PARIS-Office lease-up in the Paris Ile-de-France region is likely to be slightly above 21 million square feet this year, making 2010 an "average but reasonable vintage" for the rental market, according to realtor Knight Frank. Take-up declined to 19 million square feet in 2009 from 26 million square feet in 2008.

"The situation in the Ile-de-France rental market is fairly reassuring but we need to be realistic. For the past 18 months the market has not been driven by companies' increasing need for office space, but by a desire to rationalise their establishments and to reduce real estate costs," Knight Frank said. But this has been sufficient to end the decline in prime CBD rents, which dropped around $169 in 18 months before stabilizing. There are now some signs of upward pressures, with transactions recorded at headline rents of up to $1,079.

The contraction in construction since the start of the financial crisis is likely to lead to a shortage of new property that will become more intense in 2011, and this will also lead to upward pressures on rents. Only 7.8 million square feet of new office space is due to be delivered in 2010, followed by a similar amount in 2011, in contrast to the 2009 total of 14 million square feet. Vacancy rates are expected to stabilize around the current 7% level.