A serious report about Paris office market by Credit Agricole. Worth reading by anyone interested in office market trends, French economy and general understading of office and financial markets.

1. www.ca-suisse.com
Real Estate
Monitor: Paris
Overview and Outlook of Paris’s Office and Residential Real Estate Markets
Market and Investment Solutions
March 2013

2. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 1
Executive Summary
Our latest Real Estate Monitor examines the recent
trends in Paris’s office and residential markets and
presents their outlooks for 2013.
Office Market
The worsening Eurozone crisis, economic slowdown,
political and tax uncertainty have put the brakes on the
Paris Region office market during 2012. Although take-
up figures were sustained by large occupiers rationalis-
ing costs by grouping staff into built-to-suit office
buildings, these types of real estate operations often
result in a reduction of the amount of space used per
person. According to CBRE, the Paris Region only saw
24,000m² of net office absorption during 2012, which
compares poorly to an annual average of 726,000m²
since 2001.
On the positive side, the region’s office vacancy rate is
one of the lowest in Europe, and has been stable since
mid-2011. This is due in part to a fairly conservative
supply pipeline. Vacancy does vary by submarket,
however (lower in central Paris and higher outside cen-
tral Paris) and the gap between them has widened.
As a result of increasing vacancy rates, prime rents
have continued to fall this year in the Western Crescent
and La Défense. Elsewhere they have remained broadly
stable. With the exception of Northern and Southern
Paris, which currently have the lowest vacancy rates in
the Paris Region, average rents are lower than they
were five years ago throughout.
Although office investment volumes during 2012 were
down on 2011 levels, they held up rather well given
depressed demand and weakening rents. The main rea-
son was that international investors, sovereign wealth
funds in particular, were very active. Paris Centre West
and Northern Paris prime yields fell by 25 bps this
quarter, as investors are still focused on more ‘secure’
assets. They remained flat everywhere else bar the Out-
er Rim, where they increased by 25 bps.
With a weak GDP and worsening employment outlook,
we do not expect a recovery in demand for offices in
2013. Prime rents will continue to fall in La Défense
and Western Crescent and stay flat everywhere else at
best. Average rents will continue to soften throughout
the region.
Sovereign wealth fund activity will persist during 2013
and prime Paris Centre West yields are therefore likely
to fall this year. Prime yields in other submarkets, on
the other hand, are likely to increase slightly given the
expected stagnation in rents and rising trend in bond
yields. In the Western Crescent and La Défense, they
are likely to see a more important upward trajectory in
2013 due to worsening fundamentals.
Housing Market
France weathered the Big Recession better than many
other countries. Prudent lending practices and con-
servative construction levels helped prevent the excess-
es that destabilised other countries’ financial systems
and economies. Second-hand apartment prices only fell
by around ten per cent during 2008-2009. Due to strong
fundamentals, once economic growth returned during
2010-2011, so did price growth.
In Paris, second-hand apartment prices literally soared
during 2010-2011, principally due to a marked safe-
haven effect and particularly weak supply. The north-
ward trend in prices seems to have come to an end in
2012, however, as the same factors that had a negative
effect on the office market made consumers wary of
such a big investment such as buying a house. Adding
to this, a plethora of tax increases have been introduced
to balance the government’s budget, many of which
target the housing market. Also, in spite of low interest
rates, lending standards are reported to be tightening.
Residential transaction levels are therefore significantly
down on an annual basis. During 2012, prices have re-
mained rather sticky, however. The French housing
market does not have many ‘forced sales’ and vendors
are currently not prepared to lower their asking prices.
Buyers, on the other hand, are biding their time and
have become more picky. At the end of 2012, residen-
tial prices have finally begun heading South. In Paris,
second-hand apartment prices fell by two per cent in
the fourth quarter of 2012 compared to the previous
quarter, and in the Paris Region they fell by 1.4 per
cent.
With a stagnant French economy in 2013, an unem-
ployment rate that will continue to creep up and taxes
being more of a burden to consumers, housing sales are
likely to remain depressed. In Paris in particular, prices
are still very high, which is a deterrent for many. Credit
Agricole Economic Research forecast a 5-6 per cent
decline in second-hand residential prices nationally in
2013, and a fall of 3 per cent in second-hand apartment
prices in Paris (from end 2012 to end 2013). There will,
of course, be local variations.
The economic risks in France are, however, to the
downside. If they materialise, real estate price declines
could be more marked and incur over a longer period.

3. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 2
Office market
Economic context
France weathered the Big Recession better than many
other countries, being spared the credit-financed hous-
ing boom and bust that so rattled the US, the UK, Ire-
land and Spain. The banking system has its weaknesses
but nothing on the scale of what has been seen in the
European countries that have sought financial aid from
the European Union. Moreover, deleveraging and the
raising of capital ratios is well underway in France.
France’s economic problems lie mostly in the country’s
lack of competitiveness. It is not as dependent on ex-
ports as is Germany for instance, but it is nevertheless
more open than the US. In the current business cycle,
where private and public consumption are depressed
and investments are weak, the external sector is the area
that could bring some fizz to Europe’s ailing econo-
mies.
