2015 FRENCH MARKET REPORT

Transcription

1 215 FRENCH MARKET REPORT CORPORATE REAL ESTATE

2 215 FRENCH MARKET REPORT PUBLICATION DIRECTOR LAURENT CASTELLANI PUBLICATION EDITOR ISABELLE ASSENS RESEARCH CINDY EMOND DATABASES STEPHEN BOUAZZA DESIGN LOIC SENE VIRGINIE VARDO-COQUOIN

3 EDITORIAL FROM REAL ESTATE EASING TO QUANTITATIVE EASING To our great satisfaction, 214 witnessed a phenomenon of "real estate easing" and French corporate real estate markets behaved overall much better than in 213: the Paris region office take-up bounced back by 9% and exceeded 2 million m²; over 6 transactions of greater than 5, m² were concluded, highlighting large office occupiers' appetite; La Défense business district was particularly successful this year; rental values stabilised, with prime headline rents in Paris CBD still around 75/m²; one year supply for new or restructured offices, which had become plentiful in the Western business districts, started to adjust downwards; at 22bn, investment volumes grew by an impressive 36% year-on-year, which was mostly due to very large deals again this year; last but not least, prime yields moved in, under 4%, while they kept a very attractive spread with historically low interest rates. On that point, it is interesting to note that the ECB decided on 22 January 215 to launch a quantitative easing ("QE") programme in Europe, in an attempt to meet financial market's expectations. Whilst this QE scheme involves buying some of the Euro-zone member sovereign debt, it will actually mean a ECB cash injection of 6bn per month from March 215 to September 216 at the earliest, i.e. an overall amount around 1,1bn. Should this QE scheme be as efficient as those in place since 29 / 21 in the USA and the UK, it would bring a tangible release to the economy. In this case, it is possible to hope that French and European economic growth, as well as real estate market performance, will gain momentum as soon as 215. Isabelle ASSENS Head of Research

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5 CONTENTS The economy and investment in corporate real estate 4 Real estate in its economic and financial environment 5 Investment Office property in the Ile-de-France region 1 Take-up 12 Transactions > 5, m² 14 Movements of large corporates 16 Rents 18 Supply 2 Future supply 21 Outlook for 215 Logistics and light industrial premises 23 Logistics in France 27 Light industrial premises in the Ile-de-France region Appendix 28 Terminology

6 REAL ESTATE IN ITS ECONOMIC AND FINANCIAL ENVIRONMENT FRENCH MARKET REPORT Évolution trimestrielle de la demande placée FRENCH/GERMAN GDP SINCE 28 (%) (p) 215(p) 216(p) Germany France Sources : EUROSTAT, INSEE JOB-SEEKERS IN MAINLAND FRANCE (MILLIONS) 4,5 4 3,5 3 GROWTH PROVES ELUSIVE IN 214 / 215 Despite a slowdown in the economic climate in the last few months, Germany is driving growth in Europe, unlike France which is going through a period of stagnation. Although higher than forecast, the.3% increase in GDP in the third quarter of 214, and projections of between.1% and.2% for the fourth quarter, will not be enough to offset the negative effect of the first half of the year. INSEE's most recent GDP growth forecasts for France are.4% in 214, then.7% in 215, levels slightly below those for the Eurozone (.8% in 214 and 1.% in 215). Changes in the oil price, price competitiveness, credit conditions and budgetary policies have stifled the French recovery since 212. These four elements are likely to continue to have a negative effect of around 1 to 2 GDP points per year in 214/215, one of the reasons why French growth remains well below its annual potential, estimated at between 2.1% and 2.4%. After some concerns during the course of the year, deflation seems to have been avoided, with inflation at around.5% in France and in the Eurozone. The factors supporting the French economy include the falling oil price, historically low interest rates (a 1-year OAT rate of around.9% and 3-month Euribor of.8% at the end of December 214) and the recent depreciation in the euro, which encourages exports. Some indicators from INSEE surveys improved in November, although companies' margin and investment rates are struggling to rise. EMPLOYMENT MARKET REMAINS A CAUSE OF CONCERN 2,5 2 1,5 Q1 28 Q3 28 Q1 29 Q3 29 Q1 21 Q3 21 Q1 211 Q3 211 Q1 212 Q3 212 Q1 213 Q3 213 Q1 214 Q3 214 Unemployed Halo around unemployment Source : INSEE Disappointingly, unemployment in mainland France increased to 9.9% in September, a level close to its historic peak (1% in June 213). The number of job-seekers, as defined by the ILO (International Labour Office) has been stable at 2.8 million for six consecutive quarters. However, a group also exists on the margins of the working population referred to as the "unemployment halo", without being officially included in these figures. The number of this group seeking work has increased by 2% since the start of 28, while the number of unemployed has increased by 5% over the same period. In all, 4.2 million people are looking for work, compared with around three million seven years ago. OBSTACLES TO FRENCH GROWTH (%) (p) 215 (p) Impact on GDP from changes in the oil price -,1,, price competitiveness -,1 -,4,2 credit conditions -,1 -,2 -,1 budgetary policies -1,5-1,2-1, Cumulative effect of the four main impacts -1,8-1,8 -,9 Source : OFCE, KEOPS REFORMS DEEMED INSUFFICIENT BY THE EUROPEAN COMMISSION Five reforms; the CICE (French tax credit for competitiveness and employment), reduced corporate taxes, the new 13-region map, the Macron law and the 5bn programme of public savings between now and 217, are proving slow to have a positive impact. On the contrary, some are generating an unpopular rise in household expenses. The French government has therefore been forced to revise its 215 growth forecast downwards (1% compared with 1.5% hoped for in April) when preparing its 215 Finance Bill. France is under pressure from the European Commission to implement significant structural reforms, since its budget fails to comply with certain criteria in the Stability and Growth Pact: in 215, its public debt will exceed 97% (way above the 6% threshold) and its public deficit will be 4.3%. At the end of 212, it committed to reducing it to 3% from 213, but this has now been postponed until 217. The French budgetary adjustment is now reduced to around.1% of GDP per year. These factors led to the rating agency Fitch downgrading France's sovereign debt to AA in December.

