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Marseille in €3.5bn development drive

 by  Con Power

As the European property market begins to flag, a massive €3.5bn urban redevelopment drive has developers and investors in France's second largest city singing a different tune. La Marseillaise is set to restore the Marseille metropolitan area firmly to its rightful place as the epicentre of the French Mediterranean.

First came the Phoenicians, next the Greeks and then the Romans -- Marseille has seen them all. Now the Irish have entered the fray.

This most vibrant of Mediterranean cities is currently in the throes of a massive urban renewal drive, rivalled only by the La Defense mega-project in Paris. Launched in 1995, the pioneering Euromediterranee programme is now well on the way to putting Marseille in the same league as top European cities such as Barcelona.

This remarkable project is completely transforming a 775-acre swathe of Marseille -- effectively creating almost an entire new city in the existing metropolis. Iconic new districts are being created and no less than 300,000sqm is earmarked for new and restored offices in the Joliette district, at a location between the port and city centre. La Belle de Mai will provide the largest European audiovisual/multimedia precinct in Marseille, where thousands of new homes are under construction, together with a new Euromed convention centre and a dramatically revamped marina.

The growth of investments on the south bank of the Med and the prospect of a Mediterranean union is, in short, rapidly heightening interest in Marseille from international organisations.

The penny is, however, now only beginning to drop outside France as to the extent that the ambitious programme, orchestrated by state and regional authorities, will restore Marseille to the centre of Mediterranean commercial and cultural affairs.

Wherever you have major investment in construction these days, of course, the Irish are quick to the fore. And Marseille is no exception. Leading Dublin-based wealth management firm Custom House Capital (CHC) has been in the vanguard to stake its claim in the great Marseille development race. Set up in 1997, CHC has grown exponentially and currently manages more than €1.5bn worth of client assets -- its portfolio split broadly with 75pc property and 25pc stocks and shares.

It was quick off the mark to spot the potential for Irish investors provided by the Euromediterranee regeneration programme in Marseille. Around €90m has been chipped into three impressive Marseille commercial property developments by CHC on behalf of high net worth individuals.

Globetrotting CHC chief executive Harry Cassidy points out that the south of France is an integrated economic area comprising Marseille, Montpellier, Toulouse and Nice. The region offers extensive benefits and opportunities attracting both French and international companies. The tax breaks and other incentives offered by the Euromediterranee effort are particularly attractive.

"Marseille has a significant shortage of high-level commercial property and most developments are less than 3,000sqm," Mr Cassidy explains. "Demand, however, is for much more floor space, particularly on single floor plates. As numerous multinational companies continue to open offices in Marseille, and require additional office space, demand is expected to increase even further."

Through its various funds, CHC has been quick off the mark to purchase three strategically located commercial development sites in down-town Marseille at Le Patio, Plein Ouest and 31 boulevard Charles Moretti. The new investments are set to let for around €165-€190 per sqm.

"Marseille has huge economic potential in the coming decades," fellow CHC director John Mullholland corroborates. "Compared to other European and French cities, this city still offers attractive yields. CHC expects yields in Marseille to contract over the next few years.

"Marseille is the business capital of southern France. Its commercial port is already the largest in France and southern Europe. Together with its airport, oil industry and large population, it plays an important part in the economic role of the whole of Provence."

CHC's Marseille mission has been greatly facilitated by a highly successful connection with giant French developer Bouygues Immobilier (which has a market capitalisation in excess of €14bn). The latter has played a key role in identifying key sites and providing local construction expertise.

The first two of the CHC Marseille developments (both high-specification office schemes) are now nearing completion and winning widespread admiration among the Marseille real estate community. The combined total cost of the completed Le Patio and Plein Ouest office schemes (including all purchase costs) will be €61.8m.

Purchase at this level reflects a gross yield of 6.75pc and a net initial yield of 6.24pc. The new Le Patio office building is located in Chemin de l'Argile on the east side of Marseille. The nine-storey building will have an estimated total surface area of 8,920sqm and 94 car parking spaces. Plein Ouest is in the 16th district of Marseille at the junction of rue Albert Cohen and Chemin du Passet. The impressively designed development totals nearly 11,072sqm of office space and 290 car parking places. Both these developments are now being offered to prospective tenants and CHC reports that the reaction has been more than favourable. Indeed, the local response has been so overwhelmingly positive that it is not beyond the bounds of possibility that at least one of these investments might even be quickly "flipped" by CHC, yielding a handsome profit to investors.

The most recent CHC Marseille investment is the 5,992sqm site at 31 boulevard Charles Moretti. The total acquisition price here was just under €34m. When complete, the development will provide a modern city centre block, extending to 11,300sqm over five floors. Latest research by international agents King Sturge confirms that there will be a dearth of new office space in the Marseille area before 2009. With an acute shortage of current office accommodation, the CHC investments look particularly well-timed -- hitting the market just before the Euromediterranee wave peaks, and defying the general global downturn in commercial property activity.

Provence, meanwhile, is now home to more than 500 foreign-owned companies. Marseille itself already boasts the headquarters of Dole Food Company, the Compass Group, Richard, Eurocopter, Deutsche Post, AON and others.

Expect to see still further international arrivals -- and very possibly more Irish investment -- over the coming years.

© 2008 Irish Independent