MRM_REGISTRATION_DOCUMENT_2017

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Information on M.R.M.’s activities

Business overview

Limited renewal of high quality properties in 2018 At the beginning of 2018, future definite supply represented nearly 1.9 million sqm. 1.2 million of these will become available over the course of 2018. The renewal of speculative developments in the last quarters could result in a volume of new or refurbished surface areas placed on the market that is higher than in the past few years. However, the increasingly higher proportion of pre-lets should limit this renewal. Rise in headline rent in central locations In Paris and in the CBD in particular, headline rents continued to rise in 2017. In the tight markets in western Île-de-France, headline rents on good quality buildings seem to now be more aligned with the initial ambitions of their owners. The commercial incentives continue to be significant: the average gap between the headline rent and the economic rent reached 22,2% of the level in Ile-de-France over the course of the 3 rd quarter in 2017. Decreases were recorded in central locations such as Paris Centre West. The Western Crescent and the Inner Rim became more stable. The economic environment improved significantly in 2017, with GDP growth of 2% resulting in job creation, lower unemployment and a slight increase in household spending. Nevertheless, brick-and-mortar retail activity remained lacklustre. Revenue figures from the Procos panel in 2017 slipped 0.2%, with a sharp disparity between consumer segments. The services, food and catering sectors saw growth of 1.6%, 1.3% and 0.5% respectively in 2017 while e-commerce sales rose 13.5% over the period. The transformation of physical retailing continued and even gathered pace with the most profitable brands adopting multichannel strategies and online retailers acquiring brick-and-mortar chains. Several national and international retailers struggled against this backdrop (e.g. in the clothing and toy segments) and the downward trend of rental values continued with the exception of the most prestigious locations. In 2017, three medium-sized stores belonging to struggling national chains vacated their M.R.M. premises, and the Group had to extend time-to-market and underwent tougher financing conditions on certain lease renewals.

2018: Sustaining the dynamism The ingredients of the vitality of the Paris office market are growth perspectives for 2017 that have been revised upwards recently, and a better business climate with companies having more confidence in the future. In this generally positive context, there should be more job creation in the upcoming quarters, which should sustain the dynamism in the 0-5,000 sqm segment in 2018. The lack of supply in Paris should further the transfers of certain occupiers to markets in the nearby suburbs. The reasons behind the moves of a vast majority of large occupiers will remain their looking for efficient and functional premises to modernise their premises and incorporate new working methods. Several major transactions are under negotiation. They indicate that 2018 performance should be up to the excellent performance in 2017. The dynamism of the market offers a good visibility on the rent increases in locations where vacancy rates are tight, especially as the renewal of high quality supply will remain limited in 2018. Rental demand in the office property segment remained steady and rose by 8% to 2.6 million sqm in Île-de-France in 2017, driven by transactions in properties of over 5,000 sqm. Trends in interest rates and the ready availability of capital for investments contributed, for assets offering secure rental yield, to the continued decline in capitalisation rates with, nevertheless, a strong dichotomy between premium assets where investment demand is concentrated and other assets. The continuation of low interest rates in 2017 created a favourable environment which enabled M.R.M. to renegotiate cheaper lines of credit at fixed rates and reduce its average cost of debt.

1.4.3 The Group’s analysis of market trends

M.R.M. 2017 REGISTRATION DOCUMENT

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