In a context of falling interest rates in Europe, real estate assets are becoming increasingly attractive to investors. Leveraging diverse financing schemes—at a time when solutions are evolving—is proving particularly effective in seizing opportunities.
The impact of rising interest rates following the inflationary pressures of 2022 has been significant on the real estate market. The reduced investment capacity of buyers—who most often rely on leverage through short- or long-term financing—has led to a sharp decline in real estate transactions. At the same time, asset valuations have suffered significant markdowns.
A rebound in real estate transactions
The rate-cutting cycle initiated in June 2024 by the European Central Bank (ECB) is breathing new life into the real estate market. The notable decline in the value of certain assets offers attractive investment opportunities. Combined with the lower cost of debt, this movement is reviving confidence among real estate stakeholders. As a result, professionals are anticipating a 15% to 20% rebound in real estate transactions this year.
Retail is one of the most attractive asset classes: occupancy rates in downtown shops and retail parks—commercial complexes on the outskirts—have shown strong resilience in recent years, allowing for income growth through inflation-indexed rents. The situation is more complex for older-generation shopping malls with obsolete formats, faced with the rise of new concepts, particularly those centered on leisure.
Residential real estate also presents acquisition opportunities, particularly for energy-inefficient properties (“passoires thermiques”), which can gain value through energy renovation work.
As for logistics, asset values have held up relatively well despite interest rate increases and continue to attract investors, thanks to sustained rental demand driven by ongoing digitalization. The appeal of data centers has been further boosted by the digital transition and the development of AI.
Finally, difficulties in the office real estate sector are expected to continue this year. Asset values have been affected both by rising interest rates and the widespread adoption of remote work. A clear divide remains between highly sought-after assets considered safe havens—namely small to medium-sized office spaces located in Paris’s Central Business District (QCA, Quartier Central des Affaires)—and large office spaces in the inner and outer suburbs of Paris. Some assets have become illiquid and are experiencing significant devaluations. The steep discounts observed on the unit prices of certain real estate investment funds (SCPI) further reflect these challenges.
A reconfiguring financing market
While the market offers acquisition opportunities for real estate operators, banks are showing increased caution. Faced with borrower difficulties, loan extensions, or existing legal disputes, banks have become more selective in financing approvals. Political uncertainty and regulatory instability in France are exacerbating this trend. As a result, some financing applications—particularly those concerning offices in Paris’s inner suburbs—are simply no longer being considered by bankers.
At the same time, alternative solutions are gaining traction.
Private debt is expected to continue expanding in France and Europe over the coming years, as it still has significant growth potential. While private debt accounts for 40% to 50% of the financing market in the United States and the United Kingdom, its market share in France and Europe remains much smaller—around 15% to 20%.
Equity financing through club deals is also gaining popularity as the mezzanine debt market contracts. This trend reflects a reduced appetite for high-risk, highly leveraged deals.
In light of these developments, turning to a specialist who masters both traditional bank financing and alternative solutions provides real estate operators with strong advantages. With greater agility in acquisitions, they can optimize the structuring and leverage of their debt load—and, consequently, the balance sheet of their operation. In a highly opportunistic real estate market in 2025, the role of the financing specialist will therefore be decisive!
Axel Goujon – Head of Financing, France
