Italy’s position in the global investment market

Before co-moderating a GRI Club Italy meeting, Managing Director of Starwood Capital Group Federico Bianchi spoke to the Hub about residential opportunities and the current state of investment volume in Italy.

Experienced in the investment of residential assets, as well as helping pan-European investors find their way into Italy, Bianchi spoke about his current thoughts on the market. 

 

Where are the best opportunities in European Resi right now?
To introduce the topic, there is a general increase of interest in the residential space across most of Europe cities. Although the reasons vary, demographics is certainly the underlying driver, as the day to day routines of young adults today are different to the young adults of 20 years ago.

So in the past, the traditional model was children would grow up and use a bank loan and money from parents to buy their first house. This is much less common now due to financial constraints, but also because of a shift in the job market. People feel much more mobile than they used to, so committing and being tied to one home while you pay off the mortgage for years and years is becoming less of an occurrence for young people. 

So if you combine the factors that the young people are taking an extra 5-10 years to climb on to the property ladder, if at all, plus increased mobility and change in living style, it all points towards more of a rental than ownership approach. The UK, Ireland and Germany saw this coming for a while and invested into their build-to-rent markets around 15 years ago; now in these countries it is a well established market. Southern Europe has not, so we're seeing an under supply of rented apartments and flats in Spain, Portugal and Italy. To answer your question, the best opportunities lie in alternative and rented residential in these countries.

 

Is there much appetite for foreign investment into Italy? Do they find any difficulties with entering? Why? What must they do?
Starting from the end of the question, I think every country in Europe has some form of barrier to entry. Of course there are more established mature markets like the UK with a higher degree of transparency, but some other markets like Italy are more opaque and less forgiving, yet still have a lot to offer. I think no matter which country you're trying to operate in, a local partner should be the first thing to establish.

The question is the quality of the local partners in these countries. This is something that has definitely improved over the last 10 years, I think the level of consultants has increased with the increased interest in the country. 

In terms of how big the interest is from international investors, Italy is almost two countries. Milan, in the north of Italy, is running the show and many investors from all over Europe. The centre and southern regions of Italy however, lag behind in terms of investment volume. A big and beautiful city like Rome, the capital city of a country which is 7th or 8th in the world in terms of industry and GDP, has an investment volume comparable to Malmo or Gothenburg, the secondary cities in Sweden. So there is something clearly contradictory between the country still keeping up on an international level, and the capacity of a big part of the country to capture investor demand. 
 

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.

Active in Italian real estate and want to take part in the discussion with the regions most senior leaders? Consider attending Italia GRI in May 2020. 

Article by Matt Harris