014. At
676,526 m², the volume of take-up in Paris was 11% higher than in
2013 but 12% lower than the average of the past ten years.
Activity was especially erratic in the CBD. More than half of the
11 transactions of more than 4,000 m² completed in 2014 were
made in the first quarter of the year.The year began brilliantly with a
cascade of decisions made by occupiers wishing to benefit from
restructurings and to optimize their office space (Cheuvreux at
55 boulevard Haussmann, Clifford Chance at 1−5 rue d’Astorg).
However, this momentum ground to a halt after the first quarter.A
few significant lettings aside (Fast Retailing in Louvre Saint-Honoré,
Generali at 2−4 rue Pillet-Will), cautiousness once again came to
dominate occupiers’ real estate decisions.When confronted with the
end of a lease,some companies,including several large Paris law firms
(Linklaters, De Pardieu Brocas Maffei, etc.), preferred to renegotiate
than to relocate.Furthermore,the slowdown in large properties was
not compensated by recovery in activity among SMEs, which are
more exposed to economic difficulties. In 2014, SMEs tended not to
relocate; transactions of less than 4,000 m² were significantly below
the average of the past ten years (−10%).
Other sectors besides the CBD suffered above all from a lack of
quality office properties. For example, the 7th
arrondissement saw
only one large transaction in 2014, the letting by Salesforce of
Alcatel’s former headquarters at 3 avenue Octave Gréard.Lettings of
office space of more than 4,000 m² were almost inexistent in the 7th
after the absorption of a few large redeveloped complexes
(103 Grenelle, 23−25 rue de l’Université, Laennec, etc.). Such
weakness was in contrast with the liveliness of sectors just beyond
the city center. Large transactions in a few designated development
zones (SNI in ZAC Rive Gauche, Klesia in ZAC Clichy-Batignolles,
Pushed Slab in ZAC Rungis) and in certain mainly residential
neighborhoods (Ministry of the Interior in the Garance building) not
only helped soften the fall in demand in Paris,but also illustrated the
office market’s trend to move away from business districts in central
Paris.
In western Ile-de-France, most activity resulted from relaxed lease
restrictions. Large companies took advantage of incentives offered
by landlords, which had a relatively abundant high-quality supply to
dispose of.
3 avenue Octave Gréard – Paris 7th
140 %
61%
35%
27%
21%
13%
- 2%
- 6%
- 26% - 38%
- 42%
- 150 %
- 100 %
- 50 %
0 %
50 %
100 %
150 %
LaDéfense
ParisRiveGauche
NorthernSuburbs
WBD
Other
ParisCentreEst
ParisCBD
SoutwesternSuburbs
EasternSuburbs
BoucledeSeine
SouthernSuburbs
TRENDS IN TAKE-UP ACCORDING TO GEOGRAPHIC
SECTOR, BETWEEN 2013 AND 2014 (%)
22

OFFICES
OCCUPIER MOVED TO BUSINESS SECTOR AREA (M²)
Ministry of the Interior Paris 20 | Paris Centre Est Public Sector 26,200
Fromageries Bel Suresnes | WBD Manufacturing-Distribution 16,500
Groupe Henner Neuilly | WBD Banking-Insurance 12,800
Fimalac/Webedia Levallois | WBD Communication 12,000
Groupe M Levallois | WBD Communication 12,000
La Française AM Paris 6 | Paris Rive Gauche Banking-Insurance 10,000
Euronext Courbevoie | La Défense Banking-Insurance 10,000
Salesforce Paris 7 | Paris Rive Gauche IT 5,500
Hi Media Paris 12 | Paris Centre Est IT 3,500
Groupon Courbevoie | La Défense IT 3,500
Open Levallois | WBD IT 3,000
OCCUPIERS WHO LEFT THE CBD IN 2014*
This trend is particularly visible in theWBD, which had its best year
since 2008.Of the 336,830 m² let in theWBD,58% comprised areas
of more than 4,000 m².The geographic distribution of take-up was
inconsistent, however. Levallois-Perret alone accounted for 43% of
the m² let or sold to the sector’s occupiers. With lettings of
145,867 m²,Levallois reached an all-time high.Five buildings of more
than 4,000 m² were let: new/refurbished supply allowing long-
standing occupiers to modernize their office space and regroup
their teams (L’Oréal in Ecowest and So Ouest Plaza), and large
refurbished headquarters with competitive rental values attracting
companies from other municipalities (SNCF-Geodis in Espace
Seine, Fimalac/Webedia in Le Libertis). Other municipalities of the
WBD saw significant transactions. In Rueil-Malmaison, Ingerop and
Amex Voyages let the remaining available space of Green Office II,
and Neuilly had its best year since 2004.The arrival or return of
large redeveloped complexes (Groupe M in Silvergreen) and
refurbished buildings (Groupe Henner at 14 boulevard du Général
Leclerc) attracted large Parisian occupiers to Neuilly.
After a very bad year in 2013—the worst in a decade—the La
Défense market has also returned to the forefront. With
231,933 m² let in 2014, La Défense almost broke its 2001 record,
ending the year at a level similar to those of 2006 and 2008.In 2014
there were thirteen transactions of more than 4,000 m² for a total
of 171,925 m²,or 74% of the sector’s total take-up.The SME segment
was also lively. Take-up for office assets of less than 4,000 m²
increased by 31% in 2014 and reached its highest level since 2007.
Discounts granted by landlords played a vital role and explain the
rapid absorption of a large, diversified supply that provides
opportunities for companies in La Défense aiming to expand (Ernst
&Young in First) or to regroup their employees while modernizing
their site (KPMG in Eqho, HSBC in Cœur Défense, AXA IM in
Majunga). La Défense’s increased attractiveness to occupiers of
other business sectors served to heighten the sector’s capacity to
retain occupiers.The success of La Défense new offers confirmed
the validity of the sector’s renewal plan.For example,Thales’s letting
of part of Carpe Diem provides the company with a prestigious,
modern site that is both energy efficient and comfortable. La
Défense has also attracted companies located in neighboring towns
of the Hauts-de-Seine department and in Paris that are looking for
flexible, inexpensive, and central locations (e.g., Euronext in
Praetorium, Dalkia in the Tour Europe, and Tarkett in the Tour
Initiale).
Unlike the WBD and La Défense, most emerging districts of the
inner suburbs played a minor role in 2014, despite an economic
context favorable for occupiers looking to lower costs.The success
of La Défense, as well as efforts made by landlords, compromised
*Transactions in 2014
23
Carpe Diem – La Défense (92)

performances in the Boucle de Seine, where take-up was at its
lowest since 2005. For the first time since 2000, there were no
transactions of more than 4,000 m². Activity came mainly from
lettings of office space in rather recent buildings that offer
competitive occupancy costs (Front Office and O² in Asnières).All
was quiet in the office market of the inner eastern suburbs too,
where quality supply is scarce. On the other hand, the northern
suburbs performed well. With take-up of 160,643 m² (inflated by
Veolia Environnement’s new 45,000 m² headquarters in
Aubervilliers), performances were in line with those of the past ten
years. However, lettings may slow over the next few months as a
result of the limited supply of new office space in Saint-Denis and
the absorption of renovated large complexes in Saint-Ouen
(Mondial Assistance in Eurosquare II).
Take-up by business sector
The public sector, banking and insurance, and manufacturing and
distribution continued to dominate activity in 2013 and accounted
for 75% of total take-up greater than 4,000 m2
in Ile-de-France,
compared with an average of 71% for the period 2004−2013.
The share of the public sector fell significantly, from 25% in 2013 to
9% in 2014. In its worst performance since 2001, the public sector
originated only six large transactions, totaling less than 80,000 m².
These transactions were mostly in Paris, which accounted for 80%
of public-sector volume, thanks to two transactions of more than
20,000 m²: the letting by SNI of A9B in the ZAC Rive Gauche and
the letting by the Ministry of the Interior of the Garance building in
the 20th
,another example of the government trend to relocate from
the west to the east of Paris. Prior relocations were the Ministry of
the Interior to 35,400 m² in Le Lumière (Paris 12th
) and the
construction for the Ministry of Justice of a 32,000 m² building in
the Parc du Millénaire (Paris 19th
). By contrast, transactions by local
governments were inexistent, except for the Région Ile-de-France’s
letting of more than 6,000 m² in the Nord Pont building because of
the need to relocate employees from theTour Montparnasse.After
the municipal elections in 2014,departmental and regional elections
may slow public-sector relocations in 2015,despite the State’s need
to downsize its property portfolio.
The dominant players in the 2014 office market were occupiers in
the manufacturing and distribution sector, accounting for
24 transactions of more than 4,000 m² and 38% of total take-up,
compared with 22% in 2013.As usual,occupiers in the manufacturing
and distribution sector were also behind the largest transactions in
Ile-de-France, with four transactions greater than 30,000 m²
(including two lettings by L’Oréal from Ecowest and from So Ouest
Plaza in Levallois).In 2014,the cosmetics giant also let the remaining
available space in Nuovo in Clichy after letting 25,000 m² there the
year before.This activity was part of L’Oréal’s strategy to restructure
its property portfolio in Ile-de-France, after the construction of a
new R&D center in Saint-Ouen in 2012 and the development of a
vast logistics platform recently completed north of CDG airport.
Like occupiers in the manufacturing-distribution sector,occupiers in
the banking-insurance sector saw their share in total take-up rise
year on year (from 25% in 2013 to 28% in 2014),while total volume
of more than 4,000 m² grew an impressive 50%.Some French banks
were particularly active. After beginning expansion work of its
Montrouge and Guyancourt campuses in 2013, Crédit Agricole let
several more large properties, thereby consolidating its leader
position among large occupiers over the past five years (see table
next page). The banking sector also stood out in 2014. Several
transactions confirmed the status of La Défense as a financial center,
including consolidations (HSBC in Cœur Défense) and arrivals of
companies previously in Paris and elsewhere (Euronext in
Praetorium,Banque de France in Eqho).Except for Groupe Henner,
whose decision to relocate from the CBD to Neuilly lengthened
the list of departures since 2011 (Allianz and Euler Hermès to La
Défense,Apria RSA to Montreuil), insurance companies and private
health insurers (mutuelles) remained in Paris in 2014 (Klesia in the
17th, Generali and Covéa in the 9th
, La Mutuelle Générale in the
13th), thereby reaffirming their attachment to the Paris market in
which they are long-time participants.
JANUARY 2015
TAKE-UP (> 4 000 M²) ACCORDING TO BUSINESS SECTOR
9%
28%
9%
10%
38%
2% 4%
Public Sector
Banking-Insurance
Communication
Advisory
Manufacturing-Distribution
IT
Services
TAKE-UP IN LA DÉFENSE (M2
)
107 437
214 328
233 349
214 602
232 498
156 106
145 925
108 634
158 804
96 509
231 933
79%
77% 68% 70%
77%
81%
66%
51%
79%
53%
74%
0
50 000
100 000
150 000
200 000
250 000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Take-up (m²) Take-up > 4,000 m² (share in %)
24

