Italy
Portugal
In the first half of 2024 €3.5 billion in real estate investments
Office, retail, and hospitality drive the recovery
Strong office take-up in Milan, stabilization phase for logistics
According to the analysis by the Dils Research Team, the second quarter of 2024 sees the volume of real estate investments in the Italian market amount to approximately 1.6 billion euros. Combined with the first quarter’s results, this brings the total for the semester to around 3.5 billion euros. This represents a significant growth of about 65% compared to the previous year, indicating a recovery in real estate investment activity, which is expected to continue in the coming months.
A notable boost to the positive Q2 results came from the closing of medium to large-sized deals in the Retail and Hospitality sectors, which were the main asset classes this quarter, as well as from Offices, confirming the gradual recovery of transactions. Furthermore, Rome‘s renewed centrality in the real estate investment landscape continues, attracting approximately 40% of volumes in the second quarter.
In the first half of 2024, Offices once again represented the primary asset class in the Italian market, with around 830 million euros invested, double compared to H1 2023, with 300 million in the second quarter. Rome attracted the highest volume of investments in the office sector, surpassing Milan for the second consecutive quarter: together, the two major Italian cities account for almost 90% of the office market. The prime yield remains stable in both markets, standing at 4.0% in Milan and 4.5% in Rome.
The first half of the year in the Milan occupier market is marked by the growth of prime rent, now standing at 750€/sqm/year for grade A+ properties located in prestigious and attractive areas. This type of product characterizes market demand in the second quarter as well. The high number of transactions, mostly concentrated in medium and small sizes, testifies to the resilience of the Milan leasing market, which overall recorded an absorption of 185.000 sqm in the first six months of 2024, with 90.000 sqm in the second quarter. Thus, the substantial stability of take-up in the Milan market is confirmed, with a minimal variation compared to the previous year. The Rome market shows a volume of absorption of 70.000 sqm in the first half of 2024, with 35.000 sqm in the second quarter, and a contraction compared to the corresponding periods in 2023, indicating a phase of reduced activity. Most transactions are concentrated on grade B assets, mainly due to the limited availability of high-quality products. This contributes to the recent trend of increasing rents, with the prime rent standing at 580€/sqm/year in Q2 2024, with potential increases expected in the second half.
In the second quarter, Logistics attracted investments amounting to 200 million euros, for a total of almost 500 million euros in the first half, a slight decrease compared to the same period in 2023 (-8%). Unlike the previous quarter, where the Light Industrial sector was crucial in supporting the market, pure logistics products became predominant again in Q2, representing about 90% of the invested volume. The stability of the prime net yield at 5.5% is confirmed, thanks to the gradual effectiveness of the repricing process that has taken place over the past two years.
From the perspective of the occupier market, in the first half of 2024, the absorption of logistic spaces contracted compared to the record reached the previous year, totaling approximately 1.1 million sqm of take-up (-25% on H1 2023), with about 570,000 sqm in the second quarter. Despite the reduction in volumes, which is lower compared to other European countries, the Italian logistics market confirms its new weight, significantly higher than the historical average. The strength of market demand also justifies the upward trend in rental rates: starting from the second quarter, the national prime rent of €67/sqm/year has been observed in the Rome market, as well as in Milan and Bologna. A positive trend is also seen for the prime rent in Piacenza, reaching €58/sqm/year.
Continuing the positive performances of the last 12 months, the Hospitality sector drives the market in the second quarter of 2024 with investments of around 560 million euros. The total for the first half is approximately 790 million euros, marking a significant increase compared to the same period in 2023 (+190%). This important result is mainly due to the high number of concluded deals, which more than doubled compared to H1 2023. The centrality of the Rome market is also evident in Hospitality, but significant operations are also noted in Venice.
Q2 2024 was particularly positive for Retail, recording one of the best quarters of the post-pandemic period with over 400 million euros in investments, bringing the half-year total to around 480 million euros, more than triple compared to the first half of 2023. Thus, it confirms a favorable year for the sector, which, considering the significant pipeline of investments planned for the coming months, could close 2024 with the best result in the last five years. In Q2, most of the volumes invested in Retail are linked to two large deals in the Shopping Centres sector, one single asset and one portfolio.
After showing considerable resilience throughout 2023, the Living sector experiences a phase of less intense activity in the first half of 2024, with a total of around 180 million euros in investments, of which about 40 million euros in the second quarter. There is a growing interest in the city of Rome, which is the focus of most operations in Q2, and in the Student Housing sector.
Regarding the residential sales market, in Italy, Q1 2024 closed with over 154,000 NTN (Normalized Transaction Numbers), marking a 7.2% decrease compared to Q1 2023.
Milan saw a more marked contraction, with a 13.2% decrease in transactions compared to the first quarter of 2023. However, this decline is less pronounced than that recorded the previous year, indicating a trend towards progressive stabilization. In terms of the average size of exchanged dwellings, smaller sizes remain more attractive: the most commonly traded surface is less than 85 sqm (over 65% of total sales, compared to the national figure of 42%). New homes represent 12.6% of the total volume transacted in the Lombard capital, more than double the national value (6.1%).
In Rome, NTN also decreased, although to a lesser extent (-6.9%). The market share of medium to large-sized apartments (over 85 sqm) increased by 3% compared to the previous quarter at the expense of smaller sizes. The share of new homes sold stands at 8.7%.
The Alternative and Mixed-use sector closes the first half of 2024 with volumes of around 650 million euros, of which 60 million euros in the second quarter. Over the past two years, investments in the Alternative sector have provided a valid solution for investors seeking diversification, with growing exploration of innovative areas such as Education and Healthcare, sustained by social and economic macro-trends.
The real estate investment market continues to stabilize volumes, showing signs of greater dynamism. With the “tail” of operations initiated before the interest rate hikes now exhausted, we are witnessing the formation of a new pipeline of deals, where the repricing phenomenon represents the ideal condition to intensify trading activity. Moreover, the start of a less restrictive phase by monetary policy authorities, beginning with the first rate cut in June, could fuel investment growth.
The positive performance of the Office and Hospitality sectors, along with some large deals in the Retail sector – closed or nearing closure – testifies the market confidence in the most established asset classes, which are increasingly being interpreted through innovative lenses, focusing on hybrid formats and quality spaces.
