Overseas Investments:The decision by Irish Life to prefund a large office complex is the largest investment by an Irish company in Luxembourg, writes Jack Fagan

Irish Life Assurance is to prefund an office development in Luxembourg at a base cost of €165 million.

It is the largest ever investment by an Irish company in Luxembourg and comes a week after Irish Life bought a 50 per cent stake in a €350 million shopping centre being developed in Rome. When completed in 2010, the Luxembourg venture will comprise two Grade A office buildings with a floor area of 24,000sq m (258,336sq ft) and 195 car-parking spaces. The project is known as Kohlenberg and is in Cloche d'Or, a well established head office location in Luxembourg city. Occupiers in the immediate area include Hewlett Packard, PricewaterhouseCoopers, Ing, Luxembourg TV, the European Parliament and the European Commission.

The office scheme is being developed by Allfin SA, a Brussels-based company at the high-end of the office and residential markets in Belgium and Luxembourg. The company is noted for its ability to combine a prime location, attractive architecture and state-of-the-art technology.

One of its recent projects - the Mondrian in Brussels - won the prestigious "Business Centre" category at the MIPIM awards in 2005.

The Luxembourg development was sourced by Hiliary Fitzgibbon, head of property at Irish Life's newly formed wealth management group. She said the Luxembourg economy was forecast to perform well above the EU average.

While the presence of the European Parliament, the European Court of Justice and Eurostat all contributed to the stability of the market, the fact that there were also about 220 financial institutions based there could not be ignored. Fitzgibbon said that, as well as the strong economy, property market fundamentals were also very attractive. The development pipeline was very tight and this, combined with exceptionally low vacancy levels for Grade A office buildings, meant that the vast majority of projects were pre-let before completion. "This, in turn, has led to very good rental growth which is expected to continue," says Fitzgibbon.

Irish Life's adviser, Maxine Xantippe of CBRE in Belgium, said that over the past 12 months Luxembourg had appeared on the radars of many international investors. Competition had been "fierce", especially for well located modern office buildings such as the Kohlenberg project.

In 2006 €1.2 billion was spent on commercial property investments in Luxembourg and, in the first six months of this year, the figure had already reached €1.4 billion.

Fitzgibbon said that, with the Kohlenberg project, they were continuing to implement their investment strategy of acquiring high quality investments and to diversify into locations with strong economic and property market fundamentals.