7 FRENCH MARKET REPORT INVESTMENT INVESTMENT IN CORPORATE REAL ESTATE la demande placée de bureaux IN FRANCE ( BN) bn la demande placée de bureaux BREAKDOWN IN 214 COMMITMENTS BY SEGMENT 18% 17% 11% 13% 41% GEOGRAPHICAL BREAKDOWN IN 214 COMMITMENTS 26% 25% 15% 12% 22% < 5M 5 to 1M 1 to 5M 5 to 1bn > 1bn Paris CBD Rest of Paris Inner Western suburbs Rest of Ile-de-France Regions THE THIRD BEST YEAR OF THE DECADE With almost 22bn invested in corporate real estate in France, 214 made a remarkable return to commitment levels recorded before the global financial crisis, despite the economic climate remaining stagnant. Although well below the record amounts of 26 and 27, which achieved or exceeded 25bn, 214 ranks third in the last 1 years, which is great news for the real estate market. Furthermore, the abundance of available liquidity means that transactions were agreed without a leverage effect, with equity invested in real estate reaching the highest levels of the decade. What can explain these high volumes, up by 36% year on year? Firstly, the effect of giga-deals, in other words transactions for a unit amount higher than or equal to 1bn. For the first time ever, there were three of these between January and June. The first acquisition was the prime tertiary building Coeur Défense, in the La Défense business district. The second was a portfolio of shopping galleries distributed around Europe. The last was the sale of Risanamento's portfolio of Parisian offices and retail premises. A change was therefore observed in the nature of these large transactions. In 212/213, Asian and Middle Eastern sovereign funds massively targeted prestigious Parisian properties as "trophy assets". In 214, a lack of supply meant that office buildings in Paris CBD appeared less frequently in the Top 1 for acquisitions, which were all greater than 35m. Only Le Madeleine was sold separately, along with the abovementioned transaction agreed by Risanamento. These three giga-deals alone were enough to boost volumes, with the second half of the year down slightly compared with the first, as in 27, which featured the exceptional 2.1bn transaction for Coeur Défense in April. In addition to these giga-deals, a large number of mega-deals have been representing a growing proportion of the market in recent years, accounting for as much as 7% of volumes in 214, with around 5 transactions for unit amounts of more than 1m, including the sales of 32 Rue Blanche and 25 Rue d'astorg in Paris. These transactions are becoming more diverse in terms of purchasers and products, with three-quarters relating to office buildings and a quarter to retail premises. Investment

8 FRENCH MARKET REPORT INVESTMENT PORTFOLIO SALES > 8M IN FRANCE Number (Nombre de cessions) SHARE OF TRANSACTIONS BETWEEN 2M AND 5M (%) bn(md ) DIVERSIFICATION VIA THE SALE OF RETAIL PREMISES AND PORTFOLIOS The Greater Paris region continues to account for around 75% of volumes. Although it did not undergo any real geographical diversification in 214, the French market nevertheless evolved, turning more towards retail premises, which accounted for more than 5bn, or 24% of volumes, while offices saw their share remain stable at 7%. These property disposals particularly took the form of portfolio sales. The share of these 38 grouped transactions reached a significant level, at around a quarter of volumes ( 5.7bn). Purchasers are no fools and they know that portfolios are rarely of consistent quality. But it nevertheless improves the liquidity of sellers' properties, which often remain difficult to sell individually in the current climate. Portfolios generally involve high sale amounts and consistent resources in order to subsequently manage the properties, often distributed over several towns or regions, or even European countries. This puts them beyond the reach of many purchasers. Those with the necessary resources include French investors such as Carrefour Property France and BNP Paribas REIM, along with foreign investment funds with significant amounts of capital, such as the Blackstone Group, Northwood Investors and the Olayan Group. Transactions relating to single smaller properties (from 2m to 5m) are in decline, representing just 1% of amounts committed, compared with 18% on average over the last 1 years. The main difference between 27 and 214 concerns the activity of this core market, which contracted significantly in 214. Purchasers have certainly become very selective, although the main obstacle is sellers, who are putting off their sales since they expect to have difficulty reinvesting their funds and therefore prefer to maintain their cash flows in place. The lack of supply is becoming one of the main restrictions on the French market, whose dynamism is deceptive. The transactions which are theoretically the most liquid are rarer, and exclude many potential purchasers. Most players in this segment are French, accompanied by a few European investors. INVESTORS ALERT AND READY TO ADAPT In the first half of the year, investors either finalised transactions initiated at the end of 213, or accelerated their acquisitions, due to renewed confidence caused by the recovery in the rental market. Another factor which no doubt boosted acquisitions was the forthcoming introduction of the Pinel Law, which is by definition less favourable to owners. Nevertheless, large transactions declined slightly at the start of the autumn, possibly due to a readjustment in economic fundamentals. France appears to be waiting for the next economic miracle rather than undertaking necessary structural and budget reforms, which has probably dampened some investors' enthusiasm, even though surprisingly resilient end-of-year figures reflect confidence. In any case, most purchasers remain extremely selective, demanding high-quality properties, assuring them stable rental income. Appetite for risk is still very low, with the exception of "off-plan" sales of offices which more than doubled in volume compared to 213, to reach around 2.6bn in France. Progress is even more spectacular for those carried out speculatively or semi-speculatively in the Greater Paris region, which account for around 1bn. Some institutional investors are also diversifying towards clinics and student residences, trusting in the secure revenues from these specific types of property.

