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CBRE Launches Perspectives 2017:
An annual event to outline the main trends expected in the Italian real estate markets
In March consumer confidence showed an improvement, after declining in the first two months of the year.
Development activity is still good albeit selective: in the first three months of the year two new projects were inaugurated, one in Veneto and one in Piedmont.
During the year projects under construction are expected to complete for a total surface area of around 210,000 sqm of GLA, down slightly compared to 2016, a year that saw the completion of some large malls.
Investments in the sector declined in the first quarter compared to the same period of last year; the high street is still dominant, representing 67% of investment in the quarter.
Foreign capital continues to be dominant, with over 50% of the investment in the quarter. The timid return of domestic investors, which began at the end of 2016, is confirmed as a trend, especially in the high street sector.
In the first quarter of 2017 take-up of office space in Milan was more than 110,000 sqm and the absorption rate was the highest recorded in the last 15 years.
The result was due to a series of large deals (>5,000 sqm) closed in the quarter and concentrated mainly in the Porta Nuova area which, with 36% of the space leased out, confirms its ranking as one of the most attractive areas for occupiers.
Prime rents in the CBD have risen to 520 Euro/sqm/year while in the Porta Nuova BD they have remained stable at 500 Euro/sqm/year.
In March 2017 there were over 269,000 sqm of office space under construction, which is up slightly on the previous quarter. Of these, 54% refer to projects of a speculative nature. Refurbishments are increasing in prime locations and this is helping to raise the quality of grade A properties on offer.
Interest in Milan continues to be high even as far as investment in the office sector is concerned. The volume of investment was 491 million Euro, higher than in the first quarter of last year. Moreover the figure does not include the relevant part of the Fondo Cloe transaction, consisting of office buildings half of which are located in Milan.
Take-up in first quarter 2017 was 53,439 sqm, up by 26% on the previous quarter, and around 2 and a half times (+241%) the volume of the same quarter of last year. This is the best result for the last 10 years, second only to 2011.
Prime rents were stable in the CBD and in the EUR area at 400 and 330 Euro sqm/year respectively.
The vacancy rate is rising: the surface area vacated is still greater than that absorbed, despite the improvement in demand.
Take-up in the quarter was driven by a pre-let of 15,600 sqm for the new HQ of a prima Hi-Tech multinational in the Fiumicino Corridor area; apart from this deal, 3 other transactions of approximately 5,000 sqm (in the EUR Centro, Centro, and East Inner GRA areas) accounted for 58% of the total absorption in the quarter.
The pipeline of developments is increasing, with 150,000 sqm under construction/being refurbished and with expected delivery dates between 2017 and 2018; no completions were reported in the quarter.
Almost 1.8 billion Euro were invested in Q1 2016, a decline of 6.7% on the same quarter of the previous year.
Quarterly volume confirms 36% more than the quarterly average for the past four years.
At approximately 1.3 bn Euro, foreign capital is still the major driver of Italian CRE investment volume in Q1 16.
European investors lead the quarterly foreign capital (51%), with German on the top of the list.
The office sector, with 46% of total quarterly volume, is still the investors’ preferred asset class while retail follows whit 32%, thus improving its market share compared to previous quarters; the mixed use properties sector (mainly non-core investments to be re-positioned) fell at 6% .
The beginning of 2016 has been marked by an increased cautiousness among investors compared to the end of 2015 but the interest in the Italian real estate is confirmed sound.