Too many offices, not enough homes: can conversions work?

**John Laurenson** (0:01)
Welcome to Business Daily from the BBC World Service. I'm John Laurenson. Today, I'm just outside Paris in one of the world's biggest business districts. I'm here to find out how, at the start of the AI revolution, it's trying to adapt to survive.

**Thierry Bacot** (0:17)
France now has nine million square meters of vacant office space, including six million for the Paris region alone.

**John Laurenson** (0:25)
How Paris' business district is trying to reinvent itself, how London's Canary Wharf has reinvented itself, and what lessons can be learned from a city that's done office conversions at scale, Washington, DC.

**Nina Albert** (0:39)
We have 700,000 square feet that have been delivered and that are being lived in. We are expecting over the next 12 months that you'll see that number balloon.

**John Laurenson** (0:51)
All coming up in Business Daily.
I'm standing in the middle of Europe's biggest business district, La Défense, just west of Paris. It's a forest of skyscrapers. There are over 60 in all on a huge slab of concrete. There are loads of big companies headquartered here, Total Énergie, for example, and the Société Générale Banque. But now it has a problem. I'm here with Pierre-Yves Guisse, the head of Paris La Défense, the public company that runs this business district. Pierre-Yves, tell us about the challenge that you have here.

**Pierre-Yves Guisse** (1:30)
The vacancy rate is definitely a bit higher than it used to be before COVID. It's around 14, 15% at the moment, which is the direct consequence of the changes in corporate real estate strategies that have been taking place since COVID, because of hybrid working, because of the new work-life balance that companies and employees, both have been trying to implement.
So it is a challenge for the business district, because it leaves us with several hundred thousand empty square meters of office space in need of a new lease of life. But it's also an opportunity, because it's going to give us, and it already gives us the opportunity to transform these vacant offices into new things, such as housing, such as leisure, entertainment, everything else apart from offices.

**John Laurenson** (2:21)
We took about a 14% vacancy rate. Is that hitting all kinds of offices?

**Pierre-Yves Guisse** (2:27)
We are clearly seeing a shift of the demand for low-rise office buildings, which tend to find very easily their tenants on the current market, whereas towers, and especially the most, the towers from 20, 30 years ago, find it a bit harder to find tenants.

**John Laurenson** (2:46)
Is there a tendency as well for people to get out of big business districts such as La Défense, go towards the city centers again?

**Pierre-Yves Guisse** (2:54)
Yeah, absolutely. It's a challenge that most of the central business districts or global business districts in the world have been facing since the COVID years, because this type of environment that you can see around us in La Défense, very functional, very abstract almost, full of concrete, and almost 100% dedicated to office work and office life, maybe does not fit so much the expectancies of the workers, and especially the younger ones, not so much as it used to be.

**John Laurenson** (3:24)
Can you put a number on the vacant square meters that you have and the number of those vacant square meters that you think you can convert?

**Pierre-Yves Guisse** (3:32)
Around 400,000 square meters of existing offices might have to be transformed in the next 5 to 10 years into mostly housing, but also higher education facilities, or like I was saying, entertainment facilities, shops, restaurants, in order to increase the quality of life of La Défense and without renouncing the economic focus of La Défense, which has always been the main asset of the district and still is.

**John Laurenson** (3:57)
In much of the rest of the Paris region, office vacancy rates are higher still. Ludovic Deles is CEO of the French arm of the Canadian real estate services company Colliers.

**Ludovic Deles** (4:12)
Demand for office space in the Paris region has fallen by about 30% over the last five or six years. Now, in the region as a whole, some three out of ten offices are empty, twice La Défense's vacancy rate.
The rent reductions owners offer new leaseholders are now at 35% on average for La Défense, whereas in some areas, it's 45%.

**John Laurenson** (4:37)
At La Défense, they've launched an offices into flats conversion project with the aim of transforming, getting on for half a million square meters of office space. What do you think of this? Is this one of the solutions at least to the office vacancy problem?

**Ludovic Deles** (4:54)
It's the only solution, especially for obsolete office blocks. Two things make office blocks obsolete. Their geographic location, their places where companies don't want to rent office space anymore, and then there's their layout. In the 1980s and 90s, they built lots of private offices and cubicles. Companies now want more adaptable spaces, informal meeting places, and event areas, nicer cafes and gyms.