Large consulting and legal firms also continued to favor the CBD
(DLA Piper in Laffitte-La Fayette, Clifford Chance at 1−5 rue
d’Astorg, McKinsey & Company at 90 Champs-Élysées) and La
Défense (KPMG dans Eqho). A few companies reinforced the
communications cluster in the southwestern suburbs (Solocal in
CityLights in Boulogne) as well as theWBD (Groupe M in Neuilly).
RENTALVALUES
Prime rental values in Ile-de-France stood at €750/m²/year at the
end of 2014, down 1% year on year. This slight decline was due
mainly to the small number of transactions for new and redeveloped
Parisian buildings (McKinsey & Company at 90 Champs-Élysées,
OlivierWyman at 1 rue Euler,Holman FenwickWillan in theAstorg).
The growing scarcity of such supply forced occupiers in business
sectors with high added value (e.g., consulting, finance, new
technologies) to consider high-quality renovated office space,
whether for consolidation or expansion, which allowed them to
preserve an address in one of Paris’s most prestigious neighborhoods
(Clifford Chance in the 8th
, Salesforce in the 7th
).
Yet the market for prestigious assets is far from representative of
the trends observed in the rest of Ile-de-France, where more than
ever a diversity of rental values is the rule.Values may vary widely
within the same business sector, depending on a given building’s
location, its fundamental quality, and the owner’s letting strategy.As
a general rule,incentives have played a critical role in tenant-landlord
relations, with landlords granting more generous rent-free periods.
Occupiers are able to use negotiation tactics to their advantage,
widening the gap between headline rents and economic values.
Some landlords displayed increasing flexibility in order to retain
their tenants.
Unless the economy shows more strength, or unless demand
increases significantly with faster absorption of supply, these factors
will continue to weigh on negotiation terms between landlords and
tenants in 2015.The recent adoption of the ACTPE bill should help
clarify relations between the two parties,particularly in terms of the
sharing of expenses, work, and taxes.
AVAILABLE SUPPLY
After reaching an all-time high in the first quarter of 2014
(4,426,621 m²), available supply within six months declined to
4,190,958 m² at the end of 2014.The 5% decline in the second half
of the year was related to the lack of large complexes on the market
and to the completion of several large transactions of more than
10,000 m².The vacancy rate in the Paris region stood at 7.8% at the
end of 2014,well below levels of other major European cities (10.1%
in Brussels, 11.4% in Frankfurt, 14.9% in Milan, etc.) with the
exception of Central London.
OFFICES
*Only one transaction during the period.
LARGEST OCCUPIERS IN THE PERIOD 2009−2014
M² OF OFFICE LET OR SOLD FOR OWN USE
RANK OCCUPIER BUSINESS SECTOR
1 Crédit Agricole Banking-Insurance
2 Thales Manufacturing-Distribution
3 SFR IT
4 France Telecom/Orange IT
5 BNP Paribas Banking-Insurance
6 Carrefour Manufacturing-Distribution
7 SNCF Public Sector
8 BPCE Banking-Insurance
9 L’Oréal Manufacturing-Distribution
10 EDF Manufacturing-Distribution
PRIME RENTALVALUES BY GEOGRAPHIC SECTOR
(€/M²/YEAR)
753
680
498 488
463
429
310
292
310
257
746
667
511
478
450
426
305
290 287
240
0 €/m²
100 €/m²
200 €/m²
300 €/m²
400 €/m²
500 €/m²
600 €/m²
700 €/m²
800 €/m²
Paris CBD Paris Rive
Gauche
La Défense WBD Southwestern
Suburbs
Paris Centre
Est
Northern
Suburbs
Boucle de
Seine
Southern
Suburbs
Eastern
Suburbs
2013
2014
SUPPLY ANDVACANCY RATE IN ILE-DE-FRANCE (M2
)
3413681
3133113
2794676
3290764
4103109
4066053
3720902
3869380
4367965
4190958
57%
54%
54%
56%
58% 58%
57% 57%
57%
54%
25%
20% 25%
30%
27% 25%
24% 23%
25% 25%
7,1
6,5
5,7
6,6
8,0 7,9
7,1
7,4
8,2
7,8
0,0 %
1,0 %
2,0 %
3,0 %
4,0 %
5,0 %
6,0 %
7,0 %
8,0 %
9,0 %
0
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
3 500 000
4 000 000
4 500 000
5 000 000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total supply Supply > 4,000 m² New-redeveloped supply (all sizes) Vacancy rate
*
25

Recent months have done nothing to reduce the large differences among
the various tertiary poles in Ile-de-France. While the market in Paris
proper remains relatively undersupplied,especially outside the CBD,there
are abundant and diverse solutions in a few markets in the western
suburbs, such as the Boucle de Seine (vacancy rate of 14.1%) and the
WBD (12.2%).Available supply within six months also remains high at La
Défense,well above precrisis levels (+234% from levels observed in 2008).
This is the result of both releases and deliveries of large new and
redeveloped complexes. Nevertheless, La Défense’s 12% vacancy rate is
considerably lower than it was at the end of 2013 (14.1%).
In La Défense as in the rest of Ile-de-France, a decline in supply quality
logically paralleled the faster absorption of new and redeveloped assets in
2014.On a regional scale,the proportion of such assets accounts for only
25% of total available supply within six months, and in Paris intra muros
this figure falls to only 14%.Volume of renovated supply was stable (+2%
year on year) after the 30% rise between the end of 2010 and the end of
2013.
OUTLOOK FOR FUTURE SUPPLY
Paris: high-quality supply limited in the short term
Unsurprisingly, it is in Paris’s most prestigious neighborhoods that supply
is most limited. Since the partial letting of 1 rue Euler, redeveloped supply
to 2016 of more than 10,000 m² in the area around Etoile has dwindled
to 3−5 Friedland. Once this offer has been absorbed—and given the lack
of alternatives in the 7th
arrondissement—the most captive occupiers in
the 8th
arrondissement will increasingly turn to lease renegotiation.The
scarcity of redeveloped supply should encourage the absorption of the
highest quality secondhand supply in the CBD, primarily the 13,500 m² of
Capital 8 and the 15,000 m² released by Clifford Chance in Vendôme-
Saint-Honoré. For occupiers less concerned with a prestigious address,
other solutions exist,mainly in Paris’s financial district.Two redevelopment
projects of more than 10,000 m² will become available in 2015: the
27,000 m² of #Cloud and the 24 Drouot building. However, there should
JANUARY 2015
FUTURE SUPPLY TO 2017
1 101 619
443 320 406 713
88 524
1 417 205
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2015 2016 2017
Volume of likely future supply > 10,000 m²
Volume of secure future supply > 10,000 m²
Average take-up >10,000 m² over the past 5 years
1 101 619
443 320 406 713
88 524
1 417 205
0
200 000
400 000
600 000
800 000
1 000 000
1 200 000
1 400 000
1 600 000
1 800 000
2 000 000
2015 2016 2017
Volume of likely future supply > 10,000 m²
Volume of secure future supply > 10,000 m²
After 750,000 m² in 2013, office deliveries in 2014 in Ile-de-
France totaled just over 800,000 m². Slightly more than one-
third of total volume was in the WBD and La Défense, while
62% comprised partially or wholly pre-let offices (Majunga in La
Défense, Green Office II in Rueil, Pushed Slab in Paris, etc.) and
large turnkey campuses (first tranche of new SFR headquarters
in Saint-Denis, new Carrefour headquarters in Massy, etc.). In
2015, completions are expected to rise considerably, to near
the record level of 2009 (1.3 million m²). However, the market
will not be flooded with empty office space. Only 30% of the
1.2 million m² expected this year is still available.This volume
includes several large turnkey projects: the Ministry of Defense
in Balard, Eole building at Evergreen in Montrouge, renovation
for Sanofi in Gentilly, and the second tranche of SFR’s new
headquarters in Saint-Denis. In addition, a few large complexes
were pre-let in 2014, such as CityLights in Boulogne (Solocal),
So Ouest Plaza in Levallois (L’Oréal), and the Garance building
(Ministry of the Interior) in the 20th
.After 2015, opportunities
will become even scarcer. Of the 575,000 m² currently under
construction for estimated delivery in 2016, less than
200,000 m² is still available (10 Grenelle in Paris, White in
Montrouge, etc.).
Focus on construction
activity in Ile-de-France
26

OFFICES
be a greater number and range of solutions as from 2016,the result
of significant releases by long-standing occupiers of the CBD such
as insurers in the Grands Boulevards district (Generali on boulevard
Haussmann, Allianz on rue Richelieu) and the public sector in the
area around Gare Saint-Lazare (SNCF).Two iconic redevelopment
projects under way in the 1st
arrondissement, the Samaritaine and
the Poste du Louvre, will add to this supply.
Concentrated in just a few arrondissements,this significant potential
may encourage landlords to stagger their project launches. The
quality of certain programs, the overall improvement of the eastern
part of the CBD (redevelopment of the Samaritaine, improvement
of the Halles neighborhood, shopping center at the Gare Saint-
Lazare, etc.) and the shortage of space in western Paris will
undoubtedly make the financial district one of the main drivers of
the Paris market in the years to come.The CBD will also profit from
the maturing of the Clichy-Batignolles sector.The rapid absorption
of Rezo et Strato and the early interest shown by occupiers in
future supply to 2017 confirm the success expected of this
neighborhood by Parisian businesses, despite the postponement to
2019 of the extension of the Metro line 14. The ZAC Clichy-
Batignolles may also provide a Paris address to companies from
nearby towns such as Levallois-Perret and Neuilly-sur-Seine, where
a large supply of high-quality assets was partially absorbed in 2014.
As in the CBD,large,high-quality office space remains very scarce in
the Paris Centre Est and Paris Rive Gauche sectors. In the 7th
arrondissement the shortage of supply could be long term. Other
Left Bank arrondissements, by contrast, could return to more-
balanced market conditions as early as 2015.In the 15th
,high-quality
supply will come to market over the next few years because of
opportunities created by redeveloped assets in centrally located
sectors (10 Grenelle,43−45 quai de Grenelle) and by the completion
of large programs planned around the Maréchaux inner belt
(Quadrans). The variety of supply could attract a wide range of
occupiers from more or less prestigious neighborhoods of Paris and
allow them to consolidate their teams while upgrading their office
space.This same approach will also likely lead to the success of new
supply gradually developed as from 2016 in the ZAC Rive Gauche,
the Austerlitz and Tolbiac sectors (Panorama, Eléments,Austerlitz),
and, in the longer term, Masséna-Bruneseau (Duo).
The depth of supply in the pipeline for Paris Rive Gauche contrasts
with the chronic shortage in Paris Centre Est, where high-quality
supply comprises mainly occasional redevelopment transactions in
centrally located residential neighborhoods (Parisquare in the 11th,
Archives in the 3rd
) as well as new development projects in
peripheral arrondissements.Tempo and Parc du Millénaire 4 should
benefit from the maturing of large urban development zones, the
arrivaloflargeresidentialandretailprograms,andtheimplementation
of the Rosa Parks RER E station.Although highly valued by occupiers,
the Gare de Lyon district, with its ageing, energy-inefficient office
buildings, will not see new supply before at least 2017.
La Défense: less supply in the medium term
Although La Défense remains one of the best-supplied markets in
Ile-de-France, there is little doubt that occupiers will be offered
fewer and less-diversified solutions in the medium term.As a result,
numerous large transactions, both recent and imminent, are sure to
absorb a large part of inventory before new and redeveloped assets
can replenish stock (at the end of 2017 at the earliest), and before
the marketing of supply such as the 50,000 m² Tour Trinity. Until
then, La Défense will likely remain one of the key driving forces of
the Ile-de-France office market, mainly because of the availability of
high-quality programs,whether new (D2 and the remaining availably
supply of First, Majunga, and Carpe Diem), refurbished, or
secondhand (Cœur Défense).
As long as its lease terms remain attractive, La Défense should be
able to retain tenants and lure companies from sectors such as
Paris, where supply is scarce, expensive, and relatively inflexible.
Some of La Défense’s best available space may also be an alternative
for occupiers from established parts of the WBD, such as Levallois
and Neuilly, where supply largely dried up in 2014 except for a few
quality assets (Alegria in Neuilly).
Supply at La Défense remains abundant and diverse, creating
competition with Boulogne-Billancourt and Issy-les-Moulineaux
even if transactions in 2013 and 2014 reaffirmed that both towns
generally command loyalty among occupiers (Solocal in Citylights,
Boursorama inYou).However,supply of new and redeveloped office
space of more than 10,000 m² is increasingly hard to find in either
of those towns. The only three offers that will be available in
Boulogne for this category of office asset before the end of 2016
3-5 Friedland – Paris 8th
27