9 FRENCH MARKET REPORT INVESTMENT Despite a few large acquisitions of logistics platforms, in the form of portfolios, by funds with a value-added strategy, industrial properties are generally only sought after when secure and high quality, the bleak economic climate being unfavourable to the development of this type of real estate product. Retail premises are very well positioned, on the other hand, both due to sales of high-street shops and portfolio acquisitions; despite lacklustre household consumption and increasingly fierce competition from e-commerce, which could one day threaten the long-term profitability of some commercial real estate investments. Office buildings benefited from the recovery of the rental market in the Greater Paris region, although investors' preference is clearly for properties let on long-term leases. Prime yields are calculated excluding incentives, since the purchaser is generally compensated for these at the time of sale. Nevertheless, more and more real estate players tend to consider that maintaining an artificially high headline rent while granting rent-free periods and other incentives which significantly lower net economic rent is no longer a sustainable solution and that rents should now be assessed at their fair value. By setting a framework for changes to rent, the Pinel law does not help the situation. Market players are also changing. Investment funds and asset managers, particularly from the UK and US, are now responsible for the largest transactions, representing 32% of amounts invested. Then come institutional investors such as insurance companies and OPCIs/SCPIs (28%), followed by real estate investment companies (21%). Sovereign funds, on the other hand, were less active than the previous year, with just 2% of the market in 214. The share of French purchasers was up slightly in 214, at around 62% of investment commitments, compared with barely 6% in 213. American investors accounted for 14%, just ahead of European investors (11%), and Middle Eastern investors were less active at 6%. Globalisation and internationalisation of capital flows are continuing apace, and investment commitments in the French market by foreign investors increased. Nevertheless, it is satisfying to observe that national players are more active than ever, their acquisition amounts having peaked in 214 at over 13bn. While excess public debt is a reality in France, the behaviour of the private market appears to be healthier, having retained a strong investment capacity in equity. Banks continue to closely monitor the financing of projects and the acquisition of risk-free, core products remains the norm for the vast majority of investors. The leverage effect is spreading, however, and purchasers can once again borrow up to 65% of the property's value in most cases. Finally, a new trend emerged in 214, with investors increasingly unable to buy prime or core buildings at yields they consider to be too low. To create value, some have therefore resorted to acquiring empty office buildings, with plans to restructure them or convert them into hotels. In previous years, only a few specialist operators carried out this type of transaction. In 214, the number of investors prepared to take this sort of risk expanded to include other players, leading to greater competition and pushing up the market value of vacant properties. Investment MAJOR INVESTORS FOR TRANSACTIONS > 1M IN 214 ( BN) Insurance companies / Pension funds SIICs / Real estate investment companies Asset / Fund managers Sales Acquisitions

10 FRENCH MARKET REPORT INVESTMENT PRIME OFFICE YIELDS IN FRANCE (%) Paris CBD Inner Western suburbs Inner Rim Regional cities PRIME YIELDS FOR OTHER ASSETS IN FRANCE (%) REAL ESTATE: NOT JUST A SAFE HAVEN, A PROFITABLE ASSET Overall, even taking into account market uncertainty and regulatory adjustments, real estate retains a far higher profitability premium than other financial investments. With the ECB's key rate at almost zero (.5% since 4 September 214) and 1yr French government bond (OAT) rates below 1% at the end of 214, even with a prime yield of just 4% in Paris's CBD, the alternative looks appealing. Few other products offer such a high yield without taking major risk. Real estate, which was a safe haven for securing capital a few years ago, is therefore again an investment asset offering fairly satisfactory profitability. In fact, by the simple application of interest rates, which real estate investors can only observe without having any control over them, the risk premium attached to corporate real estate increased in 214. This is more good news for the sector, even if further vigilance is required since this appeal may wane once the European macro-economic and financial environment returns to normal. This risk premium fairly high at around 3 basis points for the best properties also helps keep investors away from non-prime assets. That section of the market has therefore withered, its transparency has decreased and the ranges of yields on secondary properties are more theoretical than ever, disparate and without any real link to the quality of the building itself. Rather than adopting a returnbased approach, some investors appear to be paying more attention to the market value of the property when deciding their sale or acquisition price, and its capacity not to lose value rather than to create it Light industrial premises Logistics Shopping centres High street shops PRIME OFFICE RETURNS VS 1-YEAR FRENCH GOVERNMENT BOND RATES (%) Risk premium for prime Paris CBD offices 1-year French government bond rates (OAT) annual average, BANQUE DE FRANCE

11 FRENCH MARKET REPORT INVESTMENT INTEREST RATE AND PRICES IN FRANCE (%) ECB key interest rate Inflation rate in France Source : BCE, INSEE CCI AND ILAT INDICES (%) Q1 29 Q3 29 Q Q3 21 Q1 211 Q3 211 Q1 212 ILAT (index of tertiary activity rents) CCI (construction cost index) Q3 212 Q1 213 Q3 213 Q1 214 Q3 214 OUTLOOK CONTINUES TO LOOK VERY PROMISING Unless the recently announced reforms have a rapid and spectacular effect, French and European growth prospects currently remain very uncertain for the next two years. In the absence of a tangible economic recovery, the ECB is unlikely to raise its key rate in the coming months, and without an increase in the interest rate, real estate is set to retain its appeal for most investors in the short term. Despite their uncertainty over public finances and the high level of unemployment in France, UK, US and Asian investors are likely to increase their investments in light of the weaker euro. Furthermore, the signing last September of the tax agreement between France and Luxembourg removed some doubts, ending the exemption applicable to capital gains from a sale, by a Luxembourg entity, of shares in a company which owns a building in France. Since this arrangement, involving a holding company or a trust, is common, investors are adapting to these new provisions which will apply from 215. At the same time, the context of sustained low inflation prevents investors systematically anticipating rent increases as they have done in the past. The anticipated annual volume for 215 is therefore around 2bn. This forecast, lower than the level seen in 214, mainly reflects the lack of properties available for sale. In particular, it takes account of a possible slowdown in mega- and giga-deals. This reflects the fact that "trophy assets" are very rare in Paris and many of them have already changed hands in the past two or three years, with portfolio sales having been very active in 214, raising the question of where these exceptional acquisitions will come from in the future, despite sources of capital still being abundant on the market. Since the residential sector is affected by weak demand, legislation and falling prices, national institutional and private investors are likely to focus more on corporate real estate. This tendency can be explained by the development of SCPI-type vehicles, with inflows possibly in excess of 3bn in 215. These investment vehicles are a solution for savers who want to build up retirement capital or an annuity providing extra income. The diversification which began to emerge recently is set to continue next year. Many institutional investors, whose exposure to real estate asset classes remains very low, are seeking to expand their portfolio. They also have the constant need to reinvest funds generated by previous disposals. Faced with the scarcity of core supply, they need to seize opportunities as they arise and adopt slightly bolder strategies. Further acquisitions of vacant Parisian buildings may therefore be carried out in 215, following those in 214. In terms of sales, developers will no doubt be fairly inactive, due to a lack of projects launched recently. Asset managers, real estate investment companies and other institutional investors should continue to optimise their assets. Once a building has been restructured or renovated and then let, it is generally put up for sale, since this type of good quality property, offering secure cash flows, is still highly sought-after and liquid. In parallel, following expected inflows of around 47m for 214, the French government could place further assets on the market in order to replenish public finances. Apart from slight downward pressure, no change in prime yields is anticipated, since the market remains highly competitive for the best products. The range of yields for the most difficult properties will only begin to be squeezed if demand takes off, which is not expected to happen before the end of 215 at the earliest, once the economic environment and the employment market have picked up slightly. Investment