France’s main export destination is the EU and, within
the EU, France exports relatively more to the Union’s
Southern European members than do other union adher-
ents – twice as much as do Belgium and the Nether-
lands for instance.1
Overall, almost two thirds of French
exports are to EU destinations, thus leaving a relatively
smaller minority share for the faster growing markets in
developing Asia. In addition to this structural vulnera-
bility to the EU business cycle, France has lost competi-
tiveness over the 1997-2011 period. The IMF calculates
that France is among the advanced countries that have
seen their share of world exports decline the most, both
in terms of goods and services.2
It is thus crucial for
France’s economic growth that competitiveness is re-
stored and that new export markets are developed.
France: Government Budget Deficit
Source: Factset
In addition to the competitiveness gap, France has a
structural financial problem. For over 30 years, the
country has not had a single year of budget surplus. It
has thus accumulated a hefty stock of debt over the
years, rising from some 20 per cent of GDP in the early
1980s to around 90 per cent currently.3
Not surprisingly, France has high structural unemploy-
ment. Since the early 1980s the unemployment rate has
not dipped below seven per cent. It now stands at 10.6
per cent, with the youth unemployment rate at over 25
per cent for young women and just under 25 per cent
for young men.4
With a relatively high minimum wage
by international standards (60 per cent of the median
wage in France compared to some 47 per cent in the
UK and under 40 per cent in the US5
), it is clear that the
barrier to hire young and inexperienced workers is sig-
nificant.
100,000 temporary jobs were destroyed from Q3 2011
to Q4 2012. According to Oxford Economics, agency or
‘interim’ workers account for about 3 per cent of the
private sector workforce and the evolution of their num-
bers is a good indicator of business sentiment vis-à-vis
employment. Since France is facing pressure from Eu-
rope to speed up budget cuts, the public sector will
struggle to create jobs to make up for those that have
been lost in the private sector.
Evolution of Temporary Work Posts in France
Source: INSEE
Luckily for France, the savings ratio stands at over 16
per cent. The high savings ratio is highlighted when
compared against for example the Japanese, who in the
past were equally keen on setting funds aside for a rainy
day, but have now seen a spectacular drop in savings.
The high savings ratio is a potential arrow in the
French’s quiver – were they to draw down on their sav-
ings, personal consumption could add positively to
growth. Such a break with past behaviour looks unlike-
ly this year though, given the high current rate of unem-
ployment.
-250
-200
-150
-100
-50
0
50
100
150
Q11991
Q41991
Q31992
Q21993
Q11994
Q41994
Q31995
Q21996
Q11997
Q41997
Q31998
Q21999
Q12000
Q42000
Q32001
Q22002
Q12003
Q42003
Q32004
Q22005
Q12006
Q42006
Q32007
Q22008
Q12009
Q42009
Q32010
Q22011
Q12012
Q42012
Thousands(levelscumulatedoverfourquarters)
-8
-7
-6
-5
-4
-3
-2
-1
0
Dec-93
Apr-94
Aug-94
Dec-94
Apr-95
Aug-95
Dec-95
Apr-96
Aug-96
Dec-96
Apr-97
Aug-97
Dec-97
Apr-98
Aug-98
Dec-98
Apr-99
Aug-99
Dec-99
Apr-00
Aug-00
Dec-00
Apr-01
Aug-01
Dec-01
Apr-02
Aug-02
Dec-02
Apr-03
Aug-03
Dec-03
Apr-04
Aug-04
Dec-04
Apr-05
Aug-05
Dec-05
Apr-06
Aug-06
Dec-06
Apr-07
Aug-07
Dec-07
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
%ofGDP

4. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 3
Household Savings Ratio: France and Japan
Source: Factset
Investments are not apt to increase much in the near
future. Capacity utilisation is at the lowest level during
the past 30 years barring the 2008-2009 recession. In-
vestments tend to increase when the capacity use is over
80 roughly speaking, and it now stands at 75. Neverthe-
less, investment levels remain positive and contributed
0.7 percentage points to growth in the fourth quarter of
2012.
France: Capacity Utilisation and Total Investment
Source: Factset
Office Demand
Paris Region Office Net Absorption
Source: CBRE
Demand for office space in the Paris Region (see map
on page 12) was relatively resilient during the recession
of 2008-2009. This has been largely attributed to the
diversified economic base of the region. The worsening
Eurozone crisis, economic slowdown, political and tax
uncertainty finally caught up with the occupier market
during 2012, however. Office tenants postponed their
relocation plans and reassessed space requirements, and
in many cases have extended their leases at lower rents.
The poor net absorption (the level change in occupied
stock6
) figure for 2012 (24,000m2
), which is way below
the long-term average of 726,000 m2
, is a reflection of
this. Net absorption measures ‘real’ demand, because
unlike take-up, it takes into account space given back to
the market.
Large companies in the Paris Region have been reduc-
ing overhead costs by decreasing the amount of office
space used per employee. This is often achieved in
modern office buildings that offer ‘open plan’ seating
solutions. Companies have also sought cost reductions
by moving to cheaper locations. This has been detri-
mental to more expensive submarkets and submarkets
without the type of supply that occupiers are looking
for. In 2008 and 2009, for example, Paris Centre West
experienced significant negative net absorption
(240,000 m2
). Small and medium-sized occupiers, very
present in this submarket, were hit hard by the Global
Financial Crisis and Big Recession. Large corporate
occupiers have also been actively regrouping staff from
central, expensive, often old, disparate offices in central
locations to cheaper, new offices in the Inner Rim sub-
market.7
This resulted in the vacancy rate of Paris Cen-
tre West increasing from three per cent in the first quar-
ter of 2008 to 6.2 per cent in the fourth quarter of 2009,
leading to a decrease in prime and average rents here
during this period.