are the 33,000 m² of In & Out, the 15,800 m² of Kinetik (the first
project completed with Ardeko for the second phase of Trapèze),
and the 10,800 m² of Cristallin.The lack of supply may seem even
more pronounced in Issy, where new and redeveloped stock now
accounts for only 10% of the town’s total inventory.However,supply
greater than 10,000 m² will be assured in the short and medium
term by a few redevelopment projects (Lemnys) and by releases of
large complexes (Sequana, former Coca-Cola headquarters). In
addition to available supply in Boulogne in theTrapèze sector and on
Ile Seguin, there are several potential development projects in Issy
(e.g., office towers overlooking the Seine). By attracting large
companies within the sector, such deals could provoke releases and
further widen the gap with energy-inefficient secondhand assets.
Are market conditions favorable to alternatives?
The competitive pressure from established markets towards
alternative markets is expected to remain intense, at least in the
short term. For example, several refurbished or secondhand assets
in La Défense (Between, Pacific, etc.) could be made available to
occupiers of nearby less established business sectors. Such tertiary
poles would provide lower costs as well as a more prestigious
address. On the other hand, incentives granted by landlords, the
quality of supply, and improved local conditions of certain towns
could allow someWBD buildings (Green Office Spring in Nanterre)
and Boucle de Seine supply close to La Défense (West Plaza in
Colombes, Défense Autrement in La Garenne Colombes) to
outperform after a lackluster 2014.
Other emerging districts could become more attractive. Some
towns of the southern Hauts-de-Seine department enjoy a positive
image,significant new and inexpensive supply,and easy access thanks
to the extension of the Métro line 4 and tramway line 6.The markets
in Montrouge (Fairway, White) and Chatillon (Area Prima) are
emerging as potential cost-efficient options for occupiers of more
established, undersupplied tertiary sectors nearby, such as Paris’s
southern districts and Issy-les-Moulineaux. A few sectors in
southern Ile-de-France, farther out but less expensive, should also
eventually profit from better accessibility. Bagneux, which saw a
couple of large transactions in 2014 (Neopost in Résonance,
Sonovision in Aristide), is an example of significant development
potential closely tied to the completion of major development
projects (ZACVictor Hugo) and to the extension of the Métro line
4. Improved public transportation is a significant selling point.
Although far from confirmed, the extension of the Métro line 10 to
Ivry-sur-Seine is under study and could encourage long-term
development of business sectors on the site of the former BHV
warehouses.
Other sectors to the north and east could provide in the shorter
term a natural alternative for occupiers aiming to cut costs and
benefit from proximity to a Métro station.Such is the case for high-
quality supply in northern Hauts-de-Seine (Pointe Métro 2 in
Gennevilliers) and for certain towns in Seine-Saint-Denis. Bobigny
(Ecocité), for example, benefits from the scarcity of high-quality
supply in Saint-Denis,where only one new building (Coruscant) will
be available by the end of 2015.These towns could also profit from
the decline in opportunities in Saint-Ouen, where the future supply
of new and redeveloped assets of more than 10,000 m² by 2016 is
mainly in the form of a 13,600 m² development project at the
former CRIT headquarters just outside Paris. Finally, the eastern
suburbs comprise the alternative market with the least supply in
Ile-de-France.With the launch of Altaïs Evolution in Montreuil still
pending, this sector can offer only one building of more than
20,000 m² (Tour 9 in Montreuil) over the next two or three years.
OUTLOOK
Given modest economic growth and the numerous possibilities
available to companies for streamlining their office space, several
trends observed in 2014 are expected to continue in the months
ahead. The year 2015 could be one of transition before more
significant recovery in 2016. Until then, the increasing scarcity of
new and redeveloped stock should whet corporate appetites for
large,high-quality refurbished spaces and could even,in sectors with
the least supply,begin rebalancing the inequalities between landlords
and occupiers.
JANUARY 2015
Tour D2 – La Défense (92)
28

OFFICES
29
THE ILE-DE-FRANCE OFFICE SUBMARKETS
Boulevard Périphérique
I
II
III
IV
V
VI
VII
VIII
IX X
XI
XII
XIIIXIV
XV
XVI
XVII
XVIII
XIX
XX
Arcueil
Gentilly Le
Kremlin
Bicêtre
Cachan
Ivry-sur-Seine
Villejuif
Charenton-
le-Pont
Vincennes
Fontenay-
sous-Bois
Nogent-
sur-Marne
St-
Mandé
Champigny-
sur-Marne
St-Denis
St-Ouen
Tremblay-
en France
VillepinteAulnay-
sous-Bois
Le Blanc-
Mesnil
Le
Bourget
Drancy
Rosny-
sous-Bois
Neuilly-
Plaisance
Neuilly-sur-
MarneMontreuil
Bagnolet
La Courneuve
Aubervilliers
Pantin
Les Lilas
Le Pré-
St-Gervais
Noisy-le-
Grand
Villeneuve-
la-
Garenne
Colombes
La Garenne-
Colombes
Bois-
Colombes Asnières-
sur-
Seine
Courbevoie
Rueil-
Malmaison
Suresnes
Puteaux
Clichy
Paris
Levallois-
Perret
Neuilly-
sur-Seine
Saint-
Cloud
Boulogne-
Billancourt
Issy-les
Moulineaux
Sèvres
Meudon
Châtillon
Vanves
Malakoff Montrouge
Bagneux
Roissy-
en-France
Bobigny
Nanterre
LaSeine
La
Défense
Gonesse
Bezons
Southwestern Suburbs
Southern Suburbs
Western Business District (WBD)
Eastern Suburbs
Boucle de Seine
Northern Suburbs
Paris CBD
Paris Rive Gauche
Paris Centre Est
La Défense
SUBMARKET TAKE-UP (M2
) PRIME RENT(€/M2
/YEAR) VACANCY RATE (%)
2014 2013 2014 2013 2014 2013
PARIS CDB 398,636 404,813 746 753 7.9 7.7
PARIS CENTRE EST 121,476 107,321 426 429 6.5 5.3
PARIS RIVE GAUCHE 156,414 97,427 667 680 5.7 5.3
LA DÉFENSE 231,933 96,509 511 498 12 14.1
WBD 336,830 265,934 478 488 12.2 13.4
BOUCLE DE SEINE 36,717 58,929 290 292 14.1 17.1
SOUTHWESTERN SUBURBS 160,312 170,566 450 463 11 10.3
EASTERN SUBURBS 34,637 46,956 240 257 7.7 7.4
NORTHERN SUBURBS 160,643 119,297 305 310 7.2 7.6
SOUTHERN SUBURBS 76,292 131,310 287 310 10.1 9.4
OTHERS SUBMARKETS 296,113 244,040 234 248 5.1 6.0
TOTAL ILE-DE-FRANCE 2,010,003 1,743,102 750 753 7.8 8.2
ILE-DE-FRANCE OFFICE-MARKET INDICATORS
Gennevilliers

”
In 2014 in France, 2.24 million m² of warehouse space was leased or
sold to occupiers, a slight increase (+3%) year on year. As in 2013,
this volume was boosted by in-house logisticians of large distribution
retailers aiming to streamline and modernize their supply-chain by
means of large-scale turnkey operations. Several such operations
fueled the Paris and Lyon markets, which revived considerably after
a lackluster 2013. These two markets compensated for the uneven
performances of most other logistics centers in France.
LOGISTICS

JANUARY 2015
OCCUPIER DEMAND
Occupier strategies
Take-up in France rose slightly (+3% year on year) in 2014, totaling
2,240,000 m².This 9% improvement over the ten-year average was the
best performance since the beginning of the economic crisis, except for
that in 2011. Higher take-up volume also brought a 10% rise in the total
number of transactions. The largest transactions played an especially
important role. Ten transactions totaling nearly 530,000 m² (and each
larger than 40,000 m²) accounted for just under a quarter of total take-
up, confirming that consolidation remains a priority for occupiers. By
replacing several buildings with a smaller number of large platforms,
occupiers are able to lower their total warehouse footprint.
The strategy of lowering property costs is not the only factor that
explains the trend in the French warehouse market towards larger
spaces.When located near major highways, large port facilities, or at the
center of catchment areas, such large platforms allow occupiers to
optimize their transport costs while reducing the number of trucks on
the roads and improving their load rate. More generally these platforms
provide significant economies of scale that are not limited to real estate
(maintenance costs, salaries, etc.).As seen in 2014 in the development of
several turnkey schemes and expansion projects of existing warehouses
(Amazon in Lauwin-Planque, Carrefour in Saint-Vulbas, etc.), the larger
size of buildings is due mainly to the rapid growth of e-commerce and to
improved supply-chain efficiency of in-house logisticians in the retail-
distribution sector,resulting in the need for more employees,sophisticated
order-processing facilities, larger parking lots, and sufficient maneuvering
area for trucks.Occupiers’ desire for modern buildings is also attributable
to their need to adapt to changes in regulatory requirements (safety,
working conditions,and product traceability),to requirements concerning
delivery time, and to the search for greater productivity.
*
Transactions > 5,000 m² including turnkey and owner-occupied premises but excluding lease renewals.
450,000m²
TAKE-UP IN FRANCE (M²)
1500000
2000000
2200000
2600000
2600000
1600000
1760000
2400000
1800000
2170000
2240000
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
500000
1000000
1500000
2000000
2500000
3000000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Take-up in France (m²) Share of Ile-de-France (%)
Volume let by in-
house logisticians
of large food
retailers in 2014 in
France, compared
with 500,00 m2
in
2013.
32

