La Défense, Europe’s largest purpose-built business district, seeks investors from Asia

Around 15 per cent of the office space in the business district is currently vacant because of weak demand

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Avenue Charles de Gaulle and the business district of La Defence, seen from Arc de Triomphe in Paris. Photo: Shutterstock

Published: 1:30pm, 8 Dec 2024Updated: 10:38am, 9 Dec 2024

La Défense, Europe’s largest purpose-built business district that is located eight kilometres west of central Paris, is trying to attract investors from China and other Asian countries in an effort to combat record vacancy rates in the wake of the Covid-19 pandemic.

Of the district’s four million square metres of office space, around 15 per cent is currently vacant due to reduced demand, as many companies have shifted to remote work or adopted more flexible arrangements after the pandemic, according to Pierre-Yves Guice, the CEO of Paris La Défense, the government agency overseeing the district’s planning and development.

The 15 per cent vacancy rate is higher than that of central Paris, though it is comparable to Canary Wharf in London as well as other prime business districts worldwide, Guice said. Despite the elevated vacancy rate, the rental yield in the district has remained largely stable at around 6 per cent over the years, he added.

In China, after the property sector was shaken by the pandemic and a deleveraging programme, the country’s office market found itself under great pressure. In Shanghai, for example, the vacancy rate rose to 21.5 per cent in the third quarter, the highest level in 20 years. Rental yields are lingering at 4.75 to 5.25 per cent, according to CBRE.

‘La Défense can provide Chinese banks, Chinese investors, with very safe and reliable conditions,’ CEO Guice says. Photo: LinkedIn

“Owning an office tower in La Défense is quite a steady investment,” Guice said. “It’s a known and safe quantity over a long period, provided the offices are regularly renovated and maintained.”

Since 2018, La Défense has planned to invest €800 million (US$845.9 million) over the following decade to modernise the district’s buildings and infrastructure. The state-owned company has also been fostering relationships with Chinese cities and other governments over the years.