Paris's business district is preparing to convert a significant share of its office buildings into residential apartments, mirroring a pattern now established across major cities in the United States and the UK. The nine-storey Le Diamant building, which currently houses 1,800 workers, is slated to become the first of many such conversions in La Défense. French real estate company Groupama Immobilier is leading the project, transforming office space into upmarket flats in the west of Paris.
The shift reflects a dramatic change in demand for office space since the Covid-19 pandemic accelerated homeworking patterns. La Défense has a vacancy rate of 14-15%, according to Paris La Défense, the public development authority that runs the area. Across the French capital more broadly, office space demand has fallen by almost a third over the past five to six years, according to Ludovic Delaisse, CEO of the French arm of Canadian real estate business Colliers. Pierre-Yves Guice, CEO of Paris La Défense, said authorities aim not only to address vacant space but to transform the district into somewhere people want to spend leisure time, not just work.
The conversion process presents substantial technical hurdles. Office floors typically contain large windowless central spaces, requiring creative solutions such as using lifts and stairs for access only, or creating internal atriums to provide natural light. Additional challenges include installing sufficient plumbing and addressing low ceiling heights. Roland Cubin, deputy CEO of Groupama Immobilier, highlighted how regulatory demands could determine France's conversion success rate, saying that treating converted buildings as new construction rather than renovations triggers requirements for car parking spaces, wheelchair access and fire safety measures that can be prohibitively expensive.
The conversion trend is most advanced in the United States, where tax cuts for property developers have fuelled large-scale projects. New York has 8,310 converted apartments in the pipeline, followed by Washington DC with 6,533, Los Angeles with 4,322 and Chicago with 3,606, according to a report from last year. Washington DC's deputy mayor for planning and development Nina Albert said the city set a goal of introducing 15,000 new residents downtown by 2028 and is on track to meet it, with hundreds of millions of dollars of private investment flowing into conversions.
The UK has also embraced the trend through tax cuts and eased planning rules. Property firm Knight Frank reported that office conversion projects in London were 60% higher than pre-Covid levels, according to a report from last year. Cubin urged French authorities to follow the US and UK approach by reducing taxes and regulatory barriers, suggesting this would determine whether France converts 2% of its vacant offices or between 18% and 23%.
For UK savers, borrowers and investors, rising apartment supplies from office conversions could affect residential property values and rental markets, though the material does not specify impacts for the UK market.