LOGISTICS
Occupier profiles
The retail-distribution sector is at the cutting edge of logistics
technology and sophistication.Accounting for 45% of total take-up
in France in 2014, the sector’s in-house logisticians were behind
most turnkey schemes and almost all deals larger than 40,000 m².
As in 2013, large distribution retailers were very active in 2014:
Socara,E.Leclerc group’s global procurement operation,developed
a platform of 106,000 m² in Villette d’Anthon, near Lyon; Lidl built
a new warehouse of 40,000 m² in Rousset, near Marseille; and
Carrefour announced numerous new leases and development
projects as part of its Caravelle logistics-restructuring program. In
addition,Carrefour is expected to increase take-up in 2015.Several
sites have already been selected in various parts of France (Nîmes,
Bourges, etc.).These trends reveal the extent of the streamlining
strategies implemented in an environment of slower consumer
spending and a price war among retailers. Although designed to
better manage the regrouping of fresh, dry, and frozen products, as
well as the proliferation of sales channels that have emerged from
e-commerce and the rapid growth of click-and-collect grocery
pickup, the projects developed for large food retailers also devote
significant resources to information systems, automated features,
and mechanized processes.
Concerned about lowering real estate costs, managing growth of
online sales, and encouraging store-network development, other
categories of retailers launched major operations (La Foir’fouille in
Dourges,C&A near Meaux,Toys“R” Us in Saint-Fargeau-Ponthierry,
Orchestra in Lauwin-Planque, etc.).
Although industrial in-house logisticians experienced a decline in
business in 2014 (15% of total take-up in France, compared with
18% the previous year), logistics service providers enjoyed
significant business growth and accounted for 40% of total take-up
in 2014, compared with 30% in 2013 and 34% in 2012. The
operations of logistics service providers comprised not only large
development projects carried out on behalf of general service
providers (FM Logistic in Entraigues-sur-la-Sorgue), but also
numerous new leases of cross-dock facilities (UPS in Savigny-le-
Temple, Geodis near Nancy, etc.). The growth of online sales
boosted e-commerce logistics,as seen in operations carried out by
some of the sector’s major players:Alpha Direct Services in Evreux,
Rhenus Logistics near Chalon-sur-Saône, and Kiala in Savigny-le-
Temple.Logistics providers were nonetheless hurt by the economy
and saw trading volume decline.The precariousness of their service
contracts is reflected in the increasingly frequent use of short-term
leases intended to lower the risk of letting buildings that logistics
providers may not be able to occupy in the long term.
REGION CITY TENANT AREA (M²)
Rhône-Alpes Villette d’Anthon (38) Socara (Leclerc) 106,000
Ile-de-France Serris (77) Auchan 52,000
Ile-de-France Saint-Fargeau-Ponthierry (77) Toys “R” Us 48,000
Champagne Troyes (10) Petit Bateau 44,000
Nord-Pas-de-Calais Wattrelos (59) La Redoute 42,000
PACA Rousset (13) Lidl 40,000
Nord-Pas-de-Calais Lauwin-Planque (59) Orchestra 40,000
Ile-de-France Moussy-le-Neuf (77) Carrefour 36,800
Ile-de-France Villenoy (77) C&A 32,000
PACA Fos-sur-Mer (13) Tempo One 24,000
Bourgogne Sevrey (71) Rhenus Logistics 22,500
KEY LEASE TRANSACTIONS IN 2014
TAKE-UP ACCORDING TO OCCUPIER PROFILE
Logistics service
providers
40%
In-house logisticians
(retail distribution)
45%
In-house logisticians
(manufacturing)
15%
33

Take-up according to geographical sector
The four principal markets along France’s north-south axis (Lille,
Paris, Lyon, and Marseille) accounted for 68% of volume of
warehouse space let or sold to occupiers in 2014 in France,
compared with 58% in 2013.This rise conceals significant differences
between geographical sectors. In contrast with the decline in the
Lille and Marseille markets, Paris and Lyon enjoyed a strong rise in
business activity. These two markets accounted for 50% of all
warehouse space let or sold in France in 2014, compared to just
28% in 2013.
Nearly 700,000 m² was let in the Paris conurbation in 2014, a
staggering 59% more than in 2013, which was the weakest year of
the decade yet.Volume let was further inflated by the completion
of large turnkey projects, such as Auchan in Serris, C&A near
Meaux, and Toys “R” Us in Saint-Fargeau-Ponthierry. First launched
in 2013, these projects account for 38% of all warehouse space let
or sold in the Paris region, if smaller, early-stage projects (Relay
France and DHL in Roissy, Dachser inWissous, etc.) are also taken
into account. Illustrating the advantages of conveniently located
buildings with operating permits, leases of large existing buildings
also enlivened the market and allowed the absorption of new space
that had never been occupied (Carrefour in Moussy-le-Neuf) as
well as of secondhand assets placed on the market (ID Logistics in
Saint-Witz).The geographic distribution of take-up confirmed the
dominant position of major logistics centers in the Paris region.
After a glum 2013, the northern suburbs were awarded the largest
share (48%) as a result of numerous transactions at and near CDG
airport (Marly-la-Ville, Moussy-le-Neuf, and Saint-Witz). Southern
Ile-de-France accounted for 30% of take-up in 2014.With nearly
50,000 m² in Saint-Fargeau-Ponthierry,Toys “R” Us took the lion’s
share,but several medium-sized warehouse spaces were also let by
logistics providers. In the eastern suburbs, Marne-la-Vallée
continued to attract more and more interest.Conveniently located
and with abundant land opportunities, this region was chosen by
Auchan for its 52,000 m² platform designed to service more than
40 hypermarkets and drives. Like theToys “R” Us project,Auchan’s
development project illustrates the trend of in-house logisticians to
set up operations further afield, well away from conurbations.
With 420,000 m² let or sold to occupiers in 2014, take-up in the
Rhône-Alpes region doubled in 2014 year on year and was 21%
higher than the ten-year average. This excellent performance is
attributable mainly to the development of a platform of more than
100,000 m² for Socara inVillette d’Anthon.The project, the largest
in 2014,represented one quarter of all warehouse space let or sold
in the Lyon region in 2014. While not record breaking, the total
number of transactions was greater than in the previous year.Most
transactions were for existing buildings in the Rocade Est sector.
Because of a scarcity of available high-quality supply,markets in Lille
(220,000 m² let, an annual decline of 13%) and Marseille
(190,000 m² let, an annual decline of 46%) were quiet in 2014, with
relatively few transactions. However, take-up was boosted at the
end of the year by a few operations larger than 40,000 m².These
transactions served to confirm the vital importance of in-house
logisticians of the retail-distribution sector in both regions (La
Redoute with 42,000 m² inWattrelos,Orchestra with 40,000 m² in
Lauwin-Planque, and LIDL with 40,000 m² in Rousset, near
Marseille). Although the slowdown in business was especially
pronounced in Marseille, statistics for 2013 were skewed by a
platform of more than 100,000 m² developed for Maisons du
Monde in Saint-Martin-de-Crau.
At just over 700,000 m² in 2014, compared with 950,000 m² in
2013, take-up outside the four principal markets on the north-
south axis fell by 26% year on year. These poor results can be
explained mainly by the sharp decline in turnkey projects for in-
house logisticians (such projects had boosted business in 2013).A
few large deals were nonetheless finalized, including a new
50,000 m² platform developed for Carrefour in Bourges and a new
44,000 m² site launched for Petit Bateau in the Aube Logistics Park
inTroyes.Generally more attractive in terms of taxes,development
costs, and available land, secondary markets continued to benefit
from in-house logisticians’ one-off consolidation and expansion
projects.Volume let to logistics providers was stable year on year
and continued to sustain traditional crossroads such as the Centre
region. Because of the wide variety of demand, this market turned
in an excellent performance in 2014. More than 110,000 m² were
let in 2014 as a result of the development of a few turnkey projects
for in-house logisticians (Carrefour in Bourges) and several new
leases by service providers (Girard Agediss in Mer, DHL in Meung-
sur-Loire, etc.). Brittany also distinguished itself through projects
carried out by various large distribution retailers (Carrefour and
Intermarché near Rennes, Scarmor/Leclerc near Saint-Brieuc).
JANUARY 2015
TAKE-UP ACCORDINGTO GEOGRAPHICAL SECTOR IN 2014
Ile-de-France
31%
Rhône-Alpes
19%Nord-Pas-de-Calais
9%
PACA
9%
Bretagne
5%
Centre
5%
Normandie
4%
Bourgogne
3%
Other
15%
34

LOGISTICS
RENTALVALUES
Rental values in 2014 were stable overall, with prime rent slightly
more than €50/m²/year in Ile-de-France. However, the overriding
need of tenants to lower property costs continued to dictate
negotiation (or renegotiation) terms with landlords, even though
incentives (mainly rent-free periods) stabilized.
The current context gives a premium to assets that are well
adapted to occupiers’ streamlining and enhancement strategies and
that meet increasingly strict regulatory standards. However, rental
values remain extremely diverse and can vary widely even within
the same market, depending on a building’s location and intrinsic
quality,and on the type of transaction (e.g.,product available on the
open market, turnkey).The decline in quality of existing supply and
the shortage of land in several well-known areas also explain the
upward price pressure in certain micromarkets with little available
space. In addition, and in line with observations over the past few
years, the price of land continues to rise, slowing the development
of large platforms near major conurbations in the short and
medium term.
AVAILABLE AND FUTURE SUPPLY
The slight rise in take-up did not correspond to a decline in available
supply in 2014.Totaling just over 3 million m² in France, of which
nearly half is in Ile-de-France, availably supply was stable last year.
Leases of existing buildings,fairly numerous in Paris and Lyon,helped
to absorb some of the supply,but releases continued to compensate
for declines in stock.Several occupiers opted for fewer sites in favor
of bigger platforms, both new and recent. Consequently the quality
of available supply continued to deteriorate.The almost complete
absence of speculative schemes revealed not only investor timidity
but also a trend towards development of custom-designed buildings
that are adapted to the increasingly specific and sophisticated needs
of occupiers.
The scarcity of land opportunities, illustrated by difficulties in
developing new projects in certain areas along the north-south axis,
is an encumbrance to future supply. This is especially the case in
dense urban areas,where occupiers’ need for more volume requires
larger sites that are rare in the inner suburbs. In addition, other
segments (housing, offices, etc.) competing for the same space are
more attractive to neighbors and municipalities.The trend towards
relocating logistics to more distant sectors, often far from the
centers of large cities, is expected to continue, particularly in the
form of large multimodal parks such as the Parc des Bréguières in
Arcs-sur-Argens in the Var region or the recently announced
600,000 m² e-commerce logistics park on the former military base
(BA 103) in Cambrai. Such parks meet occupier needs by providing
vast land opportunities,pooled expenses and services,and the latest
safety and sustainable-development standards.
While the conversion of former industrial sites or obsolete buildings
can provide real-estate opportunities, redevelopment remains
largely determined by location. Certain sites that enjoy existing
infrastructure are ideally placed to service large catchment areas.
They may also justify significant investment for decontamination,
refurbishment work, and integration of new environmental
standards and regulations. However, the future is more uncertain
for obsolete buildings or sites whose location is less than ideal.This
is all the more true because higher taxes (fees for business creation,
TSB,1
etc.) weigh increasingly on the development of new real-
estate projects, especially in Ile-de-France. In addition to problems
related to available land and slow administrative procedures, fiscal
uncertainties continue to compromise the sustainability of the
logistics sector in Ile-de-France.In the longer term,it is the markets
located just outside the Paris region (Oise, Loiret, etc.) that will
benefit the most from these conditions.
1
Office tax (TSB): annual tax on facilities used for offices, retail, storage, and parking.
PRIME RENTS FOR LARGE WAREHOUSES (€/M²/YEAR)
35

OUTLOOK FORTHE FRENCH MARKET
In 2015, the logistics-warehouses market will remain challenging.
The economy may have improved slightly,but the scarcity of available
high-quality supply, the shortage and prices of land in some key
sectors, and strong fiscal pressure will combine to slow take-up.
Activity will remain steady mainly where occupiers are carrying out
streamlining and improvement projects, such as those of in-house
logisticians in the retail-distribution sector. Such development
projects for large, modern distribution platforms are expected to
provide relative stability for the letting of warehouse space.
JANUARY 2015
36

Revolutionary new ways of shopping and the rapid growth of
international newcomers have prompted many retailers to adjust their
positioning and to continue expanding under various forms.Household
consumption remains persistently weak, while retailers’ development
projects for new and refurbished stores involve significant cost cutting.
By choosing sites and locations that provide optimal visibility, high
visitor numbers, and the best value for money, most retailers have
increased their relocations while readily closing the least profitable
stores. Now under way for several years, the polarization of the retail
property market continued to widen in 2014, further deteriorating
negotiation conditions between landlords and retailers. Other factors
also came into play, such as the uncertainty surrounding the content
and adoption of the ACTPE bill governing artisans, retailers, and very
small enterprises.
RETAIL

