The real estate market in Italy records investments for approximately 1 billion euros in Q1 2023
“Fundamentals are solid despite the still uncertain macroeconomic context. Green transition and urban regeneration are the drivers of the future” - Amitrano, CEO of Dils
Logistics is the first asset class for invested volumes, followed by living
Positive figures for take-up levels and demand for new offices in Milan and Rome
The volume of real estate investments in Italy in the first quarter of 2023 amounted to approximately 1 billion euros. Compared to previous quarters, the result highlights a lower activity across all asset classes as a consequence of the changes in the international capital market, mainly due to the rise in interest rates which took place in the last twelve months. However, the performance beats the estimates made at the beginning of the year.
In Q1 2023, the Logistics sector is back to being the leading asset class, attracting 258 million euros corresponding to 27% of quarterly total investment volume, however down by 17% compared to the previous quarter.
Take-up volume of logistics spaces amounted to 626,000 sqm in the first quarter of 2023, showing a slight contraction (-12%) on the same quarter of 2022, still in a context of always limited vacancy. The growing trend of prime rents continued in the main markets: the highest rental levels are reached in Rome and Milan, where they stand at €63/sqm/year, but increases are registered in Bologna (€60/sqm/year), Piacenza (€54/sqm/year) and Torino (€50/sqm/year) as well.
With investments for 195 million euros, Living is proving to be one of the most sought-after asset classes by investors as well as the only asset class to show a growing trend compared to the previous quarter (+45%), with Milan leading the market in terms of invested volumes (83%).
Results from the residential sales market are once again positive: in 2022 the national volume of NTN touches 784,500 – hence the best year ever - with an increase of 4.8% on 2021 and +30% on 2019. Milan registers another record, thanks to over 28,500 NTN (+6.2% on 2021 and +32% on 2019) representing the highest value ever recorded. Also in the Rome market growth continues, as 2022 ends with over 40,000 transactions (+3.2% on 2021 and +22% on 2019), a value that had never been seen in the last decade and that approaches the pre-2008 levels.
In the first quarter of 2023, investments in the Office sector showed a contraction, with invested volumes equal to approximately 114 million euros, against absorption data in line with the previous quarters. A growing number of investors, especially foreign investors, adopted a wait-and-see attitude. This is due to the combined effects of the increase in the prime net yield (equal to 3.75% in Q1 2023), and consequent mismatch between supply and demand, in addition to the exhaustion of an important pipeline of core deals in the previous months. The outlook for the next two quarters expects growth in terms of investment volumes, with the rise in interest rates mitigated by the inflationary effect on rents.
Take-up recorded on the Milan office market in the considered period almost reached 100,000 sqm: a result that, although showing a slight contraction - mainly due to the smaller average surface area of the operations - is positive compared to the number of registered leases, indicating the vitality of the market. A figure to underline during the quarter concerns the Rome market, where the absorption of office spaces equaled that of Milan, marking a 69% growth compared to the previous year also thanks to a large-scale operation in the EUR district. For both markets, the strong preference of tenants for A/A+ grade spaces was confirmed, which represent 75% and 80% of the absorbed volume respectively in Milan and Rome. The prime rents of the two markets remained constant during the first quarter of 2023, standing at €700/sqm/year in Milan and €540/sqm/year in Rome.
In Q1 2023 investment volumes relating to the Hospitality sector show a decline on both the previous quarter and the same period of 2022, totalling approximately 125 million euros, mainly distributed in small-medium sized deals. The Retail sector, especially in its out-of-town segment, records a further decline in investment volumes, equalling 39 million euros.
The Alternatives sector totals investments for 222 million euros, mostly represented by deals involving new mixed-use developments and healthcare facilities.
Though the market is undergoing times of uncertainty, in the first quarter of 2023 its fundamentals remain solid – said Giuseppe Amitrano, CEO and Founder of Dils – and the demand for quality premises stays vibrant in all asset classes. We believe that the current phase should be overcome by adopting a long-term view, taking into account the main innovation drivers of the coming 10 years. In the first place is the green transition, unavoidable since our country has one of Europe’s most obsolete real estate stocks, whose refurbishment, pushed by recent European directives, will transform the entire modernization process in a unique opportunity of repositioning for the whole sector and for Italy itself. Secondly, the evolution of the rigid distinction between asset classes through the introduction of new formats: hybridization of spaces will open the way to picturing and realizing new working, studying, and living spaces that offer tangible benefits to all stakeholders such as tenants, community and environment. We consider that the innovation of the real estate sector can generate a multiplier effect for the territory, not only in economic terms, but also from the geographical – creating new centralities and rediscovering high-potential locations - and notably social point of view, thanks to positive spillovers on the quality of life for citizens and neighborhoods.