Transformation of offices into housing: 800 projects authorized each year in France, ie more than 1.200.000 m² converted

CBRE, world leader in corporate real estate consulting, unveils its study on the transformation of offices into housing on the occasion of the launch of SIMI. Public will, growing investor interest, favorable market context: an unprecedented alignment of the planets, but a complex reality.

Depending on the fluctuations of real estate cycles, the transformation of offices into housing has been regularly considered, but until now little materialized. From a niche phenomenon to a real social issue, the subject is at the heart of the debate at a time when the logic of hybridization of working methods is confirmed and, at the same time, a new housing crisis is emerging. Renovating what already exists is a first way to respond to this problem. However, the implementation of these projects remains complex at different levels, particularly regulatory.

Sébastien Lorrain, Residential Director at CBRE France, deciphers the phenomenon of the transformation of offices into housing and delivers his analysis of the challenges and opportunities for investors, in Paris, as in the territories.

Transformation of offices into housing, where are we?
What dynamics in Ile-de-France and in the territories?
Why is this trend more than ever a real hot topic?
What is the interest of investors for the subject?
How to identify the feasibility of this type of operation and the opportunities?

The main lessons

With more than 4 million m² of immediate supply available (i.e. more than 1 million additional m² compared to 2019), vacant office space can be the start of a response to the housing crisis in Ile-de-France .

In France, more than 4.000 operations to transform premises into housing are authorized each year, representing only 13% of building permit authorizations granted between 2013 and 2021. The transformation of offices into housing represents on average 18% of these conversions of assets.

In France, nearly 800 conversion operations of offices into housing are authorized each year, i.e. more than 1.200.000 m² converted, which allows the creation of more than 2.000 housing units each year (2% of total housing units created each year).

Ile-de-France, faced with strong pressure on housing, is the first region concerned by this trend, and represents 20% of the number and volume of m2 concerned by these conversions, followed very closely by the Auvergne region. -Rhône-Alpes, Hauts-de-France and PACA.

The rate compression initiated 10 years ago resulted in the convergence of yield rates between the different asset classes: the yield spread between prime office (Paris CBD) and prime residential (Paris) was 120 bp at the end of 2012, it was only 50bp at the end of 2021.

Conversions of offices into housing are increasingly attracting private investors: in particular value-add funds and funds dedicated to urban recycling (Hab'initio d'Ampère Gestion and CDC Habitat, Harvestate Office Conversion Fund I). In addition, almost all investors ask themselves or will ask themselves the question of the transformation for certain assets of their own assets. The share of value-add operations in the volumes invested in offices was 20% on average.

The market context today is conducive to urban recycling and conversion. The identification of opportunities nevertheless remains difficult and complex. CBRE has developed an interactive map called "Office Convertor" to identify municipalities where the transformation of offices into housing would be possible.

Despite a relaxation of the regulatory framework for the change of use with the ELAN law, constraints remain regarding the change of uses of a building. However, the latter do not prevent strong public intervention in certain areas.