JANUARY 2015
ECONOMIC AND LEGAL ENVIRONMENT
Stagnation in household consumption
After a record decline in 2012, household consumption rose
slightly in 2013 (+0.2%, compared with −0.5% the previous year).
Stimulated by price cuts but curbed by weak recovery in purchasing
power and by further softness in the job market, household
consumption marked time in 2014 (+0.1 to +0.3%, according to
estimates). In 2015, however, household consumption could rise by
more than 1%,outperforming every year since 2011 but significantly
underperforming precrisis figures (annual average growth of 2.1%
during the period 2000−2007). Even though the number of
households “that believe the time is right for major purchases”
rose considerably in November, reaching levels not seen since June
2012, it is unlikely that the French will dip very deeply into their
savings and abandon their self-discipline of recent years.This rigor
is expected to hold at the same time that consumption in the
“sharing economy” (bartering, used goods, etc.) enters the
mainstream.
A weakened retail sector
The large number of jobs destroyed in the retail sector shows just
how deep the economic crisis runs.Over the past 12 months,retail
was the hardest-hit sector after construction.Although the smallest
companies suffered most,larger companies were not spared either:
Mobilier Européen group (Fly,Atlas,and Crozatier),France’s fourth-
largest furniture and home-furnishings company, is a good example.
Furniture sales have continued to fall in recent months, partly
because of the lackluster residential market.At the end of October
2014, furniture sales were down 1.4% year on year.1
After Virgin
Megastore, Game, and The Phone House in 2013, groups from
sectors other than home furnishings either disappeared from the
French retail scene (Chapitre bookshops), went into receivership
(Bata, Soleil Sucré), or implemented large-scale restructuring
measures (Zannier,Esprit).Clothing retailers have been particularly % en volume
“We believe
that pure
players are
finished, and
we are no
longer afraid
of Amazon.”
François Poupard, manager of the Auchan hypermarket in Faches-
Thumesnil and head of innovation at Auchan.
Quoted from an article published on lsa-conso.fr, October 24, 2014.
INFLATION AND HOUSEHOLD CONSUMPTION (%)
0,6 0,7
0,2
1,1
-1
-0,5
0
0,5
1
1,5
2
2,5
3
2007 2008 2009 2010 2011 2012 2013 2014e 2015e
Inflation (%) Household consumption (%)
Source: INSEE/European Commission
1
Source: IPEA (Institut de prospective et d’études de l’ameublement, or Research Center for the Home Furnishings
Industry).
40

RETAIL
hard hit, with sales expected to fall by approximately 1% in 2014.
Numerous retailers have felt consumer belt-tightening, in addition
to intense competition from energetic new international retailers
(Primark) and the continuing expansion of more established players
such as Uniqlo, Zara, and H&M.
The different faces of “connected” retail
Products related to the information economy (e.g., tablets,
smartphones),on the other hand,have been among the big winners
in rapidly changing consumer tastes.After a 4.2% increase in 2013,
sales of electronic products were expected to rise again in 2014.
According to Credoc, 29% of French people owned a tablet in
2014, compared with 17% in 2013, and smartphone ownership
rose to 49% (+7 points year on year). This change boosted the
already rapid growth of online shopping, which grew 11% in 2014
after topping 50 billion in 2013.2
Although still an impressive pace,
the growth rate is in fact continually slowing. In its most recent
report,3
Arcep looks at the European trend for e-commerce to
stagnate after rising spectacularly during the period 2004−2013.
The penetration rate of new technologies in the retail sector is
measured not only by growth of online sales. While the sale of
innovative objects and associated products is largely carried out
online, consumer demand has also created new retailers offering a
more or less complete retail network (The Kase, Lick, C4U) and
forced established retailers like FNAC to expand their offer. New
technologies are now used by nearly all retailers and have become
part of the typical consumer shopping experience. “Connected”
shopping centers,such as Qwartz,opened inVilleneuve-la-Garenne
in 2014, are emblematic of these new digital concepts developed in
various retail sectors (Gemo in Waves Actisud near Metz and
Auchan in Faches-Thumesnil).
Retail regulatory framework: future unclear
In addition to speeding the transformation of the retail landscape
in France,the use of new technologies is also the reason behind the
increasing number of “drives” (drive-through grocery-pickup
points).There are now nearly 3,500 drives,compared with 2,600 at
the end of 2013 and fewer than 2,000 two years ago. The rapid
spread of this format, which is no longer restricted to the food
sector (both JouéClub and Castorama offer drives), has forced
authorities to better regulate their growth. The ALUR law
(governing access to housing and urban renewal), published in the
French official bulletin on March 26, 2014, defines new drives—
previously considered simple warehouses—as being no different
from other commercial operations. The law contains other
important provisions, such as the obligation of owners of unused
commercial sites to restore them if they are not reopened within
three years.Another provision limits the use of areas intended for
a retailer’s parking lot.
However, the biggest change in recent months was undoubtedly
the enactment of the ACTPE bill governing artisans, retailers, and
very small enterprises. Published in the official bulletin on June 19,
2014, the law governs the end of floating sales and extends the
length of traditional sales periods from five weeks to six, thereby
breaking with a practice much criticized since its creation within
the framework of the 2008 law on the modernization of the
economy (LME).This decision should shed light on retailers’ pricing
policies and rebuild consumer confidence. In a recent IFM (French
Fashion Institute) survey,72% of those surveyed agreed that“prices
no longer mean anything.”4
The end of floating sales, however, is
only one aspect of the ACTPE law, whose key provisions concern
commercial leases. More specifically, these provisions govern
restrictions on long-term leases, the extension of the short-term-
lease option (from two years to three), rent control, and clearer
divisions of maintenance charges shared by landlord and occupier.
While certain of these measures should improve relations between
the two parties, others, such as the 10% ceiling on rent hikes, may
have the opposite effect. Other causes for concern are the
combination of the building permit with the retail-operating permit,
and the CNAC’s (Commissions Nationales d’Aménagement
Commercial, or National Retail Development Commission) power
to act on its own initiative in the assessment of development
projects of more than 30,000 m².
Laws adopted or under discussion often receive mixed reactions
further muddled by the political majority’s prevarication with
regard to retail openings on Sundays and evenings. Extended
opening hours, viewed in some cities as a driving force for tourism,
seem to have political support. For example, Laurent Fabius, who
during the French government’s most recent cabinet reshuffle was
assigned the task of developing international tourism in France, has
voiced his support for longer store hours on Sundays in Paris’s
most touristic neighborhoods. More significant, the Macron bill,
designed to liberalize the economy and boost growth,allows for 12
Sunday openings per year instead of the current five.The bill would
also create international tourist zones where Sunday trade would
be allowed year-round. Nevertheless, reactions to such proposals
are still far from unanimous. In a press release dated December 10,
2014, the mayor of Paris stated: “I shall oppose any top-down
unilateral decision that imposes the creation of international
tourism zones by ministerial decree and that does not respect local
democracy. Such decisions have always been left to mayors. The
removal of this power constitutes a decision that goes against
decades of decentralization.”
2
Source: Fevad.
3
Source: Arcep, La diffusion des technologies de l’information et de la communication dans la société française (The Growth
of Information and Communication Technologies in France), December 2014.
4
Data reported during the French Fashion Institute’s (IFM) International Fashion Outlook Day, December 4, 2014.
41

THE PROPERTY STRATEGIES OF RETAILERS
Recent trends in the French retail market reveal five key and often
complementary features of retailer demand.These features illustrate
the synergies used to adapt the retail model to new ways of shopping.
Retaking control of distribution
Retailers prefer to open single-brand shops, which allow tighter
product control.Although this strategy encourages efficient inventory
management and ultimately improves the productivity of individual
sales points, brands also use it to ensure direct contact with their
customers and for better communication. This trend is particularly
visible in the luxury sector. For example, in 2013, Prada’s 330 single-
brand stores worldwide accounted for 84% of the brand’s total sales,
compared with 51% in 2006. In France, the rapid growth of single-
brand shops continued in recent months, as seen in new openings in
the luxury segment (in September Moët-Hennessy opened its first
directly operated shop in terminal 2E of Charles de Gaulle airport) and
in projects carried out by other brands in various sectors and levels of
quality (The North Face, Le Creuset, Samsonite, Bourjois, etc.).
Flagships to promote brand universes
The opening of flagships is another key element in retailers’ strategies.
Usually located on the most desirable thoroughfares of major cities,
these store formats provide retailers with greater visibility.The use of
carefully designed art and architecture gives sales points a strong
identity intended to promote a brand’s universe, over and above basic
consumer transactions. Flagships are recognizable by their large scale,
which boosts the profitability of each sales point and provides the
setting for a wider range of products.This trend is not limited to major
high streets.In 2014,the largest fashion retailers opened megastores in
France’s best-known shopping centers (Uniqlo in Belle Épine).
Slow and carefully considered expansion
Faced with a slowdown in sales, the rapid rise of retail websites, and a
sluggish economy, many retailers have chosen to rein in their growth
ambitions. This change does not contradict the trend towards ever
larger and more spectacular stores. On the contrary, such stores will
remain the market’s defining trend. More selective in their location
strategy, retailers are willing to downsize their network in exchange
for better locations, an approach employed especially in the service
sector.Orange,for example,is focusing its efforts on a smaller number
of outlets. Well located and designed to convey the retailer’s new
concept, these outlets give Orange a larger footprint among its
customers, in addition to its usual online services.
A multichannel strategy
Although the flagship store may have become an indispensable
showcase for retailers, other formats, generally smaller and aimed at a
specific clientele (i.e., corners in department stores, factory outlets,
and shops in train stations and airports), allow retailers to build up
JANUARY 2015
“Growth will
come from higher
sales per square
meter, thanks to
larger shops and
a better shopping
experience.”
Marco Bizzarri, CEO of Bottega Veneta.
Reuters interview on March 18, 2014.
42