Paris Region: Take up by Submarket
Source: CBRE
0
500
1000
1500
2000
2500
3000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Thousandsquaremetres
Inner Rim Northern Paris Outer Rim Paris Centre West
La Défense Southern Paris Western Crescent
Long-term average
-500
0
500
1000
1500
2000
2500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Thousandsquaremetres
Inner Rim Northern Paris Outer Rim Paris Centre West
Paris La Défense Southern Paris Western Crescent Paris Region
-5
0
5
10
15
20
25
Mar-66
Mar-67
Mar-68
Mar-69
Mar-70
Mar-71
Mar-72
Mar-73
Mar-74
Mar-75
Mar-76
Mar-77
Mar-78
Mar-79
Mar-80
Mar-81
Mar-82
Mar-83
Mar-84
Mar-85
Mar-86
Mar-87
Mar-88
Mar-89
Mar-90
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
%disposableincome
France Japan
16
17
18
19
20
21
22
23
24
65
70
75
80
85
90
Dec-81
Aug-82
Apr-83
Dec-83
Aug-84
Apr-85
Dec-85
Aug-86
Apr-87
Dec-87
Aug-88
Apr-89
Dec-89
Aug-90
Apr-91
Dec-91
Aug-92
Apr-93
Dec-93
Aug-94
Apr-95
Dec-95
Aug-96
Apr-97
Dec-97
Aug-98
Apr-99
Dec-99
Aug-00
Apr-01
Dec-01
Aug-02
Apr-03
Dec-03
Aug-04
Apr-05
Dec-05
Aug-06
Apr-07
Dec-07
Aug-08
Apr-09
Dec-09
Aug-10
Apr-11
Dec-11
Aug-12
%ofGDP
%
Total Capacity Utilisation Rate, Industry. S.A. (LHS) Total Investment (RHS)

5. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 4
In this weakened economic context, office take-up,
which represents the total net floor space let, pre-let,
sold or pre-sold to tenants or owner-occupiers,8
was
boosted in 2011 and 2012 by some very large deals
(often initiated well in advance). These include the ac-
quisition for owner-occupation of 124,000m2
in St Den-
is (Inner Rim submarket) by SFR, Carrefour renting
85,000m2
in Massy (Outer Rim), Thalès’s turnkey9
deal
of 78,600 m2
in Gennevilliers (Western Crescent sub-
market) and France Télécom’s turnkey deal of
69,100m2
in Chatillon (Inner Rim submarket).
The space-optimisation fashion espoused by large cor-
porations has benefitted submarkets accessible to cen-
tral Paris that propose new energy-efficient buildings
with lower rents and potential long-term cost efficien-
cies for the occupier. The Inner Rim, in particular, saw
take-up increase by 44 per cent from 2011 to 2012.
According to CBRE, more than 60 per cent of occupier
deals over 5,000m2
in 2012 were pre-sales and pre-lets,
which means that the types of properties that larger oc-
cupiers are targeting, are not often readily available in
the desired localities. The same source reports that new
and redeveloped offices accounted for 41 per cent of
take-up in 2012, compared to renovated offices (27 per
cent) and second-hand offices (32 per cent). Given this,
investment in the development of new buildings that
meet current occupier requirements and are well located
could be regarded as an opportunity. According to a
survey of 200 corporate occupiers carried out by Ipsos
for BNP Paribas Real Estate, 55 per cent of respondents
are considering a move in the short-to medium-term,
even if the business climate is frozen.10
Take-up in 2012 was also boosted by a couple of very
large deals originating from the public sector. Accord-
ing to CBRE, this sector accounted for 20 per cent of
the total in 2012, mainly due to an 135,000 m² office
development by the Ministry of Defense in the 15th
ar-
rondissement of Paris. By comparison, the finance and
insurance sector was very quiet during the year (6 per
cent). The broadly-defined industry sector, which ac-
counted for 30 per cent of take-up and the transport/
logistics/distribution sector (16 per cent) took up the
baton, however. More than 30 per cent of Fortune 500
companies are represented in the Paris Region. The di-
versified international occupier base of the region al-
lows for continually robust take-up levels, as well as
lower rental volatility than, for example, London.11
Supply
Another strength of the Paris Region office market is
that it has a relatively controlled supply pipeline. An
office construction boom that resulted from the relaxa-
tion of planning laws from 1985 to 1990 resulted in va-
cancy rates rising from 3 to 12 per cent. Planning laws
were tightened in 199012
and since, the Paris Region
office market has witnessed under two per cent of total
office stock complete each year.
Annual Forecast Completions as a Percentage of Total Submarket Stock (Q4
2012)
Source: CBRE
Some submarkets are expecting more new completions
than the average over the next two years, however, no-
tably La Défense. In 2013 we can expect the refurbish-
ment of Tour Eqho (78,000m2
) to finish and the con-
struction of Carpe Diem (44,000m2
) to complete. Tour
Majunga (63,000m2
) and Tour D2 (45,000m2
) are ex-
pected to deliver in 2014.13
These buildings are still
without occupiers at a time when there is a preference
from the part of large occupiers for low-rise, environ-
mentally-certified, campus-style buildings with cheaper
rents. Tour First, the tallest office building in France
(80,200m2
), which completed in 2011, still has to fill up
the remaining 20 per cent of its space.14
Although La
Defénse is next to central Paris, its popularity is dimin-
ished by the fact that transport links to and from the
business district are saturated and rents here are higher
than in the Inner Rim.
