195,200 sq m THE LETTING MARKET - H PARIS CBD. Take up. Size of transactions H1 2015

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1 THE LETTING MARKET - H PARIS CBD Take up 195,200 sq m Take up in sq m 395, , ,100 Q1 Q2 85, ,600 90,000 Q3 Q4 119,800 94, ,500 91, ,200 75,000 85, , ,800 95,800 79,500 79,400 94,500 94,600 99,400 70,800 62, %: transactional activity in the CBD proved stable and solid at the start of 2015 despite the more fragile regional environment (-22% compared with H1 2014) The results observed are particularly encouraging in the small surface area segment (smaller than 1,000 sq m), with this core element of the CBD market having grown strongly (+12% in a quarter) Despite two transactions of more than 5,000 sq m (exclusively in the Financial City), transactional activity for large surface areas has lost momentum, although it should be noted that H was exceptional in this respect (five transactions) The rise of the CBD reflects its appeal to users, who have proved very responsive to the moderate marketing values The CBD accounts for 12% of regional transactional activity in H Size of transactions 22% 2 20% 9% 8% 5% 6% 6% 17% 10% 14% 24% 21% 20% 42% 38% % 40% 34% 3 39% 37% 25% 20% 25% 2 41% 40% 41% 42% 35% 49% H H12015 Small areas ( 1,000 sq m) Medium areas (from 1,000 to 5,000 sq m) Large areas (from 5,000 to 20,000 sq m) Very large areas ( 20,000 sq m)

2 Examples of transactions Transactions 1,000 sq m Tenant Address Date Area Rent Quality China Construction Bank Europe SA 86 boulevard Haussmann - Paris 8 th April sq m NA Renovated Interparfums 1 Rd-Pt des Champs-Elysées - Paris 8 th April sq m 645 Renovated Confidential 37 rue de la Victoire - Paris 9 th March sq m 460 State of repair Ecovadis 43/47 ave. de la Grande Armée - Paris 17 th March sq m NA State of repair Tag Commander 3/5 rue Saint-Georges - Paris 9 th March sq m 420 Renovated Tagerim 76/78 ave. des Champs-Elysées - Paris 8 th March sq m 550 State of repair Avenir Finance 12/14 rue Médéric - Paris 17 th Feb sq m 475 New Vatier & Associés 25 avenue George V - Paris 8 th Feb sq m 560 State of repair Insurance company 38 avenue de l Opéra - Paris 2 nd Jan sq m NA Renovated Actility 65/67 rue de la Victoire - Paris 9 th Jan sq m NA Renovated NCA Avocats 50 rue Boissière - Paris 16 th Jan sq m 440 State of repair Transactions from 1,000 to 5,000 sq m Tenant Address Date Area Rent Quality French group 15 avenue d Iéna - Paris 16 th June ,500 sq m NA Renovated Sungard Financial Systems 46/50 rue ND des Victoires - Paris 2 th May ,900 sq m NA Renovated Néoxam 46/50 rue ND des Victoires - Paris 2 th May ,070 sq m NA Renovated Finance Active 46/50 rue ND des Victoires - Paris 2 th May ,500 sq m NA Renovated Korian 21/25 rue Balzac - Paris 8 th March ,000 sq m NA Renovated Edelman 25 rue Jean Goujon - Paris 8 th March ,100 sq m 540 New Musée du Louvre 4/8 rue Sainte-Anne - Paris 1 st March ,090 sq m 516 Renovated Les Entreprises du Médicament 58 bd Gouvion de Saint-Cyr - Paris 17 th Feb ,090 sq m NA State of repair Klépierre 94 rue de Provence - Paris 9 th Feb ,530 sq m 500 Renovated Banque de France 111/119 rue Réaumur - Paris 2 th Jan ,555 sq m 565 Renovated Cushman & Wakefield 21/25 rue Balzac - Paris 8 th Jan ,180 sq m NA Renovated Transactions 5, 000 sq m Tenant Address Date Area Rent Quality Exane # Cloud - Paris 2 th March ,300 sq m 700 to 760 New Cartier 33 rue La Fayette - Paris 9 th Jan ,000 sq m 680 State of repair 2

