A record semester closes for real estate investments in italy, driven by the excellent performance of offices and logistics in the second quarter.
In the first six months of 2022 deal volumes reached € 6.3 bn according to data from the Dils Research Team.
In the second quarter of 2022, € 2.9 bn of investments were closed in Italy's real estate sector (+51% compared to Q2 21). This figure is in addition to the € 3.4 bn for the year's first quarter, bringing the total for the semester to € 6.3 bn, in addition to a further ca € 1.5 bn of deals currently under negotiation whose closure is expected by the end of this month.
The year’s first semester is therefore confirmed as the best 'first half' since market records begun, with an average over the last 10 years of € 3.5 bn.
The driving sectors were Offices and Logistics, which together accounted for more than half of total investments in the first six months of the year.
The data emerges from analysis by the Dils Research Team, one of the main market players in terms of the volumes traded in the Italian market, brokering transactions equal to 33% of the total volume during the first half of 2022.
“In the first six months of the year, the Italian real estate market grew to record levels in terms of volumes and investor interest. We focused on a return to the office and our forecasts were correct, as old workplaces were seen to be no longer in line with new requirements. In this period, the trend that sees offices as one of the most important asset classes in the real estate market has therefore been consolidated. Demand has changed radically, moving towards the search for next generation spaces, created according to ESG criteria. But above all, demand focusses on headquarters that are designed to improve the well-being of employees and to attract the best talent, a real value for those companies most dedicated to innovation,” said Giuseppe Amitrano, CEO of Dils. “After the strong resilience of investments in the first half of the year, the degree of increasing uncertainty in national and international markets is evident, linked in particular to trends in cap rates and inflation. These factors are inevitably also influencing the real estate sector and lead us to adopt a cautious attitude towards short and medium-term scenarios.”
With about € 2 bn transacted during the first half of the year (of which about € 653 mn in the second quarter), Office remains the first asset class, after more than doubling the results achieved in the same period in 2021, and reflects 31% weighting on the total investment volume.
The office component was most significant in the key markets of Milan and Rome (72% and 92% respectively) and was characterised by core transactions with significant tickets (over € 100 million), mainly finalised during the last quarter.
In the first half of 2022, the Office letting market in Milan recorded 264,000 sqm of take-up, of which 157,000 sqm in Q2 2022, representing a record total for the last 10 years. Leased volumes have therefore fully recovered to pre-pandemic levels, with excellent performance in all submarkets. Q2 2022 also sees an increase in the number of large office lettings (deals exceeding 5,000 sqm) compared to the previous quarters, highlighting dynamic demand from big corporations.
In Rome, the letting market has been in continuous recovery since 2020, although still far from record 2019 levels, also partly due to the limited availability of quality product in the main submarkets. In Q2 2022 40,000 sqm of transactions were closed, and a total of over 94,000 sqm achieved in the first half of the year, up 27% on the same period in 2021.
According to analysis by the Dils Research Team, an important pipeline of negotiations already underway in the second quarter of 2022 could also determine decidedly positive results for the second part of the year. In addition, strong demand fuels growth in prime rents which reached € 675 psm pa in strategic Milan locations and relates to the very highest quality product with ESG compliance.
As expected, Logistics continues to see investment volumes at record values: € 1.2 bn in Q2, for a total of € 1.9 bn in the first half of the year, 30% of the total invested in Italy. The figure, up about three times compared to H1 2021, represents an absolute record for a first half of any year and was achieved thanks to the closure of a solid investment pipeline that included the largest transaction of a single asset ever recorded in Italy.
Prime net yields saw further contraction to 3.8%, but analyses for the second half of 2022 expects to see a rise to 4%.
Logistics take-up continues to reach high levels, of 1.4 million sqm in H1 2022 – of which 717,000 sqm in Q2 - registering a 8% increase on H1 2021. This positive trend has kept the vacancy rate at an all-time low (about 3%) and the absence of available grade A product has fuelled speculative developments which represented 35% of total take-up in the semester. The increase in construction costs and continuous growth in demand resulted in a rise in asking rents for new buildings in all submarkets, with the prime rent in the Milan market reaching € 59 psm pa.
Hospitality, accounting for 14% of investments, has continued along a path of recovery attracting € 280 mn in Q2 and € 870 mn in the semester, more than double the values for H1 2021. Rome is in the sights of investors, contributing about € 250 mn during the quarter in two prime assets destined to be part of large international chains.
Living has become a consolidated sector from the point of view of investor interest, attracting about € 700 mn in the first half of the year (11% of total H1 investment volumes) and almost doubling volumes compared to the same period of 2021.
In Milan, investors continue to show interest in the BtR (Built to Rent) segment: according to data from the Dils Research Team, in a market with high potential the number of such apartments destined to reach the market in the short to medium term currently stands at 6,300. It is also important to take note of certain trends in the sector such as the growing interest in alternative submarkets: PBSA (Purpose Built Student Accommodation), co-living and senior housing, and in secondary locations such as Florence and Genoa.
From the point of view of the residential sales market, the number of transactions in Italy in Q1 2022 amounted to almost 182,000 NTN (Number of Normalised Transactions), following 12% growth compared to the same period of 2021 and extraordinary performance in Milan with about 7,700 NTN (+36% compared to Q1 2021).
The volumes invested in Retail during Q2 2022 equaled € 200 mn, for an H1 total of over € 380 mn, a clear recovery compared to the first half of 2021 when investments had stood at approx. € 180 mn. Market interest in this asset class saw a strong recovery from the point of view of the letting market as well: market sentiment is positive especially in relation to trying new high quality and experiential type formats. Milan confirms its leading role in the Italian retail sector, while the markets of Rome and Florence show a newfound dynamism, driven by a strong recovery in the tourism sector.