Vacancy
Vacancy Rate by Submarket
Source: CBRE
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Paris Centre West Outer Rim Southern Paris Ile-de-France Northern Paris Western Crescent Inner Rim Paris La Défense
2013 2014
0
2
4
6
8
10
12
Northern Paris Southern Paris Paris Centre West Outer Rim Paris Region Paris La Défense Inner Rim Western Crescent
Percent
Q4 2009 Q4 2010 Q4 2011 Q4 2012

6. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 5
The office vacancy rate in the Paris Region is one of the
lowest in Europe, and has been more or less stable at
around 6.5 per cent since the third quarter of 2011. The
vacancy rate varies significantly by submarket, howev-
er. The lowest can be found in the central Paris submar-
kets of Northern Paris, Southern Paris and Paris Centre
West, and the highest in the Western Crescent and Inner
Rim. The gap between the lowest and the highest has
actually widened in recent quarters.
Outside central Paris, the obsolescence of vacant supply
is becoming an issue due to advancing workplace re-
quirements and evolving employer requirements.15
This
is worsened by increasing environmental legislation.
According to the Observatoire Régional de l’Immobilier
d’Entreprise en Ile-de-France (ORIE), in 2005 12 per
cent of vacant buildings have been vacant for four years
or more. This percentage increased to 18 per cent in Q2
2012.16
Rents
Paris Region Prime Office Rents by Submarket
Source: CBRE
Prime office rents17
have fallen over the past four quar-
ters in the Western Crescent and La Défense as both
submarkets have seen their vacancy rates increase. Else-
where prime rents have remained broadly stable.
Since 2011, prime rents in the 7th arrondissement of
Paris (Southern Paris submarket) have caught up to
those of the CBD. These rents have been achieved in
renovated 19th
century buildings situated in prestigious
addresses. At €830 per m2
per year, prime rents in
Southern Paris are now slightly above those of the
CBD. This is due to four consecutive lettings at 23 rue
de l’Université during 2011-2012: McDermott Will &
Emery, Tai Ping Carpets, Capital Fund Management
and AT Kearney.
The 7th arrondissement of Paris has traditionally been
associated with embassies and ministry buildings, but
the French General Review of Public Policies, which
aims to reduce public spending, has led many govern-
ment entities to sell off buildings that have become ex-
pensive to refurbish to current standards. 23 rue de
l’Université, for example, was the old building of the
Custom House. Government bodies have vacated sever-
al buildings in the area, including 15, avenue de Suffren
(former home of the Planning Department) and 103, rue
de Grenelle (former home of the National Education
Ministry). Many government entities have also been
required to move to locations where rents do not exceed
€400 per m2
per year, like the Eastern Inner Rim.18
These dynamic presents opportunities for investors, be-
cause high-quality refurbished offices in prestigious
addresses in this micro-market have become a viable
alternative to the CBD for occupiers.19
According to
CBRE, companies that were based in the right bank of
Paris, have moved to the left bank of Paris in the past
two years (examples include Alcatel, Boston Consulting
Group, McDermott and Capital Fund Management).
Average Weighted Rents for New, Restructured and Renovated Office Space
Source: CBRE, Immostat
Average rents have headed South everywhere over past
year with the exception of Northern Paris. The strongest
falls since 2007 were seen in the Western Crescent (-16
per cent for new, restructured and renovated, or NRR
space and -15 per cent for second-hand space), the Inner
Rim submarket (-12 per cent for NRR space and -14 per
cent for second-hand space) and La Défense (-14 per
cent for second-hand space and -9 per cent for NRR
space).
200
300
400
500
600
700
800
900
Q42003
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Europersquaremetreperyear
Inner Rim Northern Paris Outer Rim Paris Centre West Paris La Défense Southern Paris Western Crescent
90
110
130
150
170
190
210
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Index100=1998
Paris Centre West Southern Paris Northern Paris La Défense Western Crescent Inner Rim Outer Rim

7. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 6
Since 2007 average rents only increased in Northern
and Southern Paris (4 and 2 per cent respectively for
NRR space) and Northern Paris (1.5 per cent for second
-hand space). The fact that these two submarkets are
both central and cheaper than Paris Centre West has
been attracting occupiers. They consequently have the
lowest vacancy rates in the Paris Region. In spite of the
trend for large occupiers to regroup in modern office
buildings in the Inner Rim, cheaper submarkets in cen-
tral Paris are still attractive to small and mid-sized oc-
cupiers.
Average Weighted Rents for Second-hand Office Space
Source: CBRE , Immostat
Investment
Paris Region Office Investment Volumes (excluding portfolio deals)
Source: CBRE
Although down by 18 per cent on 2011 volumes, invest-
ment in offices was stronger than expected during 2012.