3 Large occupiers (> 5,000 sq m) 2% 18% 4% 21% 4% 5% 4% 12% 17% 6% 7% 25% 7% 27% 10% 17% 10% 26% 32% 31% 32% 46% 8% 18% 12% 9% 9% 26% 37% 25% 22% 7% % 12% 12% 35% 34% 40% 59% 52% 24% 45% 21% Banks/Finance & Insurance Legal activities, Audits & Advices Public/Para-public/ Professional and international organisations Industry TMT Luxury & Fashion Others Available supply 5. Vacancy rate (Sources: Knight Frank, ORIE) Vacancy rate in % 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Western Crescent 12.9% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q % 5. The CBD continues to record a very low vacancy rate, significantly below the regional average (7.5%) The CBD s appeal to companies is evident from the lack of supply and the fact that the economic crisis has not led to an increase in vacant office space in the area in recent years In the CBD, as across much of the Greater Paris region, the rise recorded at the start of 2015 is largely due to a change in the statistical approach to the figures Supply tends to create demand in the CBD and the increase in the number of delivery and restructuring projects in 2014 risked leading to a sharp increase in supply. This proved not to be the case, however, with most of these buildings leased in a few months or in the process of being leased Like the rest of the Greater Paris region, the CBD continues to boast one of the lowest vacancy rates in Europe 3

4 Grade A supply Second hand New or redeveloped Grade A supply (new or restructured) has increased significantly in recent months, following the delivery of several programmes including 3/5 Friedland, Eden Monceau and Opus 4/8, as well as due to the scarcity of transactions of more than 5,000 sq m during this half-year. It therefore represents of available supply recorded in the CBD, compared with just 12% at the end of 2014 The CBD has therefore exceeded the regional average (17%) This boost for users in search of office space in the CBD is only relative, since only half of the office areas leased in the Greater Paris region were new or restructured in H The CBD s lack of Grade A supply is therefore a structural reality, stemming from the nature of the buildings and the history of tertiary development in the area, although it has tended to get worse in the last two years The lack of supply presents a potential hurdle to future transactional activity in the CBD Share of new or redeveloped areas in the available supply 17% Rents 750 /sq m/year excl. taxes and charges Prime rent Rents in /sq m/year excl. taxes and charges Prime Rent Average rent Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q High-end rent has established itself at 750 since the end of 2013, following the Hermès transaction on rue d Anjou This value has been confirmed since, for example with the lease of the new Clifford Chance head office in 2014 and that of Exane in #Cloud in Q (with a value of 760 for some of the office areas in question) The standard value for high-end rent therefore remained stable in H1 2015, following a significant downward adjustment between mid-2012 and mid-2013 (-10%). This adjustment occurred earlier than in other markets, consolidating the CBD s success in 2014 and in H There are early signs of an upward trend, however, with the signing at the end of the year of some transactions at levels not seen for two years ( 800) The Exane transaction for #Cloud marked another significant milestone, as high-end values previously reserved for the West of the CBD (the Golden Triangle), are now appearing in the Financial City 4

5 Size/rents ratio Rented area 13,000 sq m 12,000 sq m ,000 sq m 10,000 sq m 9,000 sq m 8,000 sq m 7,000 sq m 6,000 sq m Average rent for H > 5,000 sq m from 1,000 to 5,000 sq m < 1,000 sq m Average rents per area* 5,000 sq m 4,000 sq m 3,000 sq m 2,000 sq m 1,000 sq m Rent ( /sq m/year excl. taxes & charges) * Not enough references to propose an average rent for the >5,000 sq m office sector Future deliveries 1 of new deliveries before Q are pre-let New or redeveloped areas in 140,000 sq m 120,000 sq m 100,000 sq m 80,000 sq m 60,000 sq m 40,000 sq m 20,000 sq m 36,800 56,700 37,900 Average consumption of new or redeveloped office space (2009/2014): 59,000 sq m 58,100 85,800 63,300 16,900 10,000 36,400 59,500 51,100 22, , ,900 8,400 6, Delivered Pre-let Available The under-production of new or restructured supply seen since 2010 led to a decline in the average annual take-up of Grade A office space in the CBD to 59,000 sq m compared with 75,000 sq m two years ago The dominant model in the CBD remains marketing after delivery of the building, with pre-letting remaining the exception Out of the 63,000 sq m expected to be delivered in 2015, just 17,000 sq m is available. This will not be enough to induce a significant increase in Grade A supply or average take-up of new or restructured office areas The dip in the volume of deliveries expected looks set to be confirmed in 2016, which will in turn present a significant obstacle to transactional activity and exert upward pressure on rents 5

