RCA Insights

Dynamics and Dynamism of the World’s #1 Office Market

By on March 1st, 2021

Investors spent more on office acquisitions in Paris than in any other major metro globally in 2020, the second year in a row that the French capital has earned the status of the world’s largest office market. The scale of the Paris market in comparison with other large metros like New York, Seoul, Tokyo and London, means that despite a Covid-induced slowdown, it remained well ahead of its rivals last year.

More than €17 billion ($20 billion) worth of Paris offices changed hands in 2020, buoyed by strong demand for core offices and some large forward sales. In 2019, transactions had reached a record level of €23 billion.

High levels of transaction activity in recent years have rested on several pillars: a wide pool of office properties running the full risk and size spectrum across several submarkets; a large and well capitalized domestic investor base; and, an international profile. Paris is one of Europe’s two truly global cities and while it isn’t usually first on the list for new entrants to the European markets, it is often the next stop after London. 

Paris metro and submarkets office transaction volume year-over-year

In 2020, transaction activity refocused on the core market, after several years of investors seeking properties outside the traditional City Centre market of Paris Ouest and QCA. Buyers hunting for greater value had previously homed in on locations to the north and south of the city of Paris and to submarkets like Neuilly and Saint-Denis. The Grand Paris infrastructure project and plans for the Paris 2024 Olympic games also boosted the attraction of many submarkets.

Transaction volume in the City Centre actually increased in 2020 versus 2019, whereas activity in the Western Crescent and La Defense fell by 46% and for the rest of Ile de France, transaction activity fell by 27%.

This shift in investor preference is reflected in RCA liquidity and pricing data. The RCA Capital Liquidity Scores showed Paris Central was the most liquid office market in the world at the end of 2020, while Western Crescent and La Defense – though still ranking second – recorded its lowest score for seven years. As regards pricing, the RCA Hedonic Series showed price per square meter rose 14% year-over-year in 2020 in Paris Central and 3% in the Western Crescent and La Defense. (Paris Central comprises the City Centre and “Rest of Paris” areas.)

Liquidity scores in leading office markets year-over-year

The City Centre has structurally lower vacancy rates because of the restrictions on building, and occupiers pay much higher rents for office space here than in the wider metro market. With discussion about the future of the office and a record volume of speculative space underway, according to the latest Deloitte Crane Survey, buyers have clearly felt more comfortable deploying capital at a pre-Covid pace in the core market.

Nevertheless, the amount of construction underway shows there is optimism. Forward sales, where the buyer either acquires a building before completion or funds its development, were 16% of total deal volume from 2017 to 2019, but that proportion rose to 23% in 2020.

The largest such transaction in 2020 was Swiss Life’s €1 billion deal with Engie for the former national energy company’s future headquarters. The second biggest was the €850 million forward funding of an office in the 13th arrondissement by government agency AFD for their own use. Plenty of other deals completed, including two where French investment manager La Francaise was involved: one in Courbevoie, signed in January, and another in Malakoff, to the south of the city of Paris, signed in July. The latter building will be occupied by engineering firm, Safran.

Similar to the trend seen across Europe, domestic activity increased as a proportion of the Paris office total in 2020, as the restrictions on travel broadly hindered overseas investors. The top buyer of the year was Swiss Life for its December Engie deal, followed by five French institutional investors. LaSalle was the next highest-placed overseas investor, with the bulk of its spending coming via one deal that completed in March – the purchase of two adjoining offices in the 9th arrondissement.

The latest data suggests a relatively strong start to 2021: RCA has recorded transaction volume of €1.9 billion for the year through February 24. Several large deals have already completed, the biggest of which was the acquisition of the recently renovated Shift building in Issy-les-Moulineaux by a joint venture of three French institutional investors for €620 million at a 3.7% yield. The building is let to Swiss multinational Nestle on a lease that expires in 2033.


Additional data analysis by Beatrice Ginieis.

Real Capital Analytics will release the new edition of the RCA Capital Capital Liquidity Scores report in early March. If you would like to learn more about this data set, contact us

More on Paris:

These Were The Largest Property Markets Worldwide in 2020

Chart: Europe Dominates World’s Most Liquid Markets

European Investors Keep Faith With Forward Transactions

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Tom Leahy

Tom Leahy

Senior Director, EMEA Analytics

Tom Leahy joined RCA in 2014. In his role as Senior Director for the EMEA region, Tom is responsible for the development and expansion of the market analytics service for RCA’s European clients.

Prior to joining RCA, Tom was an Associate Director and then Head of Research at UK-based property consultancy, Lambert Smith Hampton. He started his career as an analyst at research consultancy Property Market Analysis (PMA).