12 FRENCH MARKET REPORT TAKE-UP la demande placée de bureaux ILE-DE-FRANCE REGION OFFICE TAKE-UP (MILLIONS OF M²) , PROPORTION OF OWNER-OCCUPIER SALES (% OF M²) 1% 9% Owner-occupier sales lettings TAKE-UP la demande BY SEGMENT placée de bureaux (MILLIONS OF M²) 1,2 1,8,6,4,2 < 6 m² 6 to 1,5 to 1,5 m² 5, m² > 5, m² A VINTAGE YEAR IN 214 WITH 2 MILLION M² Take-up in 214 reached 2.37 million m², up by 9% compared with 213. This is a good level in an economic climate which remained turbulent throughout the year. Caution is still widespread, however, and companies continued to look for the best value for money, as they did in 213. They were prepared to compare a large number of buildings before making decisions, as well as renegotiating their existing leases. Some users chose the city's Inner Suburbs, which offer more recent buildings and better services, for lower rents. The most striking event of 214 was undoubtedly the return of very large transactions, which had been completely absent from the market the previous year, with three transactions of greater than 4, m², including VÉOLIA at Le Millénaire in Aubervilliers and SAFRAN in Magny-les- Hameaux in Yvelines. Despite these major deals, however, the segment for transactions of greater than 5, m² remains below the 13% average for , making its 2% year-on-year increase relative. A new trend clearly emerged in 214: the proportion of renovated offices in transactions of greater than 5, m² rebounded to account for 25% of take-up, compared with just 13% the previous year. Companies such as TARKETT SA (6,6 m² in La Défense) and MONDIAL ASSISTANCE (17,6 m² in Saint-Ouen) chose the interesting alternative offered by these products. Take-up of small and medium-sized surface areas has proved relatively stable over time, at between 1 and 1.2 million m² in general. The 214 vintage was no exception, falling into the upper end of this range. As in previous years, small and medium-sized companies opted for second-hand offices, essentially due to a lack of opportunities. The share of new and restructured offices in transactions of less than 5, m² therefore recorded a fall of 23% compared with the previous year. Another trend in 214 was that take-up of between 1,5 m² and 5, m² fell by 14% compared with 213. Over recent years, companies have cut down the number of sites they occupy to consolidate in very large buildings, gradually abandoning this category of surface area. Faced with the fall in demand from some of the largest potential users, this market could be supported by the almost systematic divisibility of supply greater than 5, m², offering very high-quality offices to a wider range of tenants. Finally, 214 proved a poor year for owneroccupier sales, which saw a 3% fall compared with the average. Own-account transactions became scarcer and the downward trend was even more pronounced for transactions of less than 5, m², in which sales accounted for just 5% of take-up, down from an average of 1% over the past 1 years. Although demand for acquisitions remained high, opportunities were rare, with the only buildings offered often being obsolete but expensive, and therefore out of line with the needs of occupier-purchasers. Indeed the limited nature of companies' budgets was reflected in the fact that two-thirds of surface areas sold achieved a price of less than 5,/m², compared with only half the total of previous years.

13 FRENCH MARKET REPORT TAKE-UP la demande placée de bureaux TAKE-UP BY DEPARTMENT (MILLIONS OF M²) Outer Rim MAJOR COMEBACK BY LA DÉFENSE The departments of Paris and Hauts-de-Seine alone accounted for 8% of transactions in 214. While take-up rose by 13% in Paris, the clear leader was La Défense, which stole the show this year. The business district achieved take-up of 236, m², more than double that of 213, which had admittedly represented a major slowdown. In fact, the 2, m² had not been exceeded since the record year of 28. Companies' renewed interest in the business district is explained by excellent quality buildings and the adjustment made to rents throughout 213. In the shadow of this very localised recovery, take-up in Hauts-de-Seine, excluding La Défense, recorded a significant decline. Only the areas of Neuilly-Levallois and Rueil-Saint-Cloud-Suresnes displayed any dynamism. Seine-Saint-Denis has suffered a steady downward trend since 211. New supply in that department has fallen by 27% over the same period, resulting in a gradual loss of interest among users. In Val-de-Marne, although take-up increased, it remains incidental, accounting for barely 4% of the total for the Greater Paris region. Despite the lack of large own-account transactions, the market in the Outer Suburbs performed relatively well. However, if SAFRAN's acquisition of 43, m² in Magny-les-Hameaux is excluded, 214 take-up is the lowest of the decade, highlighting this area's continued difficulties in attracting tenants. Offices 214 ACTIVITY LEVELS (TAKE-UP/OFFICE STOCK) CERGY The calculations have been carried out in accordance with the subsectors adopted by KEOPS. < 3 % from 3 to 6 % from 6 to 9 % NANTERRE 16 BOIS DE BOULOGNE PARIS BOBIGNY BOIS DE VINCENNES > 9 % La Défense VERSAILLES CRÉTEIL ÉVRY