International investors continued to seek the perceived
security of the Paris property market; they accounted
for 47 per cent of office investment volumes during the
year and were particularly active in the larger deals
(accounting for 79 per cent of deals over €200 mil-
lion20
). International investor interest is still strong be-
cause the Paris Region continues to have relatively solid
fundamentals and is one of the most liquid office mar-
kets in the world. In addition, with the globalised nature
of occupiers, prime assets here are more resilient than
prime assets in markets where occupiers are more ex-
posed to the national economy or to one specific sec-
tor.21
Most Active Global Investment Markets - Offices
Deals values over €10m reported in contract or closed in past 12 months
Source: Real Capital Analytics, 28.12.2012
European, Middle Eastern and Asian sovereign wealth
funds (SWFs) have been particularly strong players in
recent years, making very large acquisitions mainly in
core properties/locations. Globally they are increasing
their allocations to real estate and reducing their alloca-
tions to bonds22
and in general, they are equity buyers
looking to make long-term placements (e.g. 30 years).23
Abu Dhabi Investment Authority, Hong Kong Mone-
tary Authority, Qatar Investment Authority and Norges
Bank Investment Management have been particularly
active in Paris of late, but there are potentially many
other SWFs that could start buying in this market, in-
cluding China, Malaysia and Singapore.24
The recent
activity of some of these in London indicate that they
might move onto Paris next, as London is usually the
springboard for cross-border investment in Europe.
Paris Centre West and Southern Paris were the only
submarkets to witness an increase in investment vol-
umes from 2011 to 2012. This is not surprising since
they were home to two of the largest deals of the year.
The Qatar Investment Authority bought 52-60 Avenue
des Champs Elysees (building of 26,850m2
) in the 8th
arrondissement from Groupama for 547 million euros
and a yield of 3.90 per cent. It also bought 90 boulevard
Pasteur (building of 30,000m2
) in the 15th
arrondisse-
ment for 252 million euros.25
80
100
120
140
160
180
200
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Index100=1999
Paris Centre West Southern Paris Northern Paris La Défense Western Crescent Inner Rim Outer Rim
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
MillionEuros
Northern Paris Southern Paris Paris Centre West Western Crescent La Défense Inner Rim Outer Rim
Long-term average
0
5
10
15
20
25
London Metro NYC Metro Paris Tokyo San Francisco
Metro
Hong Kong Washington DC
Metro
Los Angeles
Metro
Seoul SeattleBillion€

8. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 7
La Défense has seen weak levels of investment activity
for a number of years. Rents have been falling here for
a number of years and obsolescence is a growing prob-
lem26
as many buildings date from the 1970s and are
facing increasing environmental regulations.
Yields
Prime Office Yields by Submarket
Source: CBRE
Prime office yields27
in the Outer Rim have moved out
by 25 basis points over the past quarter, otherwise they
have been flat everywhere except Paris Centre West and
Northern Paris where they compressed by 25 basis
points (to 4.25 per cent and 5.75 per cent, respectively).
Overseas money into Paris has been one factor helping
to push yields down.
With the exception of Northern Paris, where it stabi-
lised, the spread between the Paris Centre West prime
yield and the prime yield in the rest of the submarkets
of the Paris Region has continued to increase. Investors
are still targeting Paris Centre West, where the central
business district (CBD) is located. The spread between
the Outer Rim and Paris Centre West is currently the
highest it has been since we 2004. The same goes for La
Défense.
Prime Yields: Spread from Paris Centre West Submarket
Source: CBRE
Paris office market outlook
Consumption is liable to make a negative contribution
to GDP this year and net exports are anticipated to not
make any contribution at all. Our forecast 0.4 per cent
growth in GDP is therefore likely to come from invest-
ments that will in all probability remain positive but
only a touch higher than in 2012. A stronger outlook
for 2014, at one per cent GDP growth, would rest essen-
tially on the elimination of the negative contribution of
consumption. In spite of this prudent outlook, the risks
to the economy remain predominantly on the downside.
A weak national GDP context and worsening employ-
ment outlook will continue to weigh on a recovery in
demand for offices in the Paris Region during 2013 as
companies continue to be in ‘cost saving’ rather than
‘expansionary’ mode. In spite of weak overall comple-
tion levels, depressed demand means that we will con-
tinue to see stagnant prime rents and weakening average
rents in most submarkets during 2013. Given higher
than average completion levels and quite a bit of obso-
lete space, both La Défense and the Western Crescent
are expected to see prime and average rents continue to
fall in 2013.
Paris Region Office Take-up versus French GDP
Source: CBRE, INSEE, CAPB
SWF and international institutional investment activity
is likely to continue in 2013. The closing and liquida-
tion of some German open-ended funds might also will
also generate investment activity. There is no particular
reason, however, for investment volumes to be stronger
in 2013 given the weakness of the occupier market. The
prime yield in Paris Centre West is likely to fall slightly
during the year, but prime yields in other submarkets
are likely to go up given the stagnation of rents and the
fact that the bond yield trend today is up rather than
down as a result of a renewed confidence in Southern
Europe and the general switch from bonds to equities,
due to the latter’s strong performance. Prime yields in
the Western Crescent and La Défense are very likely to
continue to increase in 2013 given weakening funda-
mentals.
