Ravi Chandran
As office space demand rises worldwide, GIC, Singapore’s sovereign wealth fund, has agreed to acquire Tour Ariane, a 40-storey office tower with a gross lettable area of 64,500 m2 for approximately €465 million (S$741 million), from Unibail-Rodamco-Westfield.
Located in the heart of the La Défense business district in Paris, Tour Ariane is within walking distance from two main transport hubs and multiple amenities. Its accessibility and connectivity will further benefit from the Grand Paris project, which will reduce connection times to major airports and train stations. Tour Ariane offers quality space at affordable rents. It presents multiple value creation opportunities over the long term, which GIC expects to capture by investing to enhance the asset.
The asset will be managed by Baumont Real Estate Capital. The transaction is subject to standard conditions precedent and is expected to close in the fourth quarter of 2018.
A Bloomberg report said office space demand increase in Paris pushed transaction volumes there to a 10-year high in the first quarter.
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Bloomberg Intelligence property analyst Sue Munden said that this office space demand could lead to 10 per cent growth in rental values in 2018. Infrastructure projects in the French capital, as well as the 2024 Olympics, will generate opportunities for urban regeneration around the new transport hubs, she wrote.
A recent Knight Frank report said that the office rental market in the Paris region is buoyant, with take-up at its highest level since 2007 and particularly intense activity in the large-transactions segment. The acceleration in economic activity has no doubt played a role, it said.
Philippe Perello, Knight Franks’ CEO of Paris Office and Partner said: “French growth is now in line with the European average, the business world has regained confidence and Paris has been chosen to host the Olympic Games in 2024 against the backdrop of completion of the Grand Paris Express. This “French moment” is examined by Daniel Cohen in greater depth at the start of this new issue of Paris Vision.”
A report by 56 Paris Real Estate said that France is seeing a growing office space demand for its affordable spaces and that occupancy rates in the business district of La Défense are at their highest since 2000.
The agency said: “It’s not just here that there is strong interest in affordable Paris office space. In outlying areas of Paris, businesses are showing the same enthusiasm. These include Boulogne-Billancourt, Neuilly-sur-Seine, Issy-les-Moulineaux and Levallois-Perret. French banks BNP Paribas and Société Générale have recently installed new offices in Fontenay-sous-Bois. Leading water utility company Veolia Environnement is planning to move its headquarters to Aubervilliers.”
Various factors explain the office space demand and one of these could be the Brexit effect on Paris real estate.
It added: “The upswing, though, is mainly due to competitive rents. These are good value compared to central Paris and many other European cities. La Défense, with good transport links, has plenty to offer new occupants. It’s the largest business district in continental Europe and is just four miles west of the Eiffel Tower. It provides large office surfaces where companies can accommodate thousands of workers. In downtown Paris, buildings are far smaller due to zoning laws.”
Data from Immostat showed in April 2018 that office space demand in the Paris area rose in the first quarter to its highest since 2006. Immostat an independent entity created in 2001 to harmonize market statistics for commercial real estate in Greater Paris Region said the demand is driven by improving economic growth.
Paris was listed among the Paris top 10 places where office space demand has risen said a report by Cushman & Wakefield. The cost of the office space, which is nearly half the cost of London, is one reason for the demand to grow.
The report said:
“Escalating rents have driven a growing number of multinational corporations to decrentralize to lower cost areas…At a global level, the average annual cost per workstation rose by 1.5% over the past 12 months…Along with rising occupancy costs, workplace density – the number of workers within a given office space – also increased at a global level in 2017…
“There are discernable trends affecting the rankings of office markets. The phenomenal growth of the technology sector spawned a new generation of firms less wedded to traditional power cities than banks and financial institutions. Technology also enables employees with a laptop and internet connection to work anywhere, changing the corporate landscape as central office buildings increasingly assume a different role in fostering collaboration.”
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