First-ever comprehensive report lifts lid on French debt market

France’s real estate debt market has significant differences from other major European lending markets, a new annual survey finds.

The inaugural study reveals that: French lenders’ loanbooks are heavily weighted to offices; that they have a higher proportion of corporate loans than lenders on real estate in the UK and Germany; and that lending is more highly concentrated in the country’s capital than is the case in Europe’s other two main property markets.

The survey was produced by independent French research company IEIF, and by PwC, after initial discussions with market players Allianz, BNP Paribas, Crédit Agricole CIB, Natixis and Société Générale. It was launched in Paris last month and IEIF and PwC hope that it will become a standard to rank alongside Germany’s IREBS study and the UK’s Cass lending report.

For the French debut, which covers the market in 2018, nine banks and six alternative lenders participated, accounting for €55 bn in outstanding loan books, and production during that year of €20 bn of new business. The survey says the size of the French investment market in 2018 was €32 bn.

Of the €55 bn on the books of the 15 participants, €44 bn was either secured on assets or was corporate lending, while €11 bn was for development or asset repositioning. Similarly, of the €20 bn of new lending in 2018, €14 bn was for assets/corporate deals and €6 bn for development.

More than 20% related to corporate financing compared to 12% for the UK and 11% for German lending. ‘It is interesting to note that French banks value corporate counterparty risk more highly than banks in the UK or Germany,’ the survey says.

In France, debt is heavily concentrated in offices, ‘an asset class widely favoured by investors there’, the report notes. Offices accounted for 45% of outstanding loan books and 49% of new production in 2018.

On the other hand, IEIF notes that residential is still very under-represented compared to many other European markets, with just 5% of new loans in France in 2018 made to this sector.

The focus on the capital city is also a standout feature in the French market, with 63% of debt issued to finance assets concentrated in the Greater Paris region, compared with 49% in Central London and only 19% in Berlin.

The survey found that debt funds are filling a role in several ways, including sometimes investing in longer-term financing than the banks, and that they were holding about €5 bn of the outstanding €44 bn of secured or corporate lending against investments in 2018.

Paris-headquartered investment manager Amundi was one of the sponsors of the research. Bertrand Carrez, Amundi’s head of real estate debt who also took part in the launch on 16 January, told PropertyEU: ‘It is a very good start in France to have a serious survey of our market.’

Carrez said he would like the research to quickly develop its depth to look at things like how and where debt funds are ‘accompanying banks in certain market segments’, as well as to study how the different capital charges for banks - via the Basel regulations - and debt funds - via Solvency II - impact lenders’ required margins.


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