Competition for office space and investment assets in Paris remains strong, on the back of healthy economic growth, with GDP in the country expected to grow by 1.1 percent this year, and a further 1.4 percent in 2016, after three years of subdued growth. Following a relatively weak performance in the first quarter of 2015, office leasing in Île-de-France recovered in the third quarter, with annual take-up forecast to again exceed 2 million sq m.  Though demand remains high, rents have been left unaffected, further increasing the desirability of the market. Limited development will continue to restrict occupier activity – the development pipeline for the next two years has reduced, with much of the new stock likely to be pre-leased before completion. Heena Kerai, International Research Analyst at Knight Frank, commented: “Occupier and investor confidence will remain positive and despite stock limitations, we can expect both markets to put in a strong performance in the coming quarters.”

European office take-up will rise by 10 percent in 2016 with this rise in office demand expected to encourage increased development over the next 12 months, according to the Knight Frank European Commercial Property Outlook 2016. Development activity is likely to be shaped by the current polarisation of office demand, with occupier interest most strongly focused on prime city centre space, while older and less well-located offices will struggle to attract tenants. With prime commercial space in short supply in cities such as London, Paris, Dublin, Frankfurt and Madrid, occupiers seeking large centrally-located offices currently have very limited choices. However, in cities such as Amsterdam and Brussels, vacancy rates remain relatively high for Grade B offices and secondary locations, so as a result, the European commercial property market will step up the redevelopment of such properties.

(more…)