Hot spot: Booming Paris looks set to attract debt capital

Latest real estate investment market data suggest Europe’s property lenders should look to the French capital for potential financing mandates.

According to data provider Real Capital Analytics, a strong third quarter of equity investment in the French capital helped it to pip “Brexit-battered” London to become Europe’s best-performing metropolitan property investment market for the first three quarters of 2019.

At the end of Q3, Paris had clocked up €17 billion of investment, a 23 percent improvement on the same period in 2018. It was marginally ahead of London, which saw €16.9 billion of investment in the same period, although the UK capital’s figure was down 32 percent, year-on-year.

From a debt perspective, Paris is likely to generate mandates for senior lenders eager to finance core city office deals. RCA data show offices accounted for 75 percent of Paris transactions in the first three quarters of 2019. Increased investment from South Korean buyers has also been a driving factor for the Paris market this year, with more than €3 billion invested by them in Q3 alone.

According to a September report by consultancy Savills, South Korean interest in Paris is being driven by positive carry on the euro, as well as cheap debt – they can borrow at 100-120 basis points in the French market, compared with circa 250bps in the UK. The low cost of borrowing helps investors justify buying Paris offices at yields of around 3 percent, Savills added.