Obsolescence challenge looms for the Paris office market

One of the growing preoccupations in the Paris market is the need to find alternative uses for offices that face obsolescence because it is uneconomical to bring them up to increasingly tough sustainability standards.

Although institutional investors are taking ESG seriously, frequently appointing directors to be responsible for achieving ESG goals, the focus so far has been on the “E”.

“I think this is understandable,” said Dr Alfred Fink, partner in law firm Taylor Wessing.  “That’s certainly the main focus because we have this ‘décret tertiaire’, as we say.”

He explained that the government has put in place a legal framework which requires electricity consumption to be reduced over the next 30 years by 40% to 60%.

“That is major and is particularly important in Paris where we have all the Haussmanian buildings which are historical buildings.”

Because the facades of these buildings cannot be touched which is “interesting and challenging” for investors, eventually leasing these office buildings will be prohibited if they cannot be made to comply with environmental legislation.

Also, there are many office buildings in the outskirts of Paris that were built in the 1970s and 80s which were not built with energy saving in mind and within the next decade they may also be declared obsolete, so plans are needed for them.

Conversion to some form of housing may be preferable – perhaps for students or coliving –  but is not always possible. Municipal authorities are often reluctant to grant consent because of the potential loss of tax revenue and the necessity of providing infrastructure for residents.

Fink said that resolving this issue requires a political decision and will need a discussion with the mayor and urban planning department.

Reusing buildings is one of the hot topics. “It’s important to raise it and to see how we can do that,” Fink said.

Please click on the video above to watch the full interview or listen to the podcast below.