Investor Sentiment for Paris Office Market Runs High

Invesco recently announced their acquisition of the Tour Prisma office tower in the Paris business district of La Défence, confirming a still-healthy investor appetite for Parisian commercial real estate.

Invesco have been building a high-quality European real estate portfolio as part of a dedicated mandate for a new client whom Invesco have not named. The client is speculated to be Malaysia's Kumpulan Wang Simpanan Pekerja or Employees Provident Fund (EPF).

The deal is Ivesco's third in Europe on behalf of EPF, Malaysia's largest provident fund which is thought to be extending its real estate investment in Europe with initial focus on France and Germany.

The deal highlights growing Asian interest in French real estate which now accounts for around 10% of all overseas investment in the country, compared with 22% from the Middle East and 35% from the US, according to BNP Paribas Real Estate.

The Tour Prisma office tower was purchased from Canadian pension group Ivanhoé Cambridge although financial details have not as yet been disclosed.

The building was completed in 1996 and completely renovated in 2011 and includes 23,152sqm of office space over 22 floors, rented to tenants on leases with an average duration of more than 8 years. French law firm Fidal is the main occupant with Wirpo Technologies, Polycome communications and duty free trade firm Aelia among other tenants.

Malaysia's EPF receives around €0.5bn each month from its 13.6 million members who make a compulsory 11% monthly contribution, with employers adding a further 12%. The fund's assets under management were recorded at around €150bn at the end of March 2014. Fund allocations are at 25% in Malaysian government securities, 28% in bonds, 39% equities, 4% in money markets and 2% in real estate and infrastructure.

French real estate has enjoyed significant buoyance in recent years in both commercial and residential markets, with foreign investment at record levels. In residential markets, investors are capitalising on France's position as the most popular tourist destination in the world, seeking bargains in areas such as Languedoc-Roussillon, Poitou-Charentes and Rhône-Alpes.

Commercial buying activity is generally a prelude to expansion in local real estate markets and so it's a good idea for residential property investors to catch on the coat-tails of large conglomerates and look for bargains where large-scale transactions are increasing as it indicates growth potential.