InvestiRE SGR - ‘We need to move from the classic mindset’
Ahead of the forthcoming GRI Italia 2019 investors’ conference in Milan, Domenico Bilotta, managing director and Michele Beolchini, head of product development and fund raising at InvestiRE SGR, share their local intelligence on Italy’s real estate market with GRI Hub.
InvestiRE SGR is headquartered in Rome and Milan. The firm specialises in active portfolio management and has funds invested across different sectors, including alternative asset classes such as social housing, student accommodation and nursing homes.
If you could give one piece of advice to investors wishing to break into the Italian market, what would it be?
Team up with a local partner. Choosing a reliable local partner is crucial in order to gain an advantage both in the scouting, analysis and execution of real estate transactions, and also in the following development/management of the investment. The largest Italian asset managers have gained extensive experience working alongside international investors, getting to know their working methods and expectations. At the same time, given their presence in the Italian market for many years, local asset managers are able to understand all the possible issues that may arise in the execution of a deal, liaising and maintaining direct dialogue with different local authorities. They are familiar in dealing with and resolving the potential bureaucratic obstacles and difficulties surrounding Italian market transactions.
Which real estate trends in Italy are you tracking most closely these days?
The hottest real estate trends of 2019 can be classified under hospitality, in all its possible sub-sectors and forms, namely student housing, hotels, healthcare and silver care facilities. However, we believe that particular attention should also be given to “build-to-core” offices. Tenants and investors are, increasingly, looking for premium/grade A products with the same quality standards that can be found in the major cities in Europe. Both Milan and Rome, but also the so-called secondary cities like Turin, Bologna, Florence and Naples, need to rethink, refurbish, and, in some cases redevelop, existing office buildings into modern, green, cost-efficient assets in order to fit with the new requirements of tenants and investors, and close the gap with main European cities. The residential, private rented sector is also worthy of attention. Although Italy’s home ownership rate is among the highest in the European countries, the residential rented sector could challenge that over the next few years, driven by factors such as demographic trends, work environment changes and lower home-buying power. A development pipeline appears necessary to keep up the momentum and to feed new demand for flexibility and high service standards.
What is your favourite investment or development destination in Italy, and why?
Milan is widely recognised as the ultimate destination in Italy, thanks to the success of its recent development projects. However, Italy is full of rich cities, in particular in the north and central regions, with great opportunities for developing build-to-core products that could be easily absorbed by the local leasing markets. We need to move from the classic mindset, that “Italy is only Milan (and to some degree Rome)”, to a new way of thinking: we have plenty of possibilities in the so-called secondary cities and in different asset classes, in order to create good quality products in which to invest.
Do public private partnerships (PPPs) have a future in Italy?
Yes, absolutely. We believe that PPPs involving real estate assets will be beneficial for all the parties involved: the government, private investors, and Italian citizens. We believe that the government will not only benefit in the short term from the disposal of its assets, but thinking over a medium-to-long term horizon, it will be crucial to establish a partnership with the private sector in order to improve the quality of buildings and optimise the use of spaces by public authorities in line with new standards experienced in the private market.
With a solid programme of PPPs, the government will benefit from investment in real estate assets that will increase the quality of the buildings and the efficiency of spaces let to public authorities, private investors will benefit from stable, real estate investments with the credit covenant of a well-known tenant, and Italian citizens will benefit from the renewal of assets, not least in secondary cities and small towns, where the public authority is an important ‘flywheel’ for the local economy.
Domenico Bilotta and Michele Beolchini will be joining over 130 senior executives for two days of candid and purposeful discussions on the Italian Real Estate market at Italia GRI 2019 (Milan, 22-23 May).