14 FRENCH MARKET REPORT TRANSACTIONS > 5, M² NEW AND RESTRUCTURED OFFICES AS A la demande placée de bureaux PROPORTION OF TAKE-UP > 5, M² (MILLIONS OF M²) 1,2 1,8,6,4, New and restructured offices 2 nd hand offices NUMBER OF TRANSACTIONS > 5, M² la demande placée de bureaux 5, to 1, m² 1, to 2, m² > 2, m² SUCCESS FOR PRE-LETTINGS AND LA DÉFENSE Having reached a low point in 213, transactions of greater than 5, m² picked up again in 214. With 838,2 m² let to large users, a 2% increase in volumes was recorded compared with the previous year. The number of movements remained almost constant at around 6. Compared with the last 1 years, however, 214 recorded the third lowest level of take-up for this category of surface area, which accounted for 41% of take-up in the Greater Paris region. As a reminder, this category varied between 43% and 48%, from 26 to 212. Having highlighted these nuances, one of the key trends of the year was the recovery in transactions of greater than 4, m², of which there were three compared with none in 213. By extension, the segment of transactions of greater than 2, m² recorded the sharpest increase, of around 34%, reflecting large companies' continuing focus on consolidation. These moves continue to be motivated by the desire to rationalise surface areas and reduce real estate costs. Overall, the breakdown by category of surface area is relatively well balanced. Transactions of between 5, m² and 2, m² were up slightly compared with 213, at around 48, m² of take-up. Once again, this level remains 13% below the average for the last 1 years, this slowdown no doubt being due to the large consolidations seen up to 212. Furthermore, immediately available supply for these categories of surface area, from 5, m² to 2, m², has never been higher. Pre-letting of buildings under construction or in the process of restructuring reached a particularly high level, both in number and by volume, in the Greater Paris region. They accounted for 45% of transactions of greater than 5, m². While 13% of pre-lettings concerned offices deliverable in 214, the vast majority related to buildings due in 215 and 216. Companies are taking forward positions on projects located in areas where first-hand supply is starting to become scarcer, i.e. Paris CBD, Rueil-Malmaison, as well as the Outer Suburbs. Own-account transactions have meanwhile been few and far between. After 11 in 213, only one was signed this year SMABTP for 35, m² in the 15 th arrondissement. Three business sectors account for just over half of tenants carrying out large transactions. In addition to industry, which continues to consume large amounts of surface area, banks and above all insurance companies are back after two years of near absence, with total take-up of 23, m². MONDIAL ASSISTANCE (17,6 m² in Eurosquare 2 in Saint-Ouen), LA MUTUELLE GÉNÉRALE (13,2 m² in Pushed Slab in Paris 13), COVÉA AZUR GMF (22,2 m² in Tivoli in Paris 9), KLÉSIA (1,4 m² in Strato in Paris 17) are among the year's most notable transactions. The public and parapublic sector was less in evidence in 214, with just 47, m² of take-up, half its level of the previous year. The main piece of good news in 214, from a geographical perspective, was the impressive recovery in the market in La Défense, which accounted for 2% of take-up due to 13 transactions of greater than 5, m² signed in a year. In contrast to the rest of the Greater Paris region market, these large transactions all relate to buildings which have already been delivered, users having seized immediate opportunities offering unrivalled value for money in this business district. Another positive signal is that large transactions are up significantly in Paris, with SNI opting for 23, m² in the 13 th, for example, as well as the COVÉA AZUR GMF transaction mentioned above. At the end of the year, transactions of greater than 5, m² amounted to 25, m² in the capital, compared with just 13,8 m² in 213.

15 FRENCH MARKET REPORT TRANSACTIONS > 5, M² TRANSACTIONS > 5, M² OF WHICH NEW AND RESTRUCTURED OFFICES Number Volume Change vs. 213 Number Volume Change vs. 213 Paris CBD 1 94,1 m² 6 64,1 m² Offices Rest of Paris ,2 m² 7 114,4 m² La Défense ,3 m² 8 116,4 m² Inner Western suburbs excl. La Défense ,8 m² 9 162, m² Seine-Saint-Denis 6 89,3 m² 2 5,4 m² Val-de-Marne 1 17,7 m² 1 17,7 m² Seine-et-Marne 1 14, m² 1 14, m² Yvelines 4 64,9 m² 3 21,9 m² Essonne m² m² Val-d'Oise m² m² Total Ile-de-France ,2 m² 37 56,9 m² SELECTION OF TRANSACTIONS AXA IM KPMG L'ORÉAL L'ORÉAL VÉOLIA ENVIRONNEMENT MINISTÈRE DE L'INTÉRIEUR SNI SMABTP SOLOCAL SAFRAN Bailly Guyancourt L'Haÿles-Roses Saint- Germainen-Laye Mareil- Marly Marlyle-Roi Toussusle-Noble St-Rémy- lès- Chevreuse Le Pecq Châteaufort Le Port Marly Croissysur-Seine Rueil- Bougival Malmaison St-Aubin Carrièressur-Seine Maisons- Laffitte Le Mesnil- le- Roi Montesson Le Vésinet Louveciennes Buc Les Logesen-Josas La Celle- Saint-Cloud Rocquencourt Le Chesnay VERSAILLES 1 Chatou Sartrouville Garches Vaucresson Marnesla Coquette Villed'Avray Chaville Viroflay Saclay Houilles Verrièresle-Buisson Villiersle-Bâcle NANTERRE Jouy-en- Josas Vélizy- Villacoublay Suresnes Saint- Cloud Sèvres Bièvres Vauhallan Bezons 16 Gennevilliers La Garenne- Colombes Clichy Courbevoie 4 1 Levallois- Perret Neuillysur-Seine Puteaux 17 Colombes Asnières- sur- Bois- Seine Colombes 15 Meudon Argenteuil Igny Palaiseau Issy-les Moulineaux Clamart Le- Plessis- Robinson Châtenay- Malabry 8 Sceaux 8 7 St- Ouen 14 6 Fresnes Noisyle-Sec Romainville Ile- Villeneuve- Stla- Denis Garenne Saint-Denis Vanves Malakoff Montrouge Gentilly Châtillon Arcueil Bagneux Fontenay- Cachan aux- Roses Massy Champlan Antony PARIS Bourg- la- Reine Chilly- Mazarin Wissous 3 4 Boulogne- Billancourt 13 Le Kremlin Bicêtre Villejuif Chevilly- Larue Villetaneuse Epinaysur-Seine Pierrefitte- sur- Stains Seine Rungis Paray- Vieille- Poste La Courneuve Aubervilliers 7 5 Thiais 12 2 Vitry-sur-Seine Vigneuxsur-Seine Athis- Mons Orly Pantin Le Pré- St-Gervais Dugny Le Bourget Les Lilas 6 Bonneuil en-france Vincennes St- Mandé Villeneuve-le-Roi Drancy Bois de Vincennes Ablonsur-Seine St-Maurice St-Maurdes-Fossé Charentonle-Pont Maisons- Alfort Le Blanc- Mesnil Ville Rosnysous-Bois Bagnolet Montreuil CRÉTEIL Villeneuve- St- Georges Aulnay- sous- Bois Les Pavillo sou Bondy Bo Le Perre sur- Mar Cha sur Choisyle-Roi Ivrysur-Seine Alfortville Bonneuil- sur- Marne Ne Plai Limeil- Brévannes Yerres Br

