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Real Estate

Institutional investors set to invigorate Italy

Members convened at a club meeting in The Shard, London to discuss the current Italian market

4 MIN READ October 21, 2019

From an investment perspective, where does Italy stand in the global market? To what extent are disruptive forces affecting investors’ risk exposure to the Italian real estate market?

How domestic developers and investors could implement strategies to make Italy more attractive to foriegn investments were just one of the subjects discussed at a recent club meeting on the 16th of October in The Shard, London. The members of GRI Club Italy joined in a collegial, living room setting to discuss with other senior developers, investors and operators to ask themselves where sustainable returns can be found in such unpredictable market conditions.

The club meeting began with Paola Ricciardi, Managing Director Italy for Duff & Phelps REAG, listing off some of the current investment trends in Italy this year. The first point of note was that Milan still lead the share of investments in Italy (7 billion EUR+ in first 9 months) and placed 10th in the share of all Europe’s cities. Offices had the largest share of this and was closely followed by hospitality (34% and 32%, respectively.) Further sectoral analysis showed that more than half of this capital was domestic. 

According to Paola, the Italian market is strongly influenced by demographic changes that alter the habits and needs of the population. These include the progressive aging of the population (this is across Europe but even more amplified in Italy), the increase in mobility and public transport funding, and the rise of technology and ecommerce. These changes have driven Milan to where it is now. 

This is significant considering that there was quite a rift between Milan and other big European cities not too long ago. Some thought this was down to the Italian pension funds starting to reinvest back into residential, after they stopped a few years ago. Now that institutional investors are starting to reinvigorate the Italian resi market, members believed that Italy provided smaller yet more profitable opportunities than a bigger and more mature market, such as Germany. 

Italy is now marked the 7th or 8th largest economy in the world, but it could still be growing faster. One key player said that not enough asset classes are institutional. Stating that it’s difficult for private equity to find large portfolios, he said there was still much appetite to do so. 

This is changing with sociological trends as well. The concept of sharing, which we’re seeing all across Europe as millenials find it easier to integrate with their community and harder to own their own home, is showing in the newfound popularity of build-to-rent in Italy.

 

GRI Club is hosting specialised and tailored discussions on subsectors including light industrial, logistics, offices and residential for the most senior players in the real estate. GRI Light Industrial & Logistics Europe 2019 takes place on 6-7 November in Amsterdam, and GRI Offices 2019 and GRI Residential Europe 2019 take place on 19-20 and 26-27 in London, respectively.

Article by Matt Harris

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