Elsewhere: A Booming French Market Attracts Big Spenders

Real-estate deals valued between 22 billion and 25 billion euros are likely to be made in France this year, according to Jean-Clair Maurel, head of investment in Paris at real-estate advisory firm DTZ Holdings PLC, an increase of at least 30% from last year.

It is easy to see the appeal: France is expected to produce some of the highest returns in Western Europe this year, with total real-estate returns of more than 20%, according to David Hutchings, London-based head of the European research group at real-estate advisory firm Cushman & Wakefield Inc. It is followed by the U.K. and then Italy, which are broadly in line with the forecast total average European return of around 15%, he says.

The French market has become more liquid, with more frequent sales, says Fran?oise Maigrot, a partner in the real-estate division at law firm Linklaters in Paris. "I work on deals now where vendors are selling properties that they only acquired a year ago, because investor appetite for French property is so strong. Previously, investors were more likely to hold on to assets for at least three years before reselling," she says.

Office sales accounted for 14.2 billion euros, or 93%, of commercial real-estate deals in ?le-de-France in the first nine months of this year, according to DTZ. Retail totaled 275 million euros; warehouses, 360 million euros and light industrial property, 330 million euros.

Offices "come up for sale far more frequently," says Mr. Maurel. Retail properties, because they are scarcer, "rarely come on the market, which means that investors are likely to hang onto them once they have acquired them."

There are some trophies to whet investors' appetites. Earlier this month, as part of a continuing program to sell surplus properties, the French government put two buildings forming part of the historic Ministry of Culture and Communication at 35 rue St.-Dominique in central Paris on the market, according to Daniel Dubost, director of property management for the Finance Ministry. It also is selling a corner office building on Rue d'Astorg, a prime location in central Paris. The government hopes to sell both by year's end, says Mr. Dubost, who declines to discuss target sales prices.

It also is likely to put some "very attractive" properties on the market at the beginning of next year, Mr. Dubost adds, and aims to sell around 1.5 billion euros of property assets between the beginning of 2007 and the end of 2010.

But the bidding process for the properties is complicated, says Stephen Miles, an investment director at real-estate advisory firm Jones Lang LaSalle in Paris, and the government asks would-be buyers to make a deposit of between 1.5 million to 2 million euros before making an offer. "This is not usual practice in the market and I think this could deter some buyers," he says. Nonetheless, he estimates the government is likely to sell around 800 million euros of real-estate assets by next November.

For investors looking to acquire several properties, London-based financial-services group AErium Finance Ltd. is selling 34 properties, most of them in ?le-de-France, known as the Celsius portfolio. The portfolio comprises 15 offices, three warehouses, eight retail and eight mixed-use properties, according to Antoine Derville, chairman of investment at the French division of real-estate advisory firm CB Richard Ellis Group Inc., which is selling the portfolio on behalf of AErium.

CB Richard Ellis has received several bids, says Mr. Derville. He declined to comment on how much AErium expected to raise from the sale, but a Paris-based real-estate consultant estimates it is likely to sell for around 400 million euros.

Spanish, Irish, U.K. and U.S. investors are very active in the French market, says DTZ's Mr. Maurel, citing U.S. financial-services firm Morgan Stanley as one of the biggest players. In March, Mines de la Lucette, a fund managed by Morgan Stanley Real Estate V International acquired a portfolio of five trophy offices in Paris from German open-end real-estate fund KanAm Grund Kapitalanlage GmbH for 1.11 billion euros, marking one of the biggest commercial real-estate deals in Paris this year.