16 FRENCH MARKET REPORT MOVEMENTS OF LARGE CORPORATES METHODOLOGY : MAP OF MAIN MOVES BY LARGE USERS For the 175 transactions of greater than 5, m² of office space in the Ile-de-France region recorded between 212 and 214, we have studied the original department and destination department as well as the reasons for large user movements. value DEFINITIONS : Endogenous movements Exogenous movements 92-Hauts-de-Seine 864,2 m² 95-Val-d Oise 5,4 m² 21,2 m² 17,7 m² 5,9 m² 113,4 m² 2,8 m² 93-Seine-Saint-Denis 139,2 m² 75,2 m² 12,8 m² Paris CBD + 7 th arr. 43,6 m² 26, m² 45,1 m² Rest of Paris 337,5 m² 97,2 m² 77-Seine-et-Marne 6,1 m² 6,6 m² Endogenous movements: moves by companies within their original department. Exogenous movements: moves by companies choosing to leave their original department. 78-Yvelines 116,4 m² 67,3 m² 33, m² 7,6 m² 1,4 m² 5,8 m² 94-Val-de-Marne 91,9 m² 25, m² 91-Essonne 12,8 m² MOVEMENTS BY LARGE CORPORATES To From Paris CBD + 7 th arr. Rest of Paris Paris CBD + 7 th arr. 26, m² 45,1 m² 2,8 m² 1,4 m² Rest of Paris 43,6 m² 337,5 m² 7,6 m² 6,1 m² 5,8 m² ,4 m² 67,3 m² 864,2 m² 5,9 m² 77 6,6 m² 12,8 m² ,4 m² 91 33, m² 12,8 m² 93 75,2 m² 97,2 m² 17,7 m² 139,2 m² 5,4 m² 94 25, m² 91,9 m² 95 21,2 m²

17 FRENCH MARKET REPORT MOVEMENTS OF LARGE CORPORATES REASONS FOR MOVES BY LARGE USERS (FROM A SAMPLE OF 12 TRANSACTIONS, IN M²) 14% 13% 56% 1% 7% Consolidation Cost savings Extension Modernity Other EXODUS TO THE INNER SUBURBS A new trend seems to have emerged in 214, with more companies deciding to move department and fewer relocations within departments, which fell from 8% of transactions in 213 to 7% in 214. Unsurprisingly, in the last three years 6% of these movements between departments have involved leaving Paris for the Inner Suburbs. This phenomenon is not new and the Inner Suburbs offer serious advantages, from available land to ambitious construction projects, lower rents, and a well developed public transport network which is constantly expanding. More specifically, companies have left Paris CBD, either for a cheaper arrondissement while remaining in the capital, or for the Inner Suburbs. In the last three years, a total of 16 companies have left this prestigious business district, including nine movements of greater than 1, m², in favour of Hauts-de-Seine and Seine-Saint-Denis. Meanwhile, just seven companies have moved there over the same period, including NEXITY, KLÉSIA and BPI, and the average size of these incoming moves 12, m² is slightly below moves from the CBD to other areas. These trends are clearly the result of consolidations and the search for savings. Since the start of 212, two-thirds of large movements have been motivated by one or other of these reasons. Consolidation of companies' premises and the sharp rise in the proportion of renovated offices in take-up of large surface areas also reflect this financial optimisation by tenants, accompanied by numerous medium-sized, second-hand vacations. Even the much publicised success of La Défense this year, with 13 large transactions signed there, results primarily from economic decisions, since new and restructured supply had become abundant there, leading to an adjustment in rents at the end of 213/early 214, attracting new users. To illustrate this, in recent years tenants in two out of three transactions had relocated from within La Défense, but in 214 only a third were strictly internal. The largest business district in Europe again demonstrated its capacity to attract companies from the west of the Greater Paris region and, more specifically, neighbouring districts in Hauts-de-Seine, these newcomers often coming from the towns of Puteaux, Nanterre or Neuilly-sur-Seine. Similarly, movements in the Outer Suburbs also remain mostly endogenous. For example, DASSAULT SYSTÈMES leased an extension in Vélizy-Villacoublay and SAFRAN purchased 43, m² in Magny-les-Hameaux, despite already having a site at Saint-Quentin-en- Yvelines. Other exogenous movements within the region since 212 concern one-off projects, such as EDF which left Clamart (92) for a 33, m² building in Palaiseau (91), and CASINO which left Gretz-Armainvilliers (77) to move to 25, m² in Vitry-sur-Seine (94). Two other moves were from the Hauts-de-Seine department to the commune of Saint-Ouen (93). When these companies change department, their approach often involves remaining in an area close to the Outer Suburbs. Relocations therefore mainly occur between Paris and the Inner Suburbs, which is now considered very attractive for large users in the Greater Paris region. Offices

