In a study exclusively available to Business Immo, BNP Paribas Real Estate took stock of the regional office market at the end of the first half of 2024, a period during which 658,000 square meters, or more than 7 million square feet were marketed in the 17 main French cities.
This volume remains 13% below the long-term average, "which puts this first half-year at the same level as 2014," notes the consultancy. The year-over-year decline is more substantial, at 19%. This is due, in particular, to the negative 38% drop in transactions involving medium-sized areas, 1,000-5,000 square meters.
This decline is widespread. Or almost. Four cities stand out from the crowd, achieving better half-year results than last year: Tours, Metz, Grenoble and Dijon.
"The fundamentals of the regional office rental market remain solid, with a vacancy rate that remains low, at less than 6.5% compared with 9% in the Paris region," observes Jean-Laurent de La Prade, Managing Director of BNP Paribas Real Estate Transaction in charge of the Regions division. "In addition, support measures for tenants remain significantly lower than in the Paris region, reflecting the stability and attractiveness of the regions."
Still in the lead, Lyon is the only market to reach the 100,000-square-meter mark at mid-year. Lille maintains its second place, while Bordeaux, third, and Marseille, fourth, are within a handkerchief of each other, ahead of Rennes, in fifth.
Among significant transactions, BNP Paribas Real Estate highlights the 12,000 square meters leased by Xefi in Lyon, and the 11,000 sqm leased by Commandement de l'air et de l'espace, in Toulouse. In Rennes, Arkea leased 11,000 square meters, while the Lille market recorded two significant transactions with Banque Populaire, 10,100 square meters and Décathlon, 10,000 square meters.
With transactions on the decline, available supply continues to grow over a one-year period, reaching 2.8 million square meters, an increase of 14% year over year, observes the council.
Second-hand space is clearly on the rise, up 17%, compared to the second quarter of last year, as is new space, which is up 7%. New supply accounts for 31% of volume, compared with 69% for second-hand. "Given the expected reduction in new supply in the short and medium term, renovated or restructured premises should largely find takers and boost the market," analyses BNP Paribas Real Estate.
Stabilization of interest rates
On the investment side, the regional commercial property market is down 30% year over year, with €794 million committed in the first half of the year. According to Jean-Laurent de La Prade, "The share of fixed-rate leases in the total amount invested remains at a historically low level. It stands at 14%, compared with 34% over the last five years."
Funds and neo-SCPIs have been driving the market since the start of the year, accounting for a third of investment volume each. Private investors followed with 22% of the same volume.
Significant transactions include A + Finance's acquisition of the Connexion building in Lyon, €38 million, and Norma Capital's €32 million purchase of the Espace Carnot building in Lille.
At a time when markets have seen a sharp decline of more than 200 basis points over the past two years, BNP Paribas Real Estate is seeing a slight reversal in the trend, with prime yields in Lyon and Toulouse down 10 basis points on the first quarter of this year, to 5.65% and 6.0% respectively.
Like the two cities mentioned above, Montpellier's prime yield is down from 6.25% in the first quarter to 5.9% at the end of June. Prime yields in most other regional markets remained stable between the end of March and the end of June, as in Lille, 5.8%, and Marseille, 5.9%.
"The stabilization of rates should continue over the coming months, or even decrease due to the impact of the ECB's key rate cut," comments Jean-Laurent de La Prade. "This trend should stimulate the market by facilitating access to debt, thereby increasing leverage. Paradoxically, at a time when investors have favored alternative products to reduce their exposure to the office, this is the ideal time to invest in this asset class, as we are currently at the bottom of the cycle, with fundamentals that remain solid."