In the first nine months of 2023, €3.5 billion of capital market investments were registered in Italy, a volume that is still below that of the same period in 2022. However, Q3 2023, with an invested volume of €1.5 billion and a change of +53% compared to the previous quarter, shows a positive turnaround compared to previous quarters. This is the snapshot of the most recent report by Gabetti's Studies Office, which forecasts a slight improvement as early as 2024.
The impact of inflation on real estate investments
As expected, the volume contraction recorded in these first nine months of 2023 continues to reflect the uncertainty of the international macroeconomic scenario. A context marked by inflation, which in Italy has indeed taken the path towards normalisation around 2%, but still hovers around 5%, and by interest rates still at the mercy of the ECB's monetary policy choices. A scenario that is likely to continue to characterise the wait-and-see attitude and uncertainty of investors throughout 2023.
However, according to macroeconomic forecasts, as early as 2024 the scenario will be much more favourable for corporate investments, with inflation expected to be around 3.5%, a European monetary policy that will consequently put an end to rising interest rates, and a GDP projection that is estimated to be around 1.2%.
"The stabilisation of the economic framework is certainly a fundamental point for the good recovery of the corporate market, which will allow investors to gain more confidence in investing their capital in our country," said Claudio Santucci, director of capital markets Italy of Gabetti Agency. "Investors, mostly international, in these first three quarters of the year have oriented their asset allocation on value-added transactions and confirmed the high interest in our country. This shows that the gap between demand and supply of high-quality real estate is still wide, especially in the hospitality and office asset class'.
The best real estate assets to invest in
Logistics and Living
Looking at the different asset classes, logistics totalled €970 million invested in the first nine months, 28% of the total, thus ranking as the preferred asset class for investors. For this sector, more than 80% of operations are concentrated in northern Italy, where new projects involving the construction of LEED or BREEAM certified buildings are located. In terms of investment volume, the residential sector follows with €585 million invested, 17% of the total invested.
Offices in Milan and Rome
In third position comes the office sector, which totalled €540 million in the three quarters, 15% of the total. Operations were mainly concentrated in the main markets of Milan and Rome. In terms of leases, in these two markets, the greatest growth in office space take-up was recorded in Rome, with a take-up of 186,370 m2, up 60% compared to the same period last year, following two major transactions, one of which pre-let a total of 80,000 m2 in the centre and the Euro area.
Milan, on the other hand, recorded a take-up of office space of 276,000 m2, down 26% compared to the same months of 2022. Prime rents in Rome's CBD (Central Business District) were stable compared to the previous quarter at €500/m2/a and those in the € area increased to €360/m2/a. The rents in Milan also rose in the most central areas to €690/m2/a (compared to €680/m2/a in the previous quarter), a rise that is a result of tenants' increasing demand for quality products, in a context where this type of supply is still low. Prime net yields in the CBD of both cities rose by 25 basis points compared to the previous quarter to 4.75% for Rome and 4.25% for Milan, respectively.
Hospitality
This is followed by the hospitality sector (€520m) with 15% of the volume. The sector saw major transactions in Milan and Rome, but also in Veneto and Tuscany, involving medium-high assets and repositioning towards the high-standard segment.
Healthcare
The healthcare sector (€430 million, 12% of the total invested) benefited from transactions involving hospitals, clinics and nursing homes, which were concentrated, in terms of number of transactions, mainly in Piedmont.
Retail and other
The retail sector with €300m accounted for 9% of the total invested in the first nine months, with high street activities concentrated in primary cities, while in secondary cities operations on shopping centres and in the large-scale retail segment dominated. The mixed-use segment (€60 million) accounted for 2% of the total invested, and the alternatives, which include land and power stations, accounted for 3% of the total with €100 million.
Real estate investments area by area
In the first nine months of 2023, the largest volume of investments, attributable to a specific geographic area, took place in northern Italy (63%), followed by central Italy with 16% and the south with 3%. The remaining 18% was made up of investments scattered across the country.
In terms of the origin of capital, foreign investors (57%) are the most active players in the market. These were predominantly US, French and British, focusing mainly on the logistics, living and management sectors. The remaining share is occupied by Italian capital with 37%, while the origin of 6% could not be detected.
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