18 FRENCH MARKET REPORT RENTS AVERAGE FIRST-HAND HEADLINE RENTS ( /M²/YEAR EXCL. TAXES AND CHARGES) REDUCTION IN THE GAP BETWEEN PRIME VALUES IN PARIS CBD AND LA DÉFENSE H1 25 H2 25 H1 26 H2 26 H1 27 H2 27 H1 28 H2 28 H1 29 H2 29 H1 21 H2 21 H1 211 H2 211 H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 Paris CBD Saint-Denis SQY / Outer Rim La Défense Boulogne-Billancourt AVERAGE SECOND-HAND HEADLINE RENTS ( /M²/YEAR EXCL. TAXES AND CHARGES) In a bleak economic context, take-up of new and restructured offices is 2% below its average. The relatively controlled level of supply supported headline rents, which remained stable, especially in Paris, where opportunities are rarer. Owners also proved very cautious, preferring to adjust their asking rents at the start of the year. This led to stagnation in prime rents, or even falls in some business districts. In Paris CBD, the highest value was no more than 75/m² despite a few large transactions. Not all areas behaved in the same way, however, while Paris was suffering from scarcity of first-hand supply, the Hauts-de-Seine benefited from the exceptional recovery of take-up in La Défense, which led to an increase in new and restructured rents. Average headline rents for this district in 214 were around 48/m², up from 44/m² in 213. Several leases were agreed for more than 5/m². Levallois-Perret also encountered some success with a large number of leases for new and restructured offices, at headline rents generally between 38 and 47/m², so largely more affordable than in Paris CBD. In Boulogne-Billancourt, transactions related to the remainder of new buildings, mostly delivered between 29 and 213. A single pre-letting was recorded, by SOLOCAL in Citylights for a headline rent of 43/m². In Seine-Saint-Denis and Val-de-Marne, headline rents can exceed 3/m², particularly in the Biopark in Villejuif and Le Millénaire in Aubervilliers. Finally, in the Outer Suburbs, with the exception of DASSAULT SYSTÈMES, which leased 11, m² in Vélizy-Villacoublay for 27/m², transaction values are between 17 and 23/m². Again in 214, users were looking for the best price and incentives remained quite high, from 15% to 2% of headline rent in the main Parisian business districts, sometimes with negotiations for much more, particularly in La Défense. 1 H1 25 H2 25 H1 26 H2 26 H1 27 H2 27 H1 28 H2 28 H1 29 H2 29 H1 21 H2 21 H1 211 H2 211 H1 212 H2 212 H1 213 H2 213 H1 214 H2 214 Paris CBD Saint-Denis SQY / Outer Rim La Défense Boulogne-Billancourt RANGE OF PRIME RENTS IN THE ILE-DE-FRANCE REGION ( /M²/YEAR EXCL. TAXES AND CHARGES) Paris CBD + 7 th arr. Southern Paris La Défense and Neuilly-sur-Seine Boulogne - Issy Northern Paris Northern Hauts-de-Seine Saint-Denis - Saint-Ouen Outer Rim

19 FRENCH MARKET REPORT RENTS METHODOLOGY : WEAKNESS IN THE OUTER SUBURBS Index of second-hand rents in Ile-de-France The KEOPS Research Department has put together a rental index for the Ile-de-France region, based on headline rents for second-hand office space transactions. This quarterly index has been backdated to 1/1/22. Its general principle consists in fixing the geographic breakdown of the sample so that locations of transactions from one quarter to the next do not influence changes in the index. Creation of the sample More than 13 million m² of second-hand offices were transacted in 22 boroughs between 25 and 214. From these, we have selected 6 boroughs accounting for 82% of the transaction volume over the period. Take-up between 1/1/25 and 31/12/214 determines each borough s final weighting in the index. The second-hand rent index stood at 16.3 at the end of 214. This is up slightly on the previous quarter, but down 1% over a year. This increase remained very moderate, since users are continuing to favour the lowest rents, while not neglecting the quality of the asset. Renovated offices accounted for a significant share of take-up in 214, displaying a 25% increase compared with the previous year. These renovations were much more common in the Inner Suburbs than in Paris. As a result, the second-hand rent index remained fairly stable in the capital, ending the year at This astonishing stability has been seen since the beginning of 212, with this indicator constantly oscillating between 113 and 115. In Hauts-de-Seine, the index was supported by renovated offices, but also by a few signatures in the Cœur Défense building for more than 5/m². The fall in rental values was reserved for the Outer Suburbs. The index there is down by 6% since the start of 212, and has not been so low since 29. Office assets are generally in an average state of repair, or even obsolete, and rent negotiations are more frequent, and sometimes very tense. Furthermore, although a very recent trend seems to suggest that rents are rising in some geographical areas, the abundance of secondhand offices in the Greater Paris region should prevent any significant increase in the rental index in 215. Offices Calculation of the index The average rent for the last six months of transactions is recorded for each borough once a quarter. A weighted average rent for the Ilede-France region (see creation of the sample) is then calculated and converted to base 1 in Q1 22. If there are no transactions listed for the last six months, the average rent for the previous quarter is used. Department Number of boroughs in the sample Representativeness of the sample (% take-up in the department) Proportion of take-up in the Ile-de-France region Paris 12 9% 36% Hauts-de-Seine 14 86% 29% Seine-Saint-Denis 6 71% 5% Val-de-Marne 6 57% 3% Seine-et-Marne 3 27% 1% Yvelines 9 6% 3% Essonne 6 58% 2% Val-d'Oise 4 69% 2% KEOPS INDEX FOR SECOND-HAND RENTS IN THE ILE-DE-FRANCE REGION , Q2 22 Q4 22 Q2 23 Q4 23 Q2 24 Q4 24 Q2 25 Q4 25 Q2 26 Q4 26 Q2 27 Q4 27 Q2 28 Q4 28 Q2 29 Q4 29 Q2 21 Q4 21 Q2 211 Q4 211 Q2 212 Q4 212 Q2 213 Q4 213 Q2 214 Q4 214 CCI Keops Index for 2 nd hand rents