their networks. While this holistic approach is designed to meet
the demands of increasingly segmented consumers, it also reveals
the growing synergies between brick-and-mortar retail and online
commerce. FNAC and Darty are excellent examples of just such a
strategy. Long present in the largest cities, these two retailers are
now opening numerous stores in smaller towns,where they can be
closer to their online customers.The use of smaller sales points,
usually developed as franchises, limits risk.
Exploring new territory
New ways of shopping, the rapid development of online sales, and
competition from large international retailers have encouraged
established retailers to adapt their model in order to consolidate
their position and, in some cases, expand their clientele. In addition
to Darty and FNAC, several retailers have repositioned their
strategy,even going into new areas previously unexplored.While La
Halle continued to move upmarket,other retailers long established
on the outskirts decided to test concepts in the city center (Gemo
with Follow Me, rue Crébillon in Nantes) or ramped up their
development in shopping centers (Kiabi Kids in Qwartz and
O’Parinor). By contrast, a few city-center retailers went the other
direction, expanding into shopping centers (e.g., SMCP Group,
which opened retail outlets in 2014 in Les Terrasses du Port in
Marseille).
RETAILER DEMAND
Trends in high-street demand
In 2014, demand for chief shopping thoroughfares in Paris and
other large French cities remained strong. Desigual, Kiko, and
Calzedonia were among the numerous retailers that continued to
expand.H&M added several megastores (avenue deVerdun in Nice,
boulevard Saint-Germain in Paris, rue du Noyer in Strasbourg) to
its French network. Other openings in Paris included several
upscale brands of the Swedish group—Cheap Monday in Le Marais,
& Other Stories on rue Montmartre, and COS on rue Tronchet in
Paris. The accessible-luxury segment also distinguished itself.
Because this market segment is reaching maturity,its largest French
proponents have been forced abroad in search of fresh growth
fields. However, other retailers have enhanced their networks
opportunistically by consolidating their positions in Paris (Claudie
Pierlot on avenue desTernes and rue de Charonne) or by expanding
in other French cities (The Kooples in Marseille on rue Paradis).
Other retail segments have boosted demand, such as the Paris
openings of fast-food chains Burger King and Costa Coffee, as well
as the recent Marks & Spencer blitz of small-format food shops
(M&S Food). A few high-end food retailers and restaurants (Café
Pouchkine, Palais des Thés, etc.) enlivened markets in Paris and
other French cities, at the same time that Lafayette Gourmet
reopened on boulevard Haussmann ahead of the much-anticipated
Eataly. Nevertheless it is the fashion industry that drives the yearly
arrival of new brands.In 2014 numerous Italian retailers (Gianfranco
Lotti, Ottod’Ame, Maliparmi, Golden Goose, Twin-Set, etc.)
reaffirmed the attractiveness of the French market to newcomers.
However,their demand is usually confined to Paris and its trendiest
neighborhoods (Le Marais, Saint-Germain-des-Prés), where the
Dutch cosmetics retailer Rituals also chose to open its first shops
in France.
Le Marais and Saint-Germain-des-Prés, stars of 2014
Although the number of foreign tourists in 2014 was slightly less
than in 2013,5
international tourism remains one of the main
drivers of the Paris market. Saint-Germain-des-Prés and Le Marais
are the prime beneficiaries of this momentum. Although long
visited by wealthy locals and western tourists, these two
neighborhoods are increasingly on the itinerary of visitors from
emerging countries. Brazilian and Chinese tourists are, after the
Americans and Japanese,among the biggest foreign spenders at the
Bon Marché. Saint-Germain-des-Prés’s inexorable move upmarket
will only be reinforced by the Bon Marché’s face-lift and the
Lutétia’s refurbishment. After Berluti, Shang Xia, and Omega in
2013, the triangle formed by rue de Sèvres, boulevard Saint-
Germain, and rue de Grenelle once again saw significant activity. In
2014, Moncler, La Perla, and Salvatore Ferragamo moved into the
triangle, and LVMH acquired 165 boulevard Saint-Germain.
Trends in retailer demand and the latest openings and development
projects have also reinforced the high-end positioning of Le Marais,
a neighborhood with large numbers of tourists and a remarkable
architectural heritage. In certain streets, Le Marais offers the
additional attraction of Sunday openings.As seen in the repositioning
of BHV, the expansion of trendy French retailers (The Kooples,
Maje,etc.),and the proliferation of designer stores and showrooms
(Margaret Howell and Tom Greyhound are the most recent), Le
Marais’s rapid climb upmarket has set the perfect stage for the
most exclusive brands.After the opening of a Marc Jacobs pop-up
at the end of 2013 and the new Helmut Lang and Sonia Rykiel
shops, in 2015 four big luxury names—Gucci, Givenchy, Fendi, and
Moncler—will open menswear stores in Le Marais (rue des
Archives).
RETAIL
Alberta Ferretti, 43 rue du Faubourg Saint-Honoré – Paris 8th
435
Paris Tourist Office. The number of foreign visitors was down 2.7% year on year at the end of October 2014.

JANUARY 2015
Map of openings and development projects in Le Marais in 2014
Luxury Store
Single-brand-store
Newcomer
Other

Although at a lower intensity, other neighborhoods on the right bank
more or less near Le Marais—rue de Charonne and boulevard
Beaumarchais—continue to attract designers and upscale fashion
retailers. The Champs-Élysées, meanwhile, remained relatively quiet in
2014.The even-numbered side, traditionally the more expensive of the
two, did see a few major openings, but most of these had been launched
long before (Tiffany & Co at no. 62).This maintenance of the status quo
in no way suggests a loss of appetite of retailers, whose demand remains
strong but which are confronted with a very limited number of
opportunities. Future projects will largely comprise refurbishment of
existing sales points (e.g., work currently under way at the Cartier
flagship store). A few openings will also confirm, in the relatively short
term, the move upscale of the Champs-Élysées, whether on the odd-
numbered side, where at no. 77 Longchamp recently opened its largest
European store, or on the even-numbered side, where at no. 52−60 the
formerVirgin Megastore will be replaced by Galeries Lafayette.
Few significant openings outside Paris and Ile-de-France
The small number of transactions recorded in the rest of France in 2014
is not so much a sign of flagging interest in major cities as it is an indication
of the scarcity of leasing opportunities in their most desirable
thoroughfares. Such prime locations are very much in demand by
retailers, especially recent newcomers that are ramping up their
expansion in France (Desigual on rue des GrandesArcades in Strasbourg).
A few fashion giants in the mass-market segment have kept their
ambitions (e.g., the opening of the Uniqlo flagship in Strasbourg on rue
du Noyer, and the H&M in Nice on avenue deVerdun). Some cities have
been especially active.After welcoming several major operations in 2013
(Desigual, Primark, Hema, Kiko, etc.), Bordeaux andToulouse continue to
attract retailer interest (Size? in Bordeaux and Toulouse, and Nespresso,
de Fursac, andThe Kooples inToulouse). Investors are also taking notice.
Syntrus Achmea acquired a portfolio of ground-floor stores for €130
million.6
RETAIL
In 2014, 32 luxury shops were either opened or reopened in
Paris, compared with around 50 in 2013.While the number
of foreign tourists in Paris remains high, the international
environment is less favorable than a few months ago.
Newcomers and retailers will no doubt trim their network
of stores instead of developing full steam ahead.Unsurprisingly,
projects under way in the historic center of the Paris luxury
market involve mainly relocations, refurbishments, and
product repositioning. In the neighborhood around Place
Vendôme and rue de la Paix, some of Richemont Group’s
brands are playing a lively game of musical chairs. IWC has
moved to 3 rue de la Paix, formerly the site of Van Cleef &
Arpels, while the latter brand has expanded its footprint in
PlaceVendôme by taking over space released by Mauboussin.
The rhythm of new creations should nonetheless remain
vigorous, especially on rue Saint-Honoré. Since the opening
of the Mandarin Oriental, this street has remained one of
Paris’s most exclusive addresses. Numerous arrivals in 2014
(Lyubov, Exemplaire, Gianfranco Lotti, etc.) will be followed
by significant openings in 2015 (Alexander McQueen, Tory
Burch, Missoni). However, because of the rise in rental values
and the scarcity of available facilities in the most desirable
areas, retailers will be forced to search in districts that today
are not as exclusive (i.e., beyond the Colette showroom and
in a few adjacent streets such as rue Cambon and rue
Castiglione).
A long-term slowdown in
the Paris luxury market?
45
Longchamp, 77 avenue des Champs-Élysées – Paris 8th
6
TheVerano portfolio sold by Grosvenor also contained a few Parisian assets.

Trends in demand for shopping centers
Openings by fast-fashion giants (Zara in Créteil Soleil,Mango and Desigual
in Saint-Lazare Paris, etc.) have been on the rise in recent months, proof
of just how resilient the shopping-center model can be.The success of
shopping centers was aided by increasingly diversified demand, as seen in
new concepts implemented by several French retailers in search of
image-enhancing ideas for the domestic market (Tati at Millénaire in
Aubervilliers, Côté Seine in Argenteuil, and La Halle at La Toison d’Or in
Dijon) and by retailers seeking to expand their clientele (Kiabi Kids at
O’Parinor). The greater diversity of retailers in shopping centers also
reflects an unquestionably upmarket trend. Already visible in 2013, this
trend gathered speed in 2014 with the arrival in shopping centers of
retailers and branded shops previously found only in high streets (Sonia
By and Bourjois at Parly 2, Mauboussin at 4 Temps). New, high-quality
facilities, better adapted to consumer needs (Les Terrasse du Port in
Marseille, Polygone Riviera near Nice), appeared at the same time.
The shopping-center market also benefited from demand of international
newcomers. Although newcomers were relatively few in 2014, several
recent retailers continued to grow (e.g., Pandora and Kiko). The most
striking example, however, was undoubtedly Primark, whose remarkable
success was further strengthened by new openings (Qwartz, O’Parinor,
La Toison d’Or). Other names also generated buzz. One year after its
return to France, Burger King went nationwide. In 2014, the American
fast-food giant opened several outlets in Ile-de-France (Créteil Soleil,
Rosny 2), in other major French cities (La Part-Dieu and Confluence in
Lyon, Grand Littoral in Marseille), and in a few smaller towns (L’Escapade
in Troyes).
The most upmarket retailers and newcomers accounted for the majority
of demand for prime slots in existing regional shopping centers, for the
largest new shopping centers, and for expansion of the best-known sites.
Jumbos were not the only outperformers, however. Large distribution
retailers completed numerous high-quality expansion and property-
refurbishment projects (Cora Mundo’ near Strasbourg). In addition,
openings were planned by large retailers in several shopping centers in
JANUARY 2015
TRENDS IN SHOPPING-CENTERVISITOR NUMBERS
(ANNUAL CHANGE IN %)
-3,00%
-2,00%
-1,00%
0,00%
1,00%
2,00%
3,00%
4,00%
January
February
March
April
May
June
July
August
September
October
November
December
Source: CNCC
46
And the future of department
stores?
“Each [city] has its own department store—a place where you
interpret the lifestyle of the region, the locality and attract tourists. . . .
You need to take advantage [of your city] and become the store of
the city.That’s what department stores should be, all over the world,
so when I come to your city center and want to go somewhere for a
coffee, spend time, to go see new things and even buy new things, it
should be your store.”
Vittorio Radice, chief executive officer, La Rinascente
After upgrading and, in some cases, streamlining their networks,
department stores today seem to be at a turning point. The
slowdown of global luxury sales and the decline in the number
of foreign tourists are adding to the already lackluster
performances,despite colossal investments made by department
stores to become the showcase of the biggest luxury brands.
Nonetheless the outlook for growth remains favorable. Paris’s
reputation as the birthplace of haute couture, the prestige of its
architectural heritage, and the importance placed by tourists on
the quality of the shopping experience would seem to be major
advantages for the city’s department stores. The possibility of
Sunday and evening store openings in tourist zones, as provided
for by the Macron bill, make department stores even more
attractive to such tourists and shoppers. These advantages
should allow department stores to continue confidently
investing in Paris (Galeries Lafayette on the Champs-Élysées,
BHV luxury shops on rue des Archives, etc.). Simultaneously
numerous deals are in the pipeline for large shopping centers in
Ile-de-France (Galeries Lafayette in Carré Sénart) and other
parts of France (Galeries Lafayette in Marseille’s Prado shopping
center, Printemps in Les Terrasses du Port in Marseille, and
Polygone Riviera near Nice).
The Business of Fashion, Reinventing the Department Store, October 8, 2014.