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Percent
Inner Rim Northern Paris Outer Rim Paris Centre West Paris La Défense Southern Paris Western Crescent
0
50
100
150
200
250
300
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
BasisPoints
Inner Rim Northern Paris Outer Rim Paris La Défense Southern Paris Western Crescent
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Take-up Paris Region (y-o-y change) (LHS) Annual GDP Growth France (RHS)

9. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 8
Housing market
Second-hand Apartment Price Index
Source: INSEE, Notaires
French residential prices fell during 2008-2009 as a re-
sult of the Global Financial Crisis and Big Recession,
but only by a limited amount (10 per cent for second-
hand apartments). Prudent lending practices (in France
a loan is granted depending on the household’s capacity
to repay, credit does not exceed a third of household
income and most property loans come with fixed inter-
est rates and a maximum repayment period of 20-25
years28
) and conservative construction levels helped
prevent the excesses that destabilised other countries’
financial systems and economies. France was thus
spared any hangover from a housing fiesta like Spain
and Ireland, and in general the country has strong hous-
ing fundamentals, so once economic growth returned,
so did residential price growth. From 2010 to 2011 both
the French economy and housing market recovered, and
by 2011 second-hand apartment prices were higher than
they were at their 2007 peak.
Paris Second-hand Apartment Price Index
Source: INSEE, Notaires
In Paris, second-hand apartment prices literally soared
during 2010-2011, due to a marked safe-haven effect
(investors were facing highly uncertain and volatile fi-
nancial markets) and particularly weak supply.29
The
monetary and financial contexts at the time also encour-
aged residential investment during this period.
INSEE Monthly Consumer Confidence Survey
Source: INSEE
The northwards trend in prices seems to have come to
an end during the course of 2012, however. The same
factors that had a negative effect on the office market
(economic slowdown, rising unemployment and politi-
cal uncertainty) are currently making consumers wary
of such a big investment such as buying a house.
A plethora of tax increases have been introduced to bal-
ance the government’s budget, and many of them are
aimed at the housing market. This is another explana-
tion for the moroseness of the market of late. Frequent
fiscal changes create a sentiment of instability that
weigh down on investment projects. Changes include
the restriction of tax reductions that spurred the market
in recent years. The zero-interest loan scheme for first
time buyers is now limited to new properties and social
housing tenants who want to purchase their homes.30
In
the buy-to-let and secondary home markets, the intro-
duction of higher tax rates on capital gains and the in-
troduction of a new law announcing a ceiling limit on
rents have cooled things down considerably on the
home-buying front. Considering how high prices are,
yields have become less attractive with more taxes.31
Other changes include tax increases on vacant proper-
ties.
20
40
60
80
100
120
140
Q11997
Q31997
Q11998
Q31998
Q11999
Q31999
Q12000
Q32000
Q12001
Q32001
Q12002
Q32002
Q12003
Q32003
Q12004
Q32004
Q12005
Q32005
Q12006
Q32006
Q12007
Q32007
Q12008
Q32008
Q12009
Q32009
Q12010
Q32010
Q12011
Q32011
Q12012
Q32012
Index
Paris Ile-de-France (excluding Paris) French Regions
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
20
40
60
80
100
120
140
Q11993
Q31993
Q11994
Q31994
Q11995
Q31995
Q11996
Q31996
Q11997
Q31997
Q11998
Q31998
Q11999
Q31999
Q12000
Q32000
Q12001
Q32001
Q12002
Q32002
Q12003
Q32003
Q12004
Q32004
Q12005
Q32005
Q12006
Q32006
Q12007
Q32007
Q12008
Q32008
Q12009
Q32009
Q12010
Q32010
Q12011
Q32011
Q12012
Q32012
Index
Paris Secondhand Apartment Price Index (LHS) Annual Growth (RHS)
70
80
90
100
110
120
130
Jan-00
May-00
Sep-00
Jan-01
May-01
Sep-01
Jan-02
May-02
Sep-02
Jan-03
May-03
Sep-03
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
Index
Long-term average

10. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 9
Average Lending Rates (bank loans only)
Source: Observatoire du Financement des marchés Résidentiels - Crédit Loge-
ment / CSA
In spite of low interest rates (the average lending rate
was 3.29 per cent in Q4 2012 according to the Observa-
toire du Financement des Marchés Résidentiels), lend-
ing standards practiced by French banks have tightened
slightly in Q4 2012. According to CBRE, loans have
become more difficult to obtain, in particular, the de-
posit required has gone up to 15-20 per cent of the val-
ue of the property, against 10-15 per cent demanded
previously. Notaires de Paris have also seen an increase
in loans refusals. The consequence is that demand for
new housing loans has been heading South, although
the low points seems to have been reached in May
2012.
Bank Lending Survey - Lending Standards in France
Loans to Households for House Purchase
(Previous three months)
Source: Bank of France
According to Notaires de Paris, transactions of second-
hand apartments in Paris during the last quarter of 2012
stood at 5,930, which was only just above the 5,730
apartments sold during Q4 2008 (the middle of the re-
cession). During 2012, 27,690 apartments were sold in
Paris, which was 10 per cent lower than the levels trans-
acted during 2011, and only just above the 26,540
apartments sold during 2009 (the weakest year since
1996). The same source states that from 2000 to 2010
the average annual number of second-hand apartments
sold in Paris stood at 36,700. The Paris Region saw
roughly the same decline in the sale of second-hand
apartments from 2011 to 2012 as Paris itself (11%).
Second-hand house transactions fell by 14% in the Paris
Region.
The decline in transactions of new apartments from
2011 to 2012 was even stronger (although the new
apartment segment is only 20 per cent of the Paris Re-
gion and 3 per cent of Paris). It was -24 per cent in Paris
and -17 per cent for the Paris Region. New houses in
the Paris Region were the worst hit from 2011 to 2012
(-28 per cent).32
France: Second-hand Residential Sales
Sources: CGEDD, Notaires, CASA
Second-hand transaction levels are down but they have
not collapsed entirely, as the market still has robust de-
mand drivers. These include the decreasing size of
households through social changes like ageing and a
general trend for decreased cohabitation, the fact that
people still want to own and to prepare for their retire-
ment and the fact that France attracts international buy-
ers looking for quality of life. Interest rates are also cur-
rently at the lowest they have ever been, which can only
support housing sales.
