Earlier this month, we hosted Co-Liv France to explore the rise of office vacancy and the emerging opportunity to transform it into residential and shared living spaces.

Work-from-anywhere and freelancing are fundamentally reshaping the office real-estate market. What will become of the 54.25 million m² of office space in Ile-de-France? If companies downsized their workspaces by just 1%, this would mark an incredible shift.

As the need for fixed workspaces is called into question, and as housing demand intensifies, coliving and shared residential could be in particularly strong positions to turn offices into innovative urban habitats. In this article, we'll examine:

How can real-estate developers and investors make this shift into a promising opportunity? What are the key barriers, risks, and design constraints facing transformations? How could new regulations help transform workspace into living habitats relevant to today?

We brought together Grégory Cardona (Head of Real Estate Development, The Babel Community), Jérôme Flot (Founder, SOLTDEV for Immobilier Solidaire) and Eric Barbarin (CEO, Nexity Patrimoine and Valorisation) to discuss and unfold insights on the process and opportunity.

Today, we wanted to highlight the biggest, key takeaways from this event.

As always, if you have different ideas or disagree about what's most critical for developers and investors to understand about these transformations, we’d love to hear your perspective and thoughts! There are a lot of complexities to the topic, so please don't hesitate to send us a message.

Here are the x5 big ideas:

1— Do not count on this trend fully reversing. 📈

As Fabrice outlined introducing the topic at the event, one big signal we can see is a sharp decline in new office rentals. According to Immostat’s fourth-quarter reporting in 2020, office rentals fell 44% in Ile-de-France. This is an unprecedented drop that may suggest greater profitability by converting the spaces into innovative housing solutions. (There is a critical question of costs that we will explore later below.)

Additionally, Millennials will represent 75% of the workforce by 2025. They are more accustomed to mobile, flexible, changing life-styles and environments than any generation before. Freelancers make up a growing segment of the workforce, replacing the need for traditional offices with coworking spaces, cafés, and more ubiquitously – anywhere with wifi access. Spaces are increasingly free from their pre-defined usages, and this is calling the whole premise of the office into question.

A study by Airtasker measured the productivity of employees working from home during confinement and found that they "worked 1.4 more days every month, or 16.8 more days every year" compared to people working in an office.

If the business is gaining in productivity and could save additional money by reducing their office space, it could make unavoidable economic sense to give employees regular flexibility to work from home.

2— This opportunity could be BIG. 🏙

Today, 41% of French companies currently offer two days of remote work per week. A study by IEIF (Institut de l’Epargne Immobilière et Foncière) found that if the economy maintains this standard of remote working after the pandemic, active workspace would decrease by 27% – roughly 3.3 million m² of office over the next 10 years in Ile-de-France.

We surveyed our audience to ask “how many days do you spend at the office per week?” As you'll see, it's very evenly distributed over the week. However, it's worth noting that 45% of participants do not spend more than 2 days at the office per week.

• Never ➞ 14.9%

• 1 day / week ➞ 14.9%

• 2 days / week ➞ 14.9%

• 3 days / week ➞ 17.9%

• 4 days / week ➞ 16.4%

• 5 days / week ➞ 20.9%

These trends can be seen in most Westernized counties, but particularly in the U.S. According to Upwork, a freelance marketplace, 27% of the American workforce will be remote through 2021. And CBRE recently estimated a San Francisco vacancy rate of more than 16% – the highest on record.

3— Transformations are spatially and technically constrained. 🛠

Eric Barbarin and Cutwork have collaborated on several feasibility studies and transformation roadmaps for Nexity projects in France. Cutwork co-founder Antonin Yuji Maeno came into the discussion to speak with Eric about some key spatial constraints facing transformation projects.

The first is that offices are generally much thicker than residential buildings. Bedrooms need to have windows on the surface of the facade, limiting the number of rooms an office could accommodate and rent. The thickness also makes the core of the building dark, which can require creative solutions to use this space in ways that do not require natural light (ie. cinema, game room, gym, indoor grow-op, workshop, shared circulation).

Office facades pose the next challenge. In a lot of commercial offices, windows are not thought to be opened for ventilation. Facades are also often not attractive enough to sell as living spaces. This poses costs if the facade needs to be converted.

Lastly, regarding building circulation, elevators and stairwells in office buildings are often not in optimal positions for residential spaces. Moving them can be very costly, affecting the profitability of the building.

As Eric points out, indeed, some office transformation projects are unfeasible because they would be expensive than rebuilding the whole property.

4— In France, “temporary permits” can already be utilized to make transformations. 🕊

Jérôme Flot's company, SOLTDEV, specialises in helping establish localized community operations. This has included Grands Voisins project in Paris and transforming the historic Saint Vincent de Paul Hospital into accommodation.

Jérôme introduced "temporary permits," a legal status that can last more than 10 years and immediately be applied to convert offices into shared housing. In this respect, despite the constraints of public urban planning, it is already legally possible to transform the millions of m² of vacant offices into housing.

This is particularly promising as a social housing solution. For context, more than 60,000 people are living in emergency accommodation in France as a consequence of the pandemic.

Conditions to convert office space are coded differently in each country, but similar options may exist to those of you outside of France.

Generally, transformation relies on construction regulations and housing codes (ie. ERP in France for commercially managed housing), tax codes (particularly VAT), leasing agreement (between operators, investors, users), social housing laws, and urban planning regulations (ie. PLU in France for parking lots, etc.) Therefore, it is necessary to master the destination of the project in order to anticipate and determine its economic feasibility.

5— Blended-use and shared living would have big advantages for transformations. 💪🏻

As Grégory Cardona discussed, multi-use, blended living spaces are the future. In this respect, coliving and shared residential are very well positioned to make the most out of the spatial, economic, and regulatory constraints in office transformation. Some key advantages include:

• “Darker” spaces in the core of the building can be incredibly valuable and easier to appropriate for coliving communities (cinema, gym, workshop, focused workspaces, etc.)

• The need to create parking is generally low.

• Regulations and specific arrangements can make transformations into social housing easier and more immediate (particularly in France)

• VAT for the costs adapting the space can be reclaimed, which could be passed on the rent of residents.

Are you reinventing the ways people live and work today? Thinking to transform, open, or expand shared spaces?

We work with pioneering companies who are reimagining today’s habitats — and how spaces can be shared to establish more inclusive, resilient, and sustainable ecosystems.

If you share this vision, we’d love to connect and build them together.

Connect with us here:

➞ hello@cutworkstudio.com