Paris Wants Landlords to Turn Vacant Office Space Into Apartments—Or Else

Leave your office space unrented and we’ll fine you. That’s the new rule declared by the city of Paris last week. Currently, between six and seven percent of Paris' 18 million square meters of office space is unused, and the city wants to get this vacant office space revamped and occupied by residents. The penalties for unrented space will be as follows: 20 percent of the property’s rental value in the first year of vacancy, 30 percent in the second year and 40 percent in the third year. The plan is to free up about 200,000 square meters of office space for homes, which would still leave a substantial amount of office space available should demand pick up. The city insists that, while the sums involved are potentially large, this isn’t a new tax but an incentive. And, if it has the right effect in getting property re-occupied, may end up being little-used.

Landlords' groups are taking the new plan as well as can be expected. They’ve pointed out that, while the cost of the fines might be high, it could still cost them less to pay them than to convert their properties to homes. According to a property investor quoted in Le Figaro, the cost of transforming an office into apartments can actually be 20 to 25 percent more expensive than constructing an entirely new building. Many landlords might be unwilling or unable to undertake such a process and thus be forced to sell in a market where, thanks to a glut of available real estate, prices are falling. There is also the question of how easy the law will be to enforce: Landlords could rent out vacant properties at a token rent simply to avoid the vacancy fine.