Mathieu Rosemin
PARIS (Reuters) – Paris’ La Défense business district is betting that upgrading more than 300,000 square meters (3.2 million square feet) of offices into greener, more flexible workspace will attract companies and reduce record vacancy rates.
With brutalist architecture and modern skyscrapers dominating the skyline west of the Arc de Triomphe, La Défense is considered Europe’s largest purpose-built business district. Like other commercial areas of the city, offices have emptied and deals have fallen through during the pandemic. The vacancy rate has jumped above 15% from less than 10% before the pandemic, according to real estate agents, much higher than the 2% vacancy rate in central Paris.
Many of its towers are outdated and environmentally damaging, but demolishing or converting most of them for other uses would be too expensive.
The head of Paris La Defense, the community organization that runs the area, told Reuters there were plans to renovate it over the next few years to accommodate tenants wanting smaller, greener space. The plan will start with 300,000 sq. m, which is almost a tenth of the entire area of La Defense.
One selling point is that average rents of about €550 ($588.61) per sqm are half those in supply-constrained central Paris, agents estimate. Before the pandemic, the central areas were about 40% more expensive than La Défense.
There are preliminary signs of improving demand. The vacancy rate has dropped from a record high of nearly 16% last year to 15% at the start of 2024.
French IT services company Sopra Steria has moved into eco-friendly offices in a 1970s building that was renovated two years ago. It now boasts a Parisian-style inner street filled with restaurants.
“If you want to attract the best talent, you need to have very modern and very functional premises that will facilitate teamwork,” Sopra Steria CEO Cyril Malarge told Reuters. “You must be sure that [people] I want to stay in the office as long as possible.”
Filling huge offices will not be easy.
Aymeric Le Roux, chief executive of property agency Savills, said new buildings remained easier to rent than older ones, citing the rapid leasing of Unibail-Rodamco-Westfield’s (URW) Trinity tower.
Some major projects have been cancelled. In February, URW said it was suspending the planned Sisters Twin Towers project.
The upcoming early elections in France could further undermine confidence if it results in a Eurosceptic, far-right government.
“There are fewer large corporations renting properties,” said Le Roux of Savills.
“But it’s not as bad as it seems,” he added, as today’s tenants want state-of-the-art buildings that are “owned.” [central] Paris doesn’t offer that scale.
CITY PARK
The concept for La Defense, now home to companies such as Vinci and Societe Generale (OTC:), dates back to the 1950s when plans were drawn up to create a business district to replace the area’s run-down housing and small factories. The first skyscraper was built in 1966. Subways, shopping malls and the huge Coeur Defense office complex followed.
Supporters say La Defense has survived previous downturns and can do so again.
Paris La Defense is now selecting real estate projects based on their energy and environmental performance and is transforming the main concrete public esplanade into a five-hectare urban park, due to open in 2027.
Low-carbon and partially renewable energy is used to meet some of the local electricity needs, and building management systems automatically turn off office lights at night and maintain temperature controls.
“We are starting with a district model that is extremely energy-intensive and extremely monofunctional,” Paris La Defense CEO Pierre-Yves Guis told Reuters from his office overlooking the district.
“No matter what people say, our ideas are still very smart, easily adaptable to the needs of companies, and we can meet the needs of both large and small companies,” he said.
This gives it an advantage over central Paris, where buildings are smaller, many built in 19th-century brick, limiting the use of more energy-efficient building materials.
La Defense will soon be home to France’s tallest skyscraper, The Link, at 242 meters high, which will open next year to house long-time La Defense resident TotalEnergies (EPA:).
The cost of renovation is 300,000 sq. m of offices in accordance with modern environmental standards, according to experts, will reach hundreds of millions of euros, and it will mainly fall on the shoulders of large developers such as URW and Vinci.
To attract younger workers and companies, developers are building more apartments and converting some older buildings into student housing or fancy hotels.
It is reminiscent of efforts in other recession-hit cities such as London’s Canary Wharf.
La Defense’s mission will now be to serve small firms and large companies that require less space. Luxury groups Kering (EPA:) and LVMH’s Christian Dior, for example, recently moved part of their back offices there.
Typical buildings in La Défense were occupied by one or two companies, but the number could rise to 10 to 15, said Yiannis De Francesco of real estate agency JLL France.
“It’s a completely different way of marketing than what we had before, and by the way, it takes a little longer because you have to sign more contracts,” he added.
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