Italian real estate activity increases 35% in H1

Real estate investments in Italy have grown to over €3.4bn in the first half of 2016, which is almost 35% higher year-on-year, according to Savills.

Cross border investment into Italy accounted for 65% of all deals, while international funds are increasingly dominating the market, with 80% of foreign capital coming from Europe, the real estate advisor said.

“Favourable market conditions are fuelling the supply of product in the Italian market through fund liquidations or equity fund investors who are taking advantage of the point in the market’s cycle to dispose of some of the most liquid assets in their portfolios,” said Eri Mitsosterigiou, director of Research at Savills Europe.

“Our analysis suggests Italy is at an earlier stage in the cycle compared to Europe’s primary markets in France, Germany and the UK, therefore international investors are still identifying the potential for capital growth and better returns from core Italian product,” Mitsosterigiou said.

According to Savills, investment into the office sector in Italy this year accounted for near 46% of all activity, over 40% ahead of H1 2015.

The retail sector represented 26% of the total investment volume, also a year-on-year 40% hike. The high streets of Milan, Rome and Florence are dominating the retail investment market and the first six months of this year saw circa €505m invested, an increase of near 80% compared to the previous year.

Savills also recorded that H1 2016 experienced a notable increase in investment into alternative commercial real estate sectors (including hospitality). Almost 22%, circa €761m, of the total volume can be attributed to investment into the alternatives sector, markedly within healthcare.

Also of note is that the vast majority of the transactions so far in 2016 were on a single asset basis, whilst portfolio transactions accounted for 21% of the total, down from 35% in H1 2015.

Looking at the next twelve months, Savills believes that the supply of commercial real estate is set to increase as funds will take advantage of the improving market conditions, particularly the ones that purchased in the low point of the cycle in 2011-2012.

“Prime locations of major Italian cities are most likely to benefit from this trend, while top yields for the best office and retail assets in Milan and Rome could stabilise this year following a few quarters of steep yield compression,“ comments Marco Montosi, head of Investment at Savills Italy.

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