6 Summary (Sources: Knight Frank, ORIE) H H Annual change H share in Stock 6,625,481 sq m 6,781,473 sq m ,227,320 sq m 12.5% Take up 195,200 sq m 196,491 sq m -0.7% 912,600 sq m 21.0% Immediate supply 348,000 sq m 357,000 sq m -2.5% 4,002,000 sq m 9.0% Vacancy rate % - Average rent 511/sq m/year 502/sq m/year +1.8% 316/sq m/year - Prime rent 750/sq m/year 750/sq m/year - 750/sq m/year - Map 17 ème 16 ème 9 ème 2 ème 1 er Avenue venue e Niel Ternes ard de Courcelles agram Avenue Victor Hugo Avenue de la Grande Armée enue des Champs-Elysées Avenue e Foch Avenue Victor Hugo Avenue Ca Ca enue Kieber enue Mac-Mahon Avenue venue d Iena d Iena Avenue Hoche Charles de Gaulle - Etoile Arc de Triomphe enue Marceau Avenue de Friedand Avenue Geo Avenue Montaigne Av G Av. Gabriel Avenue des Champs-Elysées B Boulevard Malesh Saint-Lazare Boulevard Hauss Rue Saint-Lazare e Tronchet Rue e d de Rivoli rue Scri Bd des Capucines Madeleine Champs-Elysées Concorde Rue Saint-Honoré Opéra R. embre Ave péra R. du Petits Champs Bourse Trocadéro Quai des Tuileries s Louvre 6

7 RESEARCH Contacts for market studies Cyril Robert Research +33 (0) Contacts Philippe Perello CEO Paris Office Partner Knight Frank LLP +33 (0) Aymeric Sevestre Office Agency +33 (0) Guylène Brossart Property Management +33 (0) Arnaud Cosny L Atelier Knight Frank +33 (0) arnaud.cosny@fr.knightfrank.com Nadège Pieczynski Analyst +33 (0) nadege.pieczynski@fr.knightfrank.com Julien Bonnefoy Capital Markets France Partner Knight Frank LLP +33 (0) julien.bonnefoy@fr.knightfrank.com Laurence Karsenti Retail +33 (0) laurence.karsenti@fr.knightfrank.com Aron Shadbolt Knight Frank Valuation +33 (0) aron.shadbolt@fr.knightfrank.com Knight Frank Commercial Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independant advice customised to their specfic needs. Knight Frank Research Reports are also availaible at KnightFrank.fr Knight Frank SNC 2015 This report is published for general information only. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Commercial Research or Knight Frank SNC for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank SNC in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Commercial Research. Knight Frank SNC is the french branch of Knight Frank LLP. Knight Frank LLP is a limited liability partnership registered in England. Sources used in this report: ORIE, INSEE. Amérique Argentina Brazil Canada Chile Colombia Mexico Peru The Caribbean USA Europe Austria Belgium Czech Republic France Germany Ireland Italy Monaco Netherlands Poland Portugal Romania Russia Spain Switzerland United-Kingdom Africa Botswana Kenya Malawi Nigeria South Africa Tanzania Uganda Zambia Zimbabwe Asia Pacific Australia Cambodia China Hong Kong India Indonesia Japan Malaysia New Zealand Singapore South Korea Taiwan Thailand Middle East Kingdom of Saudi Arabia United Arab Emirates