PARIS — With consumer spending weak and tourist flows lagging, commercial real estate in France stagnated this year.
Real estate executives said transactions in the luxury sector fared worst. Rents stabilized and vacancies went unfilled on tony thoroughfares like the Avenue George V and the Rue François 1er.
“The Paris luxury market is dead,” said Jean-Jacques Bertrand, director of the French market for commercial real estate firm August Thouars. “The French aren’t opening their pocketbooks and there’s not enough high-end tourism. There aren’t many shops that want to open expensive locations in this environment.”
Rents on Avenue Montaigne, George V and the Faubourg Saint-Honoré have dropped some 10 percent and few major deals have been signed, executives said.
Christian Dubois, director of commercial real estate in France for Cushman & Wakefield Healy & Baker, added that openings from the fast-fashion behemoths have decelerated, too.
“We’re not seeing the rollout we did a few years ago from the likes of H&M and Zara,” said Dubois. “Conversely, we’re seeing more activity in the service sector and banks.”
But not everything is bad. Several high-profile deals were inked this year, including 50,000-square-foot spaces for Adidas and Go Sport, the French sporting goods store, on the Avenue des Champs-Elysées.
They underscore continued high demand for locations on the street, which will also see Hugo Boss and Lancel stores bow over the next few months.
Hennes & Mauritz has been searching for a suitable Champs-Elysées location for years, real estate agents said.
A recent Cushman & Wakefield study said the street is the most expensive in Europe, commanding average rents of $2,124 a square foot ($7,648 a square meter) annually. London’s Oxford Street is a distant second, with an average of $1,545 a square foot ($5,564 a square meter) a year.
Meanwhile, deals have flowered around the high-traffic Avenue de l’Opéra and the Boulevard Haussmann.
Esprit signed up for a 25,000-square-foot space at the Opéra, where Lancel recently renovated its flagship.
A cluster of shops, including a Sephora and a Surcouf electronics store, are in the works on the Boulevard Haussmann, where Benetton recently opened a sprawling flagship. A Heineken brasserie is also part of that development, Dubois said.
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Cushman said average Haussmann rents were $1,138 a square foot ($4,097 a square meter).
Activity is also bubbling on the Rue Saint-Honoré around Colette, the hip fashion emporium.
Recent additions include Chantal Thomass, next door to Colette, and Diane von Furstenberg, on the adjacent Rue d’Alger. Roberto Cavalli plans to move into the neighborhood soon in the former Laura Ashley boutique at the corner of the Rue Cambon and Saint- Honoré.
“Saint-Honoré is one of the only neighborhoods to still be in demand,” said Bertrand. “But we’re talking about small spaces. Rents on and around Saint-Honoré are up about 15 percent.”
Rents on Saint-Honoré range from about $805 to $945 a square foot ($2,900 to $3,400 a square meter) a year, Bertrand said. (Figures are converted at current exchange rates.)
Conversely, several blocks northwest, Faubourg Saint-Honoré, especially locations above the Place Beauvau, has been unusually quiet.
Average annual rents on the Faubourg last year were $1,245 a square foot ($4,479 a square meter), according to Cushman’s study.
But while Paris had a quiet year, rates have leapt in provincial cities. Rents in Lyon, Lille, Toulouse, Strasbourg, Bordeaux and Marseille have grown by double digits this year.
“Rents are up 10 to 15 percent in the provinces,” said Bertrand. “Demand is greater than supply. But we’re not talking about luxury for the most part.”
Dubois added that shopping strips on the frontier of provincial cities are booming, too. He said companies such as C&A and Grand Optical were expanding quickly in such formats.
“We’re not seeing companies at the level of Gap, but we’re moving in that direction,” he said. “These formats are attractive because rents are low and sales are high. Retailers can make money there.”
— Robert Murphy