A quarter of Paris’s La Defense offices are ‘obsolete’, says district’s CEO

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By Iain Withers

LONDON (Reuters) – A quarter of the office space in Paris’s La Defense business district is “completely obsolete” and will need to be overhauled or switched to a mix of uses such as hotels and student housing within a decade, the boss of the district told Reuters.

The cluster of office towers that has sprung up since the 1960s in the west of Paris has fallen out of favour with some companies, exacerbated by more home working since the pandemic that has pummelled office property prices globally. Purpose built business districts have been among the hardest hit.

Pierre-Yves Guice, CEO of Paris La Defense, told Reuters around one million square metres of office space – equivalent to around 150 soccer pitches – across the four million square metre complex needed retrofitting to higher green standards or redeveloping for non-office use due to lower office demand.

“It must be [redeveloped] within 5-10 years. If we wait any longer, it will hamper the whole social and investment dynamic of the area,” Guice said in an interview.

Reuters reported in June that La Defense was modernising more than 300,000 square metres of offices into greener and more flexible work space.

The proportion that ultimately needed overhauling, much of it into alternative uses, across the estate was larger, Guice said, and cash injections would be needed from external investors to fund this.

La Defense would like to follow the example set by London’s Canary Wharf district – which is planning to break up one of its largest office towers into a mix of uses after banking giant HSBC leaves – but has been frustrated by French regulations, he said.

“Regulations make it difficult to put several different uses in the same building,” Guice said. “Traditionally France has always been very strict. I think it is absolutely essential (to change that).”

La Defense is trying to reinvigorate the area, including by creating a large park running through the centre of the estate. Office tenant demand remains, Guice added, but fewer companies want large headquarter-style buildings.

The investment environment for real estate in France will be “challenging” in the short term due to a lack of political stability since this summer’s parliamentary elections, but Guice said he remained optimistic.

“There’s most definitely light at the end of the tunnel, the question is when do we reach it.”