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Italian Real Estate Overview H1 2021

Raffaella Pinto • 28/07/2021

"This is the time to invest in Italy” - Jamie Dimon, Chairman and CEO J. P. Morgan

This sentence summarizes the momentum Italy is facing at mid-21: confidence is back, there is money to deploy for the structural reforms we need to fully recover and there’s still huge volumes of capital for real estate. This is the background which will shape our future. What has happened in the market in this first half of 2021?

It has been another tough time, with lockdown spread all over the Country until mid-May, affecting mainly retail, F&B and hospitality which experienced closures for the majority of the period.

Three major events happened which can lead to a better and positive growth outlook for the second half of this year:
On February, Mr. Mario Draghi become PM, bringing Italy to the center of European – and global – politics. His positive reputation was reflected in an improved economic outlook, the approval of the PNRR (National Recovery and Resilience Plan ) and a positive change in the attitude of other European peers toward Italy. After a weak start, the vaccination campaign sharply improved with the military lead and to date (July 2021) we have 60% of people over 12 years old vaccinated (first jab at least), between 30-40% with the 2 doses.
The Italian football team won Euro 2020, spreading a wave a new optimism among Italians as a whole.

Thanks mainly to the second event, which lead to a gradual easing of restrictions, growth gained pace in Italy in the second quarter. Inflation rises but the core component remains very low and GDP looks set to accelerate from the summer onwards.
The property market in the first half of 2021 has been marked by a slow recovery however we are expecting a sharp acceleration in the second half, subject to the worsening of the spreading of the variants.

Capital is still available and in large amounts, but it can’t match the right target.
The revolution is affecting the real estate product: if people behaviors are changing, how will it change the property that should host and serve that people? The answer is not easy, and it is boosting uncertainty among players, differing in level by sector.

The office is the most challenged by the question and suddenly it has faced what retail has faced for more than ten years: the new way of working eased by the use of technology will change the purpose of the office? Waiting for the right answer, big corporation looking for large offices are still holding their decision. Despite that, in the first half of the year the occupier market improved with leasing activity increasing in both Milan and Rome compared to the same period last year. A positive sign from the market is that existing occupiers who were looking for large spaces since before the pandemic and had previously put their searches on hold, are now back.

Logistics continue to outperform recording the highest absorption in the last five years for first half figures. The acceleration of online sales is driving retailers demand towards logistics reflected by an increase in take up. The strong confidence in this sector is also reflected by investment volume, doubling the first half 2020 data, standing at over €680mln.

Living sector didn’t disappoint, delivering a positive first half of 2021 from an investment perspective, although lower than H1 2020, with a total transaction volume of circa €220mln.

Hospitality and Retail, still negatively affected by the restrictions in the first half of the year (until May) are showing some signals of recovery, at least in the outlook and confidence from investors. Investment in the hospitality sector increased 12% compared to the same period last year and the positive outlook strengthened with the easing of restrictions. Retail is awakening at least from a consumer’s perspective showing a great desire to come back to the physical experience. Italian households posted greater levels of savings last year and a part of it is forecast to flow into consumers this year. We are expecting a better second half for retail fundamentals.

Overall, first half 2021 ended with almost €3bn invested in the CRE in Italy, 28% below last year’s volume (same period) but we are expecting a rebound in the second half.

We are aware that the course of the pandemic and the effectiveness of the policies still offer a degree of uncertainty and we’ll continue to monitor the evolution of the situation. We are also witnessing the return of confidence and a positive outlook among all the real estate players, including individual households.


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