Lara D'Appollonio

Italy - Where will investors focus their attention?

2 MIN READMay 31, 2019
This year’s edition of Italia GRI tested again the boundaries of investment appetite for the market against a backdrop of a particularly ‘non investor-friendly’ local political environment.  Over 100 c-level domestic and global private, institutional investors, lenders and developers  gathered on 22nd and 23rd May in Milan, for candid, informal private discussions reflecting on market trends, opportunistic and value add strategies and the likely outcomes for the next 12 months in the Italian real estate market.   

italia GRI 2019 Milan: A law unto itself?

Compared to last year’s sentiments, Milan holds greater supremacy amongst other Italian cities; great for attracting global capital and yet it was felt not so great for gaining value out of core products. Most were optimistic about the future scale-up of alternatives; focusing on urban regeneration ‘big projects’ as well as a greater mix of long term and value add investors in residential and mixed use schemes., The pros and cons of  the domestic market’s risk/reward appetite towards core milan and secondary locations as well as alternative assets classes was also touched on.

Rome: ‘Life is too short’ 

Because the majority agreed that Milan alone cannot be sufficient to relaunch the whole real estate Italian sector, optimism turned to Rome. Contrasting and very extreme opinions were given to Rome this year: the eternal city divides investors who class the city as a definitely ‘no hope’ destination, against others who see it as ‘being slow to the party’ but showing positive yield growth. It was agreed by the majority that best opportunities in the Roman market lie in the hospitality and residential sectors.

italia GRI 2019 Offices: Flexible spaces and community factors really are changing the game

Nicolas Maciocia (WeWork) contributed to a lively debate on how his industry peers might establish a greater presence in Italy. The discussion allowed participants to understand what it truly means to develop, own and operate offices these days that fit customer demand and satisfy P&L balance sheets. Many were unsure of the future rental growth for the assets, debating whether actually we are not experiencing a ‘game changer’ but just  a ‘soft shift’ to find value in the cycle by relying more on tenants’ needs.

Retail: Working harder for the next positive cycle (with some unique advantages) 

It was no secret that many felt retail was experiencing profound structural changes and shifting tenant demands.  And yet it seems that Italian operators have a great advantage that other European cities do not have. In Italy, e-commerce is slow to take up, causing many  to think there will be a 2-3 years ‘transition window’ to leverage on a new balance between retail, ecommerce and logistics real estate. Italian retail real estate could also be said to enjoy counter-cyclical conditions -Italians and foreigners visiting Italy will always love to go out and shop, eat and experience the rich and unique culture. For these reasons, F&B and entertainment inside retail destinations can and will be the answers for assets to survive in the long term.). 

italia GRI 2019 Hospitality: Big potential,  but a lot to do … 

Two dedicated discussions on Hospitality this year, allowed for eager debates on how to create value in this particularly complex sector. Nobody doubted that potential is huge, yet many argued the ways to lift off in Italy. Opinions were divided on those who believe it’s almost impossible to work on hospitality in Italy, due to administrative and bureaucratic constraints, whereas those already active and successful in the country say it’s only a matter of being ‘persistently present’ (with a local office or a strategic local partner to navigate such complexities). Winners of the asset class could also be recognised for their visionary and creative flair to convert underused and non performing assets; gone are the days of ‘location, location, location’, we might just be entering the era of ‘capital, conversion, creativity’! 

Overall, candid and friendly group discussions on capital markets, lending appetite and all asset classes allowed insights into how the industry can satisfy future occupier demands on’ live, visit, work, shop and play’. opportunistic and defensive strategies. 
It remains clear there is value to be uncovered still, across all of Italy’s cities. However, the question remains whether Italy is truly back as a real estate powerhouse; does all hope lie with Milan or are we at risk in putting all the eggs in one basket? Is there a danger for Italy’s secondary cities to suffer from a supply/demand imbalance and in turn a rental growth upswing in the near future? If so, perhaps it’s time for more visionary real estate leaders to think ‘Bella Roma’, ‘Splendida Firenze’... rather than only ‘Mia Milano’. 

Italy’s real estate market and its place in Europe’s broader landscape will be discussed further at Europe GRI 2019, a dedicated event being held on 11-12 September in Paris, France. 
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