Pierre-Yves Guice has a formidable task at hand. The chief executive of Paris La Défense, a public-private partnership, is aiming to transform Europe’s largest office district into an area where people want to live.
Like other office districts, La Défense took a hit following the pandemic. New towers were completed just before or during the pandemic. After the pandemic, many companies decided to cut back on space as hybrid working became the norm. As a result, the vacancy rate shot up to a record 15%, while in previous downturns, the vacancy rate was 12-14%. Take-up has remained constant at around 200,000 square metres a year.
“We reached a point during the pandemic that the district was so heavily focused on offices that [because of the lockdowns] it became a systemic risk for the whole district,” said Guice in an interview with CoStar News.
La Défense has 4 million square metres of office space, twice as much as London’s Canary Wharf, with offices accounting for 85% to 90% of space. By the end of the decade, Guice wants to reduce that to 70%. In a way, it is a return to La Défense’s roots, because it started as a mixed-use area in the late 1950s and early 1960s, he said. In the decades that followed, however, more and more office towers were added, resulting in an office monoculture. The high vacancy rate has dragged down office rents. While prime office buildings command €600 to €650 per square metre a year, the average rent has fallen to €400.
For decades, La Défense was the area where large corporates, such as AXA and TotalEnergies, would have their headquarters, taking tens of thousands of square metres of space in single lettings. Today, take-up has fallen to an average 5,000 square metres as smaller companies are moving in. The 30,000 to 40,000-square-metre lettings of the past have become a rarity, said Guice.
“Companies are still finding it difficult to come to terms with their real estate strategy in terms of remote working and managing new offices, the way they set up office floors, the way they manage workers and spaces,” said Guice.
EY is a perfect example of how office occupiers are changing. The consultancy firm is vacating its offices in La Défense, leaving 50,000 square metres behind, to move into the central business district, where it is leasing half of the space. Like in London, companies in the French capital appear to have settled on three days in the office for now, with people working remotely on Monday and Friday.
“It’s an absolute pity because it makes it very difficult to manage cities and infrastructure,” said Guice. “The subway is crowded on Wednesday and Thursday and quiet on Friday.”
In a bid to diversify away from offices, Canary Wharf, the closest UK equivalent of La Défense albeit on a much smaller scale, is attracting tenants from other sectors than the financial sector, which has dominated the estate for decades. This week, it started works on a new tower for life-science tenants, with laboratory and office space. Guice is also in talks with life science and pharmaceutical companies, and he hopes to announce a big letting by the end of the year. In Paris, life science and pharmaceutical companies are further out from the centre on big campuses from the 1980s.
“Because they are decreasing the square metres needed, they are coming back to the city centre and La Défense,” said Guice.
At the same time, La Défense is in talks with landlords to convert older office buildings into student accommodation or coliving properties. There are currently 15,000 people living on the estate, including thousands of students. Business and engineering schools have taken up space in the towers. Students want to be near the corporates where they may be able to intern or work.
“In France, some investors are reluctant about this [transformation], because you cannot transform it back,” said Guice. “We help them, convince and encourage them to do it.”
Tenants may also need some convincing as high-rise buildings are associated with the banlieues, the suburbs where poor people live. It will not become an area for families due to the lack of schools and nurseries, said Guice. To make the area more liveable, La Défense is adding more greenery. By the end of this year or early 2025, work will start on creating a whole new park on the esplanade, much like Canary Wharf Group’s recent plan to cut floors out of the HSBC office tower to create space for roof gardens.
“The main challenges are the same, to bring life back into the district,” said Guice, who visted Canary Wharf on his trip to London before the interview.
Paris La Défense is paying for the park. It raises income from local taxes and selling land and air rights.
But becoming green is not just about planting a few trees. By the end of the decade, Guice wants to cut carbon emissions by half so that it becomes what he calls "the first post-carbon office district".
Residents also want more amenities, such as cinemas and doctors' surgeries, and better connectivity. The Olympics has helped with the latter in the form of new cycle lanes. As part of Paris 2024, all Olympic venues had to be accessible by bike. Paris La Défense upgraded its existing cycle lanes and added new ones.
“Now you can go to Paris from La Défense without risking your life,” said Guice.