Up Front: UNREAL ESTATE
PARIS IS TANKING
NO END IS IN SIGHT TO THE surplus of office space in Paris. Economic recovery is bringing good news for commercial real estate elsewhere in Europe, but not in the City of Light. One big bank, Compagnie Financire de Suez, announced a stunning write-off of $1.5 billion in weak real estate loans. Some Paris financiers hope the Suez example will encourage the banks to face up to their problems and conduct a wholesale write-off of weak loans on Paris office buildings. Worries over bank realty problems helped push the Paris Bourse down 17% in the past year.
Builders and lenders were slow to deal with the crunch caused by overbuilding because they were accustomed to ever-growing Paris property values. Now, their headaches will linger: The vacancy rate shot up to 9% last year, from 7.5% in 1993. Scott Bugie, an analyst at Standard & Poor's, forecasts an upturn only at decade's end.
Meanwhile, central London's vacancy rate dropped from 11.5% to 8.5%. In Frankfurt, the rate did rise--from 6% to 7.8%--but experts expect vacancies to stay around that level. Europe gets no sympathy across the pond in Manhattan, though. There, the Midtown rate stood at 14.3%. At least it's on the way down, from 16.4% the year before.Stewart Toy