20 FRENCH MARKET REPORT SUPPLY SUPPLY IN THE ILE-DE-FRANCE REGION (MILLIONS OF M²) Immediate supply One year supply TYPOLOGY OF ONE YEAR SUPPLY (MILLIONS Évolution OF trimestrielle M²) de la demande placée Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 29 Q1 21 Q1 211 Q1 212 Q1 213 Q1 214 Q1 215 New and restructured offices 2 nd hand offices SUPPLY BY AREA (MILLIONS OF M²) Paris Inner Western suburbs Rest of Inner Rim Outer Rim A RECORDBREAKING YEAR A number of records were broken in office supply in the Greater Paris region during 214. Immediate supply reached a historically high level with 4.2 million m², despite significant take-up. There were two reasons for this upward trend. Firstly, 45% of the surface area of large transactions recorded in 214 actually related to pre-letting of new or restructured buildings to be delivered, leaving available supply unaffected. Secondly, large surface areas were delivered or vacated during the year, including 2, m² of renovated offices in La Grande Arche in La Défense, the remaining 33, m² in the Majunga tower also in La Défense, and the vacation of 22, m² on the Saint-Christophe campus in Cergy. One year supply also continued to increase, setting another record at 5.4 million m². This is most evident in the medium-sized surface area segment, from 6 m² to 5, m². It is the result of partial leases in large buildings, leaving remaining premises to let of less than 5, m². Geographically, and for the fourth consecutive year, supply grew significantly in the capital. With 1.4 million m² available, this abundance conceals differing situations depending on the type of premises and district of Paris. The Outer Suburbs were also active, with the vacation in Cergy mentioned above, as well as 42,7 m² of offices renovated in Nieuport in Vélizy-Villacoublay. This large number of vacations of secondhand properties can be explained by the major consolidations of recent years. There was some good news however. As a result of the recovery of take-up in La Défense, supply is beginning to fall in Hauts-de-Seine. Although the department still accounts for 39% of available supply in the Paris region, one year supply has therefore fallen by 12% since the end of 213. Aside from these geographical observations, first-hand supply increased significantly, to 1.37 million m² an equivalent level to the end of 29/early 21. Second-hand supply, however, worryingly accounts for 74% of availability, the highest proportion ever recorded for one year supply. Furthermore, there is a widening disparity between the quality of supply of greater than 5, m², three-quarters of which is new, restructured or renovated, and the quality of supply of less than 5, m², 56% of which is in an average state of repair. In a real sign of growing awareness among owners, renovation of offices of less than 5, m² are soaring, however, by +12% year on year. That is another new record, since 85, m² of renovated small and medium-sized surface areas are currently on offer, while improvement works had previously generally been reserved for offices of greater than 5, m². As for large premises, these medium-sized renovations are attracting significant attention from users looking for the best quality at the most attractive rent. Secondhand premises are more difficult to let, however. This applies both to small surface areas, most of which are in an average state of repair, and large surface areas, in which used premises are taking up an increasing share.,5 1 1,5 2 2,

21 FRENCH MARKET REPORT SUPPLY MARKETING PERIODS AND VACANCY (months) (%) Marketing periods (months) Vacancy rate (%) SLOWER MARKETING PERIODS FOR SECOND-HAND SUPPLY The vacancy rate increased sharply and now stands at 7.9% for the Greater Paris region as a whole. Immediate supply has not reached this level since 1995 and it is taking longer to market, despite dynamic take-up in 214. It will now take two years to market the 4.2 million m² available. This increase in immediate supply affects new and restructured offices as much as secondhand offices, although it has a different impact on their respective marketing periods. Although theoretically it takes just 14 months to market first-hand supply, marketing second-hand supply takes twice as long (2.5 years). Perhaps surprisingly, marketing periods for supply remain stable in most areas of the Greater Paris region market, whether looking back at levels of take-up over 3 years or 1 years. It seems to be picking up a little for areas in the Inner Suburbs such as Pantin- Aubervilliers, where several large construction projects have boosted the market in recent years in the Parc du Millénaire and the Grands Moulins de Pantin. Another example is Neuilly-Levallois, where L'ORÉAL agreed several large transactions ín 214. In the Outer Suburbs, in contrast, where immediate supply takes longest to market, times have lengthened considerably in recent years, particularly in Bassin d Argenteuil, Évry, Massy-Antony, and Versailles-Vélizy. Saclay- Courtabœuf stands out as a result of the large transaction carried out by EDF in Palaiseau in 212, which reduced marketing periods on that market. Overall, more than half of areas in the Greater Paris region are well-balanced or present interesting opportunities for tenants at the start of 215. While the La Défense business district still suffers from excess supply, as illustrated by its high vacancy rate, it is important to bear in mind that one year supply fell by 2% there in 214 as a result of numerous large transactions. Offices MAP OF SUPPLY IN MARKET AREAS 16 % 14 % 12 % 1 % 8 % 6 % IDF marketing period = 24 months Neuilly - Levallois Boulogne - Issy Saint-Denis - Saint-Ouen Paris Ouest - QCA La Défense Courbevoie - Puteaux - Nanterre Montreuil - Bagnolet Hauts-de-Seine Sud Saclay - Courtaboeuf Hauts-de-Seine Nord Saint-Quentin-en-Yvelines Rueil - Saint-Cloud - Surenes Massy - Antony Paris Nord Ivry - Gentilly Pantin - Aubervilliers Versailles - Vélizy Évry (142 months) Paris Nord 2 Saint-Germain-en-Laye Orly - Rungis Cergy-Pontoise Marne-la-Vallée IDF vacancy rate = 7.9 % Bassin d Argenteuil 4 % 2 % Paris Sud Paris Est Vincennes - Créteil % month 1 months 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 1 months Balanced markets Markets offering opportunities IDF vacancy rate = 7.9 % Markets with insufficient demand Over-supplied markets IDF marketing period = 24 months