An Index of Global Occupancy Cost Per Employee: A Study of Service Activities in Paris Business Districts
||Nappi-Choulet, Ingrid; Cancel, Marion
||An Index of Global Occupancy Cost Per Employee: A Study of Service Activities in Paris Business Districts
||16th Annual European Real Estate Society Conference in Stockholm, Sweden
||This research project focuses on the question of head office locations for large service firms in the Paris region, with particular emphasis on FIRE (finance, insurance, real estate) industries and other service industries such as legal, accounting and consulting firms. The aim of the research is to propose a measure of the average global occupancy cost per employee for a head office established in the Paris region. For each geographical sector in the region – particularly the Paris Central Business District, La Défense Business District, and the Western Crescent – we used hedonic rent modeling to estimate the 2007 global occupancy cost per employee for a head office, depending on its total number of employees (at least 100 employees, as the data used concerns offices of more than 2000 sq.m.), the type of building (new or second hand), and the lease contracting date. This global occupancy cost per employee for 2007 incorporates rents (adjusted according to France’s Construction Cost Index for leases contracted pre-2007) as well as most other real estate costs such as rental charges and taxes. While occupiers generally refer to rent per sq.m. when looking for a new office location, this new measure of global occupancy cost per employee takes account of per-employee occupancy ratios. This research shows that although a new building has a higher rent per sq.m. than a second hand building, it is generally also more efficient and allows better optimization of surface use for the occupier. It is thus observed that putting the head office in a second hand building can ultimately be more expensive than in a new building. This measure is also used to compare the occupancy cost per employee for a head office in a given geographical sector of the Paris region with the occupancy cost per employee for the same head office under a new lease contracted in 2007, in the same geographical sector, or in a different sector. The occupancy cost differential can be used to analyze the attractiveness of geographical sectors and potential relocations of head offices within the Paris region, for the business sectors under examination. Based on assumed future developments in on rents and France’s Construction Cost Index, we propose scenarios on the future head office relocation opportunities within the Paris region in the next few years.
||Offices occupancy cost,Paris Office, Property Market, Hedonic Rents Index
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||Corporate Real Estate
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