Planning regulation changes set to revitalise Paris market

New legislation and changes to planning regulations could give the Paris market the boost it needs, experts agreed at Real Asset Media’s Trends 2024: France Investment Briefing, which took place recently at Taylor Wessing’s offices in London.

“The changes are the right thing at the right time to modernise and reinvigorate rundown areas of Paris,” said Alfred Fink, partner, head of real estate France, Taylor Wessing. “There are areas with many obsolete office buildings that have been empty for years, but until now it has been difficult and time-consuming to get change of use authorisation”.

The new bill, which has passed its first reading in parliament and is set to become law, will make change of use of a commercial building easier. More flexibility is likely to follow.

“Dual-use permits are also being considered, which will allow developers to build a flexible asset that can be adapted to different uses, such as student accommodation or senior housing or other types of residential,” said Fink. “This will encourage the refurbishment and transformation of buildings into ESG-compliant assets. Hopefully by the end of the year it will be easier to turn buildings green.”

The capital’s new city planning regulations, known as the “PLU bioclimatique” and aimed at adapting Paris to climate change, seek to promote the repurposing, conversion and upgrading of existing commercial buildings for environmental reasons. Mixed-use (servitude de mixité fonctionelle) with a residential component is actively encouraged.

“The Olympics have helped in this transition, because buildings have been planned from the start for a future change of use, so it has shown that it is possible,” said Fink. “Things are evolving and moving in the right direction.”

The office sector, which in the past accounted for as much as 70% of the Paris market, looks set to shrink as demand changes and investors’ portfolios are being reshaped.

“Over the next couple of years Paris will have to overcome its addiction to offices, which are now out of favour with investors,” said Kim Politzer, director, head of research European real estate, Fidelity International.

Even if planning regulations do become easier, there are other obstacles to overcome if the transformation of obsolete buildings is to happen on a large scale.

“It not only takes a lot of time, but a lot of capex is needed as well to upgrade assets,” said Serge Bacconnier, deputy head Paris office, Berlin Hyp. “Many assets have taken a value hit, and the risk is particularly high in secondary areas. The question is if you can justify the cost of a conversion. But if these planning laws materialise, then offices will become a very interesting asset class again.”