midsized cities, in order to flesh out their network in France
(Calzedonia at Jeu de Paume in Beauvais, Kiko at Avaricum in
Bourges). For numerous sites, however, competition from the
largest existing shopping centers and the most iconic projects
creates a very unfavorable environment. Traditional retail anchors
are hurt by direct competition from the internet.In addition,choices
made by retailers faced with slowing sales, and the decisions of
some retailers not to cannibalize earnings from their other stores,
explain longer marketing periods and penalize development projects
with insufficient catchment areas.
Trends in demand for retail parks
In 2014, the retail-park market continued to enjoy demand from
large French retailers long located in peripheral zones. Discount
retailers such as Gifi and Centrakor continued to grow and should
drive demand once again in 2015, confirmation of their successful
response to consumer calls for low prices.After opening more than
30 stores in 2014, Centrakor plans to open another 25 this year.
Food outlets were also very active in 2014. Last year one of the
fastest growing chains, La Pataterie, crossed the threshold of 200
outlets, developed mainly as franchises.
Demand was also underpinned by new concepts from established
players. In addition to Gemo, Chaussea, and Tati, several of Vivarte
Group’s brands reaffirmed their new, upmarket positioning (e.g., La
Halle and Besson Chaussures, whose new concept was launched in
a dozen stores after an initial test in Mondevillage in 2013).These
examples illustrate the upscale trend of retail parks,a change that is
attracting retailers that were largely or completely absent from
peripheral zones.Attracted by low occupancy costs,easy access,and
locations that are large and easy to equip, several retailers new to
these peripheral zones have added to their positions as opportunities
arise (Célio,Camaïeu,Carré Blanc,etc.).New retail parks increasingly
feature a disparate mix of retailers and quality. The most visible
example of this approach is Waves Actisud, a new shopping center
near Metz, which places several relatively high-end brands such as
Swarovski, Sephora, and Bose alongside more traditional retailers
such as Gemo, Cultura, and Réauté.
However, success of this kind cannot eclipse the problems
overshadowing an entire segment of the French market. Some
groups are under extreme pressure (Bata, Mobilier européen,
Zannier, etc.), and others have either slowed or terminated their
expansion plans.This reality weighs on the sustainability of numerous
development projects.Several sites have been hurt by relocations to
new-generation retail parks or to more-established peripheral
zones by numerous retailers in search of locations that are modern,
spacious, and well designed. Beaumanoir and Orchestra have opted
for the multistore format, which allows them to create synergies
among their various brands. By targeting the latest zones (Waves
Actisud, Parc Saint-Paul in Romans-sur-Isère, Les Bons Raisins in
Loches,etc.),Intersport has combined new openings and relocations
by opening large stores of more than 1,000 m² that provide a
showcase for its entire product range.
Consequently the success of the newest and most-established
zones has brought on a massive loss of appetite by retailers for
secondary zones.Abandoned by the most successful retailers, these
zones have sometimes experienced a significant rise in vacancy
rates or a severe decline in retailer quality
TRENDS IN SUPPLY
General trends
The shortage of prime locations persists. Since medium-sized and
large stores—those most in demand by retailers—are the first
affected, this scarcity has been alleviated occasionally in recent
years by releases due to problems experienced by major retailers.
Such releases were a major source of supply in 2013 and continued
to be absorbed in 2014,e.g.,the letting of several locations formerly
occupied byVirgin Megastore (H&M in Nice, La Halle in Metz,etc.).
Other opportunities allowed certain retailers to set up new
showcases on the most frequented high streets (Jules in the former
Esprit on rue de Rennes, Tommy Hilfiger in the former Foncier
Home on boulevard des Capucines), to launch single-brand stores
(Asics in the former Game on rue d’Amsterdam in Paris), and to
increase the number of stores (Lick in the former The Phone
House outlets) in their network.
However, releases added mainly to the rise in supply of secondary
markets and sites, and to such an extent that the future of some
derelict retail space is at risk.This change is all the more worrisome
because of the steady rhythm of openings, although there were far
fewer openings in 2014 than during the previous two years
(604,000 m²,compared with 872,000 m² in 2013 and 982,000 m² in
2012). The arrival of new shopping centers automatically dilutes
retailer revenue and weighs on existing shopping centers as well as
those still in the marketing phase.Additional dilution comes from
the increasing tendency of developers to expand for further
growth or to build on their success.
RETAIL
MyValley - Cormeilles-en-Parisis (95)
47

JANUARY 2015
LOCATION NUMBER OF SITES NUMBER OF SHOPS TOTAL AREA (M2
) GROWTH IN TOTAL
AREA 2013-2014 (%)
HIGH STREETS *
Provinces 209 112,316 13,579,138 0.0 (0)
Ile-de-France 83 26,167 4,015,729 0.0 (0.2)
Total 292 138,483 17,594,867 0.0 (0.1)
SHOPPING CENTRES **
Provinces 753 26,665 15,013,019 1.5 (1.0)
Ile-de-France 190 10,123 5,180,411 1.3 (2.5)
Total 943 36,788 20,193,430 1.5 (1.4)
RETAIL PARKS ***
Provinces 924 35,567 29,654,231 0.8 (1.4)
Ile-de-France 132 4,971 4,242,355 0.5 (0.5)
Total 1,056 40,538 33,896,586 0.8 (1.3)
FRENCH RETAIL-PROPERTY STOCK
*Comprising at least 50 sites/** Shopping center comprising at least 10 sites/*** Retail Parks comprising at least 10 sites.
Source : Cushman & Wakefield – as at 1st
january 2015.
(xx): growth in total area 2012-2013 (%)
Trends in supply on high streets
The mismatch between retailers’ criteria and the quality of available
supply on the market explains the relatively limited number of
creations.The scarcity of available prime locations has resulted in
retailers’ current preference for improving existing sites in order
to update their design, increase their visibility, and gain market
share. In Paris, this trend is particularly visible in the luxury sector.
The shortage of supply, the rapid development of international
tourism, and the sharp rise in rental values stimulate retailer
demand for alternative sectors located near the most prestigious
streets or in less central neighborhoods (Le Marais,Saint-Germain-
des-Prés). Consequently the luxury topography, unchanged for
decades, is starting to blur, even though the central shopping areas
of Paris and major regional cities remain relatively fixed and even
seem to be settling around the most renowned high streets and
locations. Change is more visible in midsized cities, which are
directly exposed to competition from e-commerce, neighboring
large urban areas, and new projects on the outskirts.Vacancy rates
in such places can soar, as in Perpignan, where the number of
retailers declined by 20% during the period 2006−20137
.
However, large development projects will likely alter the retail
landscape in some large cities. In Paris, the largest development
projects are for refurbishment of the Samaritaine and the Poste du
Louvre. In addition to redevelopment of the Halles district, these
refurbishment projects could serve to connect the retail core of
the Right Bank (Opéra, rue Saint-Honoré, etc.) and Le Marais.
Other French cities are also receiving attention. Several large deals
in Bordeaux illustrate the success of the Promenade Sainte-
Catherine.
Trends in supply of shopping centers
More than 340,000 m² were inaugurated in 2014 in France, similar
to volume in 2013. This capacity was driven by a few large-scale
openings.The two biggest projects in 2014,Qwartz inVilleneuve-la-
Garenne and Les Terrasses du Port in Marseille, accounted for
more than one-third of new retail space opened in France during
the year.The total number of shopping centers was relatively low,
but volume was boosted by several expansion and relocation-
expansion operations of existing shopping centers, e.g., Grand Cap
in Le Havre, Mérignac Soleil near Bordeaux, Le Grand Moun in
Mont-de-Marsan, and Cora Mundo’ near Strasbourg. If
redevelopment prospects are included (La Valentine in Marseille,
Saint-Jacques in Metz), these types of development projects
account for 47% of total openings in 2014.
48
Promenade Sainte-Catherine – Bordeaux (33)
7
Report by the Perpignan CCI (chamber of commerce and industry), whose results were presented in February 2014.

RETAIL
In contrast with lackluster household consumption, this vibrant
activity is due mainly to the strategies of property-investment
companies, which aim to adapt supply to consumer expectations
and to help large international groups expand. One of the most
highly anticipated openings is the Polygone Riviera, a shopping
center of 75,000 m² located near Nice. Like Les Terrasses du Port,
this new shopping center offers stores and architecture that are
unquestionably upscale.This deal is also a sign of the times:“bigger
is better.” In addition to creations from scratch, a few expansion
projects for a few of France’s best-known regional shopping centers
will, as from 2015, feature outsized footprints (Forum des Halles,
Cap 3000, Carré Sénart,Val d’Europe, etc.).The largest property-
investment companies are focusing on these types of assets, which
also appeal to many retailers aiming for maximum visibility to
customers. This is true of new retailers (Primark), retailers
developing single-brand stores (Lego), and traditional retailers
implementing new concepts in megastores (Mango).
In 2015, large cities such as Paris (Forum des Halles,Vill’Up) and
Marseille (Les Docks Marseille, Centre Bourse) will be host to the
majority of the most important projects.However,several midsized
cities will also host openings in 2015 as part of urban-renewal and
transformation projects in city centers (Le Jeu de Paume in
Beauvais, Avaricum in Bourges, and Les Passages Pasteur in
Besançon).
Trends in supply of retail parks
With 276,000 m² in 2014 (−43% year on year), the volume of
completed retail parks is far from levels seen at the end of the
2000s (580,000 m² per year on average during the period
2007−2010) and even reached its lowest point since 2004.
This unequivocal slowdown is related to the very low number of
large deals, even as the total number of development projects
remained relatively stable. Only two shopping centers larger than
20,000 m² (Waves Actisud and Parc Saint-Paul) were opened,
compared with eight in 2013.This decline may also be explained by
the numerous projects postponed to 2015, 2016, and 2017, and by
several cancellations, proof that lettings are a major challenge for
many developers.In addition,some locations seem to be arriving at
maturity, thereby auguring a rise in expansion and redevelopment
projects in the years to come.
KEY OPENINGS IN 2014
LOCATION SHOPPING CENTER TYPE OF DEVELOPMENT AREA M2
Villeneuve-la-Garenne (92) Qwartz Creation 63,000
Marseille (13) Les Terrasses du Port Creation 61,000
Saint-Pierre-du-Mont (40) Grand Moun Transfer-extension 45,000
Le Havre (76) Grand Cap Extension 23,700
Mundolsheim (67) Cora Mundo’ Extension 8,500
Mérignac (33) Mérignac Soleil Extension 8,300
Cagnes-sur-Mer (06) Polygone Riviera Creation 74,000
Meaux (77) Les Saisons de Meaux Creation 30,000
Nice (06) Nice One Creation 27,000
Paris (75019) Vill’Up Creation 24,000
Beauvais (60) Le Jeu de Paume Creation 23,000
Marseille (13) Les Docks Marseille Creation 17,000
Paris (75001) Forum des Halles Extension 11,400
KEY OPENINGS ANNOUNCED FOR 2015
Key shopping-center openings
FRENCH SHOPPING-CENTER OPENINGS AND PIPELINE (M2
)
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
2 012 2 013 2 014 2015e
creation extension redevelopment transfer-extension
49

