B of I clients buy €70m building

Bank of Ireland Private Banking has paid approximately €70 million on behalf of clients for a landmark property in the centre of Brussels.

The deal is the largest transaction by Irish investors in Brussels to date.

The 23-floor IT Tower, located on a main thoroughfare in Brussels, is let to 22 tenants, including Volkswagen, McKinsey & Co, Banca di Roma and Banque de Rothschild.

Bank of Ireland Private Banking said there had been good rental growth in the Belgian capital's office sector in recent years in contrast to most other major European cities, with the market underpinned by the presence of public sector occupiers including the EU and NATO.

Mr Peter Collins, director of Bank of Ireland Private Banking, said this rental growth was expected to continue as the EU expanded its office requirements.

"While a lot of attention is being paid to property opportunities in central Europe, we believe that established markets like Brussels, which are very transparent, have competitive rental levels and high degrees of liquidity, represent better opportunities for investors looking for good returns in a relatively low-risk environment," Mr Collins said.

Rental growth forecasts suggest that the Brussels office market will continue to grow at a rate of 4.5 per cent per annum for the next four years, according to the bank, whereas forecasts for the Dublin office sector do not predict any growth until late 2005 or early 2006.

Office vacancy rates in Brussels stand at 10.4 per cent, compared to 16.9 per cent in Dublin.

"In addition, prime office yields in Brussels are currently 6.25 per cent, significantly more attractive than Dublin, where prime yields are in the region of 5-5.5 per cent," Mr Collins said.

The bank said it expected Irish investors to continue to look toward Europe for property opportunities.

The IT Tower purchase is Bank of Ireland Private Banking's third European transaction over the past two years, following the bank's acquisition of properties in Amsterdam in 2002 and 2003. The Brussels deal is double the value of the larger of the two Dutch purchases.

CB Richard Ellis Gunne advised on the deal in conjunction with CB Richard Ellis Brussels. Ms Caroline McCarthy of CB Richard Ellis Gunne said the acquisition marked Irish investors' desire to diversify into mainland European markets.