A strong rebound in the (next generation) office sector takes the quarter beyond expectations: investments reached €3.4 billion, driven also by the acceleration of the logistics and living sectors.
The first quarter of 2022, with €3.4 billion investments in the Italian real estate sector, is the best first quarter since records taken by market players begun, with the 10-year average standing at €1.5 billion.
The main factors contributing to this historic result were a rebound in the Office sector and further growth in Logistics and Living.
The data emerges from analyses by the Research Team at Dils, one of the key players in terms of volumes traded in the Italian market.
“We saw significant deals which originated in 2021 slip across to 2022. If these had been closed in time the volume at the end of 2021 would have touched the levels seen in 2019, a record year. Postponement of these closures contributed to achieving the extraordinary performance for the first quarter of 2022,” said Giuseppe Amitrano, CEO of Dils. “Contributing to these results was, on the one hand, the strong rebound in the office sector with growing demand for so-called hybrid and new generation offices which integrate typical elements of Hospitality, Living and Wellness and are oriented towards ESG sustainability criteria, and on the other the continuous acceleration of the Logistics and Residential sectors.”
Offices were the first asset class, with €1.3 billion invested (four times the volume recorded in the first quarter of 2021), representing 39% of the total Q1 volume. Transactions involved mainly foreign capital (83%). The cities of Rome and Milan were successful in attracting 78% of national investment, 15% and 63% respectively. In both markets, the office component remains the most significant asset class, accounting for 62% of the total investment volume for Milan, and 65% for Rome where an important pipeline of transactions under closure suggests an increase in investment volumes for subsequent quarters as well.
The office letting market in Milan has recorded 106,600 sqm of office take-up (+30% compared to the first quarter of 2021), reaching circa 54,600 sqm in Rome (+105%). The data illustrates how identifying ESG-compliant properties is a priority, with a trend that thus favours new or recently developed product and a preference for buildings that offer Grade A/A+ spaces (which accounted for 85% of take-up in Milan and 47% in Rome). Prime rents are confirmed at the levels achieved in the final months of 2021, with a trend of constant growth.
As expected, Logistics, with an investment volume of €671 million (20% of quarterly volumes and more than double those of Q1 2021), also saw record levels with the highest value ever recorded in the first quarter of a year. Thus this consolidated asset class is confirmed as central in the choices made by prime international investors.
Take-up equalled 708,000 sqm (+7% on Q1 2021), with strong demand and the international economic scenario supporting high prime rental values. In particular, the Piacenza submarket increased to €49 /sqm/year and a growth trend is also expected in other locations during the year. The most active markets in terms of take-up are Lombardy and Emilia Romagna, 40% and 32% of total take-up respectively, whereas speculative developments reached almost 30% of the total amount let during the quarter. A slight contraction in net prime yields to 3.90% was also seen.
In the Living sector investments totalled €526 million (16% of the total invested), ten times higher than the same period the previous year and almost 70% of the value for all of 2021. The Milan market, which accounts for 60% of total investments in Living, continues to attract the attention of players with its new residential development projects. Pipeline PRS projects here total about 7,600 units, of which 80% concern newly built BtR product.
Results in the Residential sales market were exceptional as well. In 2021, the number of weighted transactions (NTNs) totalled about 748,500 nationally, a 34% increase on 2020 and 24% on 2019. Milan, with almost 27,000 NTNs, recorded the best performance ever (+24.5% on 2020 and +2.6% on 2019).
The Hospitality sector recorded €534 million of investments (16% of the total), almost four times higher than the result of the previous year, thanks also to a deal involving an estate in central Italy with an agricultural activity. The reasonable recovery and dynamism of the sector shows the difficulties present during the pandemic being overcome.
In the Retail sector, investment volumes amounted to €183 million, twice as much as the previous year. The letting market is dynamic and recovering, in particular with reference to the Food & Beverage sector. As with other asset classes, the focus is increasingly on qualitative rather than quantitative development strategies.