Furthermore, renewal of deteriorated city outskirts will be
increasingly common, such as Ode à la Mer, undertaken by Frey in
Montpellier (after Be Green in Saint-Parres-aux-Tertres, opened in
2013). Lesser projects will also contribute to the production of
new retail space.With total space of 10,000−20,000 m² composed
mainly of small units, these new formats announce the arrival of a
new generation of retail parks located just outside midsized cities
(Cormeilles-en-Parisis) or attached to existing large retail zones
(Le Patio in Sainte-Geneviève-des-Bois and the project developed
by Compagnie de Phalsbourg in Plan de Campagne).
TRENDS IN RENTALVALUES
Rental values continued to rise in certain districts of Paris,especially
the historic center of the city’s luxury market. The trend is
nonetheless towards stability of prime retail space on major
thoroughfares in the provinces and in the most established shopping
centers and retail zones on the outskirts. Secondary slots, on the
other hand, have experienced downward pressure.This is especially
true in shopping centers of intermediate size, where some retailers
have unhesitatingly pulled out.
Proof of retailers’ loss of appetite for the riskiest locations, the
market’s polarization has been accompanied by a general
deterioration of relations between landlords and retailers. In a
tendency that reflected this decline, lease commitments were the
object of bitter negotiation. Property owners were obliged to grant
more incentives, particularly in the form of financial aid for fit-out
contributions. In addition, retailers aimed systematically to secure
their openings by including lettings clauses.While relations between
the two parties are expected to remain tense, the recent adoption
of the ACTPE bill could help to settle matters.The definitive text of
the law indeed provides a balance in the breakdown of maintenance
charges, work, and taxes.
JANUARY 2015
Key retail-park openings
KEY OPENINGS IN 2014
Moulins-lès-Metz (57) The Waves Creation 38,000
Saint-Paul-lès-Romans (26) Parc Saint-Paul Creation 27,000
Montluçon (03) PAC Saint-Jacques Creation 18,000
Seynod (74) Arcal’Oz Extension 12,000
Loches (37) Les Bons Raisins Creation 11,000
Villennes-sur Seine (78) White Parc Creation 10,100
KEY OPENINGS ANNOUNCED FOR 2015
Brétigny-sur-Orge (91) Les Promenades de Brétigny Creation 45,000
Fenouillet (31) Toulouse-Fenouillet Creation 33,500
Chambray-les-Tours (37) La Petite Madelaine Creation 31,400
Terville (57) Supergreen Creation 28,000
Saint-Nicolas-de-Port (54) Frun Park Creation 19,500
Saint-Maximin (60) St Max Avenue Creation 17,300
0
100 000
200 000
300 000
400 000
500 000
600 000
2 012 2 013 2 014 2015f
FRENCH RETAIL-PARK OPENINGS AND PIPELINE (M2
)
50
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
2 012 2 013 2 014 2015e
creation extension redevelopment transfer-extension

RETAIL
TRENDS IN SHOPPING-CENTER PRIME RENTALVALUES
(€ / M2
/YEAR)*
ILE-DE-FRANCE 2014 2013 TREND 2015
Regional shopping centers 2,000 2,000
Large shopping centers 950 950
PROVINCES
Regional shopping centers 1,400 1,400
Large shopping centers 700 700
*For very well-situated 150 m² of retail space (clothing or services) in existing centers that are leaders in their
catchment areas.
2014 2013 TREND 2015
ILE-DE-FRANCE 180 180
PROVINCES 170 170
*For 1,000 sq.m.and new space in top slots in strong catchment areas.
2014 2013 TREND 2015
PARIS
Champs-Élysées 18,000 18,000
Avenue Montaigne 12,000 10,000
Rue du Faubourg Saint-Honoré 12,000 10,000
Boulevard Haussmann/Grands Magasins 8,000 6,000
Boulevard Saint-Germain 6,500 6,500
Rue de Rivoli 4,500 4,500
Rue des Francs-Bourgeois 4,500 4,500
PROVINCES
Lyon / Rue de la République 2,200 2,200
Lille / Rue Neuve/Béthune 2,000 2,200
Marseille / Rue Saint-Ferréol 2,000 2,000
Bordeaux / Rue Sainte-Catherine 2,200 2,200
Nice / Rue Jean Médecin 2,200 2,200
Toulouse / Avenue Alsace-Lorraine 2,200 2,200
Cannes / Croisette 8,000 6,500
Strasbourg / Place Kléber 2,000 2,000
TRENDS IN HIGH STREET PRIME RENTALVALUES (ZONE A, € / M2
/YEAR)
TRENDS IN RETAIL-PARK PRIME RENTALVALUES
(€ / M2
/YEAR)*
51
OUTLOOK FORTHE FRENCH RETAIL MARKET
Anemic economic growth,high unemployment,and unattractive occupancy-cost ratios will continue to weigh on the French retail-property market
in 2015. Hurt by retailer arbitrage, secondary markets will likely experience rising vacancy rates over the next few months.Although the principal
high streets are expected to remain desirable, business may be slowed by an increase in property values in some cities and by the lack of quality
opportunities. The next few months should also see more arrivals of upscale and original retail formats that meet both retailer demand and
consumer expectations.

JANUARY 2015
INVESTMENT

JANUARY 2015
ASSET MANAGER
Professional responsible for creating an investment fund. He/she defines the fund strategy and structure,
raises funds from investors, and oversees the fund throughout its life.
FAMILY OFFICE
Private structure for high-net-worth families whose assets require sophisticated management. The
principal function of a family office is to optimize, organize, protect, and increase the family’s assets,
whatever they may be.The family’s own wealth, often accumulated over several generations, constitutes
the financial capital of the structure.
INSTITUTIONAL INVESTORS
Professional that collects long-term savings from individual investors to invest on their behalf. This
category includes sundry institutions: mutual funds, insurance companies, pension funds, banks, property-
investment firms, other retirement funds, etc.
INVESTMENT FUND
Investment vehicles, often collective (multiple ownership), that comprise financial or real-estate assets;
managed by regulated and certified structures (investment companies).
INVESTMENTVOLUME
Volume of all transactions recorded by Cushman & Wakefield concerning standard commercial-
property transactions (offices, shopping centers, high-street shops, retail parks, logistics warehouses,
and manufacturing premises) of more than €1 million (including sales to occupiers) over a given period.
NET INITIALYIELD
Percentage rate expressing the ratio at a time “t” between a building’s income (net of unrecoverable
costs) and its purchase price (sale price plus fees and transfer duties).
OPEN-END FUND Fund with no limit on the number of shares it may issue.
OPCI
(FRENCH REAL-ESTATE
INVESTMENT TRUST)
Mutual savings scheme designed for retail or institutional investments in property assets.OPCI portfolios
must include investments in property assets (at least 60%) and in cash or cash equivalents (at least
10%). Like SIICs (listed real-estate investment companies), OPCIs are tax exempt, provided they pay out
dividends. Because they are not listed, OPCIs are not subject to market fluctuations.
OPPORTUNISTIC FUND
Fund that targets maximum profitability, using one or more of the following: high added value, significant
risk exposure, and high leverage.
PENSION FUND
Fund specialized in raising capital from individual savers and investing it in financial markets, in order to
provide those investors with retirement income through funded pension plans. Such funds are often risk
averse.
PRIME/CORE ASSET
Asset of excellent quality, exceptionally located, and under a firm, long-term lease with one or more
rental commitments.
PROPERTY COMPANY
Commercial company whose purpose is the establishment, management, and operation of a property
portfolio, in order to maximize profitability.
SCPI
(REAL-ESTATE INVESTMENT
TRUST)
An investment trust whose exclusive purpose is to own and manage a portfolio of rental properties.
At least 90% of an SCPI portfolio must consist of property assets.An SCPI’s purpose is to sell shares in
acquired buildings to shareholders. SCPIs are not traded on a stock exchange, are financed by savings
from the public,and are exempt from corporate tax.Individual shareholders must pay tax on any income
received from the trust.
SPECULATIVE DEVELOPMENT Building whose construction has begun without prior sale or lease to an occupier.
VEFA
(VENTE EN L’ÉTAT FUTUR
D’ACHÈVEMENT)
Forward sale, or the sale of a property asset before it has been completed. In a forward sale, the vendor
transfers immediately to the purchaser all property rights and ownership of the buildings as they are
completed.
INVESTMENT
54

GLOSSARY
55
AVAILABLE SUPPLY Total amount of space available to let in existing buildings within six months.
AVERAGE RENT
Average rental values (headline rents stated in transactions), all areas included, of refurbished and second-
hand properties.
ILAT
(rent index for tertiary
activities)
Rent index for tertiary activities composed of three indexes calculated quarterly by INSEE: the consumer-
price index (IPC),the construction-cost index (ICC),and the index for gross domestic product (PIB).These
periodic means are combined in the following proportions: IPC 50%, PIB 25%, and ICC 25%.
PRIME RENT Average of top five lettings transactions (more than 1,000 sq. m.) in terms of headline rents.
TAKE-UP Total number of square meters let, pre-let, or sold to occupiers.
VACANCY RATE Ratio of volume of available supply for the next six months to total office inventory.
LOGISTICS WAREHOUSES
ICPE
(classified installations for
environmental protection)
Premises operated or owned by any individual person or legal entity, public or private, that may present
dangers or risks. Depending on the nature of the risks, the premises may be: unclassified; classified and
subject to declaration at the prefecture; classified and subject to authorization by the prefecture; classified
and subject to registration at the prefecture.
IN-HOUSE LOGISTICIAN In the industrial and retail sectors, firm that provides logistics services for its own goods.
LOGISTICS PROVIDER
Specialized firm that provides complete logistics services to companies seeking to outsource their logistics
requirements.
SUPPLY CHAIN
Comprises the optimization of the entire production cycle, from suppliers and raw materials to final
customers.
TAKE-UP Total number of square meters let, pre-let, or sold to occupiers.
OFFICES
RETAIL
CDAC / CNAC
Created by the Economic Modernization Act (LME, enacted in 2008) as replacements for CDECs and
CNECs, these département and national retail-development commissions oversee the openings of retail
spaces of 1,000 sq. m. or more, in accordance with criteria for urban planning and sustainable development.
FLAGSHIP
A retailer’s finest, largest, or most important store, used primarily to promote the brand. Flagship stores,
which concern all business sectors and may be any size, are always located in the most desirable and
prestigious shopping districts.
ILC
(INDEX OF RETAIL RENTS)
Weighted-average index comprising indices representing trends in consumer prices,construction costs,and
retail sales.The ILC is used as a benchmark for the review of commercial leases.

For further information, please contact:
David Bourla
Head of Research France
+33 (0)1 53 76 91 91
david.bourla@eur.cushwake.com
C&W is the world’s largest privately-held commercial real estate services firm. Founded in 1917, it has 250 offices in
60 countries and more than 16,000 employees. The firm represents a diverse customer base ranging from small
businesses to Fortune 500 companies. It offers a complete range of services within five primary disciplines: Transaction
Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including
property sales, investment management, investment banking, debt and equity financing; Client Solutions, including
integrated real estate strategies for large corporations and property owners, Consulting Services, including business
and real estate consulting; and Valuation & Advisory, including appraisals, highest and best use analysis, dispute resolution
and litigation support, along with specialized expertise in various industry sectors. A recognized leader in global real
estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at:
www.cushmanwakefield.fr
This report has been prepared solely for information purposes. It does not purport to be a complete description of the
markets or developments contained in this material. The information on which this report is based has been obtained from
sources we believe to be reliable, but we have not independently verified such information and we do not guarantee that
the information is accurate or complete. Published by Corporate Communications.
©2015 Cushman & Wakefield, Inc. All rights reserved.
Cushman & Wakefield France
11-13 avenue de Friedland
75008 Paris
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David Bourla
Head of Research
Thierry Juteau
Head of Capital Markets Group
Christian Dubois
Head of Retail Agency
Philippe Guillerm
Head of Valuation
Ludovic Delaisse
Head of Office & Industrial Agency and
Guy Grundy
Head of Corporate Services
Olivier Gérard
President
CONTACTS
Thomas Hébert
Head of Consultancy
Stéphane Bureau
Head of Property and Asset Management
Development

French Property market 2015 - Cushman & Wakefield

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