Reinventing fringe as the new core

The trend of urbanisation is reinventing the optimal investment thesis to one that is increasingly local, based on the structural factors of an area. As pricing of central business districts (CBD) reach new highs and supply becomes more constrained, investors are looking to suitable fringe locations worldwide to deploy their capital.

Case Study: Paris’ Fringe

Over the next decade, several new markets in Paris, France, will open to investors as the Grand Paris rail project completes. ‘Saint-Denis/Pleyel’ in northern Ile-de-France, will benefit from four new lines, as well as the infrastructure promised for the 2024 summer Olympics in France. A number of new developments and refurbishment projects are underway and the office market is already gaining traction. Investment volumes in the northern inner suburbs increased +105% across 2018, including Ivanhoé Cambridge’s purchase of the 9,000-sq ft Cap Ampère building – the largest office sale in France in 2018.

We also expect Nanterre will benefit from the Grand Paris project. Located near La Défense, the area will be connected to the southern rim and the northern inner suburbs once the line is completed. It will also benefit from the extension of the existing suburban railway line E. Construction giant Vinci is building its headquarters there. Other future hubs include Fontenay-sous-Bois in the east and Villejuif and Bagneux in the south.

And inside Paris…

Beyond areas directly benefitting from new Grand Paris stations, the chase for yield by investors is creating demand for other fringe-of-core developments, most of which are around the city’s transport hubs. In the 13th arrondissement, the “Paris Rive Gauche” [1 in map] development zone will ultimately host 7,500 housing units, 7.2 million sq ft of public facilities and nearly eight million sq ft of office space. “Bercy-Charenton” [2] is an urban development zone in Paris’ 12th arrondissement, which comprises more than two million sq ft of office space and 4,000 new residential units, while former industrial sites in the 18th and 19th arrondissements are being transformed into mixed-use areas, such as the “Chapelle International” [3], a 3.3 million sq-ft office project, which was acquired by Blackstone in 2018.

What is the Grand Paris Express?

The “Grand Paris Express” is Europe’s largest transport infrastructure project. As well as accelerating development and increasing land values in secondary areas, the project will connect existing commercial hubs in the inner and outer suburbs, supporting the investor investment thesis.

To date, the impact on the commercial property investment markets has been relatively limited, but several zones are to benefit from the shortening of transport time and the development of new schemes near the main transit stations.