Monthly New Lending for House Purchases - France
Source: Bank of France
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Q12003
Q22003
Q32003
Q42003
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Percent
-30%
-20%
-10%
0%
10%
20%
30%
40%
2002Q4
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
Balanceofresponses(reportedtighteningminusreportedlooseningofcredit
standards)
> 0 = Tightening of lending standards
< 0 = Weakening of lending standards
0
50
100
150
200
250
Q12003
Q22003
Q32003
Q42003
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q22007
Q32007
Q42007
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
EstimatedQuarterlyVolumnes(ThousandUnits)
-40%
-20%
0%
20%
40%
60%
80%
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
January2004
April2004
July2004
October2004
January2005
April2005
July2005
October2005
January2006
April2006
July2006
October2006
January2007
April2007
July2007
October2007
January2008
April2008
July2008
October2008
January2009
April2009
July2009
October2009
January2010
April2010
July2010
October2010
January2011
April2011
July2011
October2011
January2012
April2012
July2012
October2012
January2013
EuroMillions-Cumulatedoveroneyear
Level (LHS) Year-on-year growth (RHS)

11. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 10
During 2012 prices have remained rather sticky in spite
of lower transaction levels. According to Century21,
unless a forced sale takes place because of a divorce,
death or the owners moving countries, current owners
do not have to sell, and therefore are not prepared to
accept to lower their asking prices. Prudent lending
practices and a fairly rigid labour market means that
forced sales like we have seen elsewhere have not been
replicated in France. Buyers have also become more
selective. The average number of days it took to sell a
property in Paris increased by 15 days from 2011 to
2012, reaching 59. In the Paris Region it took 13 days
longer to sell a property in 2012 from 2011, or an aver-
age of 77 days. A lack of investment alternatives and
less favourable taxation are also not encouraging people
to sell or accept lower prices.
At end 2012, prices have begun heading South. Accord-
ing to Notaires de Paris, second-hand apartment prices
in Paris fell by two per cent in quarterly terms in the
fourth quarter of 2012, and in the Paris Region they fell
by 1.4 per cent. In annual terms, prices in Paris fell by 1
per cent and in the Paris Region they fell by 0.6 per
cent. Second-hand houses saw smaller price falls in the
Paris Region.
The performance of the Paris Region residential market
is very diversified. For example, in Paris itself, the
strongest median price falls of second-hand apartments
from 2011 to 2012 were witnessed in the 7th
arrondisse-
ment (-4.8 per cent, median price in Q4 2012 of
€11,740 per square metres), 20th
arrondissement (-4 per
cent, median price of €6,900) and 16th
arrondissement (-
3.8 per cent, median price of €9,550). Over the same
period, the strongest median price increase were found
in the 10th
(+5.2 per cent, median price of €7,720), the
2nd
(+4.6 per cent, median price of €10,000) and the 8th
(+2.5 per cent, median price of €10,560).33
According to CBRE, there has been a two-speed market
for high-end properties. For properties between €2 and
€5 million, the volume of sales have dropped substan-
tially as buyers have become more picky. French resi-
dents, in particular have become very concerned about
taxes. Conversely, the market for properties over €5
million has stayed quite active. This part of the market
is dominated by non-residents who are not dependent
on financing. Uncertainty surrounding the tax status of
non-residents has, however, had an impact in this seg-
ment of the market as well. We should remember, how-
ever the that high end of the market only accounts for
about 1.5 per cent of total sales in Paris.34
Residential market outlook
The French economy is expected to remain stagnant in
2013 (we project GDP growth to be 0.4 per cent during
the year), which means that the unemployment rate will
continue to creep up. French consumers are very sensi-
tive to the job market situation and tax increases are
reducing their spending capacity even further. All these
factors will continue to have a negative impact on the
housing market. We expect housing sales in 2013 to
remain weak both nationally and in Paris. In Paris pric-
es are very high, which is a deterrent for many to buy
(in certain neighbourhoods, prices increased by over 40
per cent over the past five years). According to Credit
Agricole Economic Research, households have been
compromising on size and location to be able to buy in
this market. There is a limit to how much households
can concede, however, since debt repayments cannot
exceed one third of income and interest rates are cur-
rently at historically low levels.
Given this context, Credit Agricole Economic Research
forecasts a 5-6 per cent decline in second-hand residen-
tial prices nationally in 2013 and a 3 per cent fall in Par-
is second-hand apartment prices (end 2012 to end
2013). Globally speaking, however, the decline in resi-
dential prices is expected to be limited in France since
the country’s housing market is not in a logic of ‘forced
sales’ and fundamentals are considered to be robust.
There will, of course, be local variations.
The economic risks in France are to the downside, how-
ever. If they materialise, house price declines might be
more marked and incur over a longer period than ex-
pected.

12. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 11
Sources
1
Eurostat data
2
IMF, “France : Selected Issues”, IMF Country Report No. 13/3, January 2013
3
IMF data
4
Eurostat, total unemployment, mainland and territories
5
ILO data
6
CBRE definition
7
Catella, “Property Market Trends, France” March 2012
8
CBRE definition
9
According to CBRE, “a transaction concluded when the building is still a project or under construction, but whose structure will be modified to suit the needs
of the occupier”.
10
“Un marché paradoxal”, p. 3, Les Echos, 12 March 2013
11
<http://www.joneslanglasalleblog.com/the-investor/insights-and-outlooks/paris-ample-opportunities-for-cross-border-investment>
12
Nappi-Choulet, I, “The Paris Office Market Crisis”, February 1996
<http://knowledge.wharton.upenn.edu/papers/479.pdf>
13
Deloitte Drivers Jonas, “Crane Survey: Paris Offices”, Winter 2012
<http://www.deloitte.com/assets/Dcom-France/Local%20Assets/Documents/Votre%20Secteur/Immobilier/Etude_Paris_Crane_Survey_12_2012.pdf>
14
“La tour First fait la pluie et le beau temps”, Le Parisien, 19.12.2012
<http://www.leparisien.fr/hauts-de-seine-92/la-tour-first-fait-la-pluie-et-le-beau-temps-19-12-2012-2419433.php >
15
“Europe’s Office Buildings facing Greater Obsolescence, Value Depreciation than Ever Before”. World Property Channel, 30 April 2012
<http://www.worldpropertychannel.com/europe-commercial-news/european-office-market-report-jones-lang-lasalle-offices-2020-research-programme-office-
building-obsolescence-europe-commercial-property-depreciation-eurozone-debt-crisis-5582.php>
16
Les Echos: Immobilier Special MIPIM, Mardi 12 Mars 2013, page 2.
17
According to CBRE, “the prime rent should represent the ‘achievable’ open market headline rent which a blue chip occupier would be expected to pay for: an office unit
of standard size commensurate with demand in each location… an office unit of the highest quality and specification…and office unit within the prime location (CBD, for
example) of a market. It is assumed that the occupier will also be agreeing to a package of incentives that is typical of the market at the time.”
18
CBRE, “La Rive Gauche de Paris dans un nouvel élan”, Sabine Echalier, Mars 2012.
<http://www.cbre.fr/fr_fr/etudes/viewpoint/view_point_content/view_point_left/viewpoint_rive_gauche_2012.pdf>
19
“A Paris, l'Etat vend ses bijoux de famille, les entreprises s'y installent”, Challenges, 12 September 2011
<http://www.challenges.fr/finance-et-marche/20110912.CHA4109/immobilier-parisien-l-etat-vend-ses-bijoux-de-famille-les-entreprises-s-y-installent.html>
20
CBRE data
21
“Sovereign wealth property could reach 20% of assets”,Property Investor Europe, p.18, Vol. 9 ed. 293 March 2013
22
Ibid.
23
<http://www.lettrem2.com/edito.php?id=114>
24
Ibid.
25
CBRE data
26
<http://www.propertyeu.info/peu_storage_root/PEU12-MA06-068-BRIEFING-FRANCE.pdf>
27
According to CBRE, 'prime yield' "represents the yield which an investor would receive when acquiring a grade/class A building in a prime location (CBD,
for example), which is fully let at current market value rents".
28
“French Real Estate: A Little Bubbly”, Wall Street Journal, 14 September 2011,
<http://online.wsj.com/article/SB10001424053111903532804576568573122088718.html>
29
CASA Economic Research
30
Global Property Guide
31
CBRE, Residential France, Market View, January 2013
32
Chambre des Notaires de Paris
33
Ibid.
34
CBRE, Residential France, Market View, January 2013

13. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 12
Paris Region office submarkets
Source: Immostat / CBRE
*Data points refer to Q4 2012

14. Real Estate Monitor: Paris
Real Estate Monitor: Paris - 13
© 2012, CREDIT AGRICOLE (SUISSE) SA all rights reserved
This document has been prepared by the Real Estate Operations department of Crédit Agricole (Suisse) SA.
The information contained herein is based on indications provided by third parties which have not been independently verified by Crédit Agricole
(Suisse) SA. No guaranty, representation or warranty (express or implied) can be given that such information is current, accurate or complete. In
particular, no guaranty, representation or warranty (express or implied) can be given that the price mentioned herein (if any) reflects the fair
value or the market price and that any report on the valuation of the object is current, accurate or complete.
Internet transmission cannot guarantee the information's security and integrity and the Bank excludes all liability in this respect.
This document is for information purposes only and shall not be construed as an offer, invitation or solicitation to purchase the object or as an
investment, legal, audit, tax or other professional advice.
Crédit Agricole (Suisse) SA may at any time modify this document or stop producing or updating this document.
Crédit Agricole (Suisse) SA may have issued or issue in the future other documents that are inconsistent with, and reach different conclusions
from, the information presented in this document. Crédit Agricole (Suisse) SA is under no obligation to ensure that such other documents are
brought to the attention of any recipient of this document.
This document may not be photocopied or otherwise reproduced, distributed or reused without the prior written consent of Crédit Agricole
(Suisse) SA. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other
party without the prior express written consent of Crédit Agricole (Suisse) SA.
Crédit Agricole (Suisse) SA is not responsible for the information contained in this document. To the extent permitted by applicable laws and
regulations, Crédit Agricole (Suisse) SA accepts no liability whatsoever for any direct or consequential loss arising from the use of this document
or its content.