Italian Real Estate Market Q3 2021
October 14, 2021
The office sector is growing in the third quarter of 2021, which is becoming one of best years for this sector after the record performances of 2019.

In Milan, the third quarter of 2021 recorded 83,000 sqm of office space taken up, bringing the year-to-date total to approx. 289,000 sqm (+ 41% compared to the same period in 2020). Occupiers are increasingly focusing on properties with certifications and high levels of efficiency, preferring hybrid and flexible environments that encourage collaboration and interaction in an effort to adapt to the new dynamics imposed by agile work.

The Rome office letting market continues to be dynamic and growing in the third quarter of the year, recording a total take-up of approx. 31,000 sqm, which brings the annual total to 106,000 sqm, up by 79% compared to the first three quarters of 2020. Major Italian and international occupiers, always interested in the Roman market, promptly seized opportunities arising for high quality assets, contributing to the growth of prime rents in the EUR Core and Semicentre sub-markets.

The logistics sector continues to grow, with a take-up of 1,730,000 sqm in the first nine months of 2021, up 12% from the same period in 2020. This is an exceptional level for the sector, which could close the year with volumes in line or even higher than those of 2020, the record year so far for logistics. It should also be noted that, compared to previous years, most of the take-up recorded since the beginning of 2021 has mainly involved existing properties and / or speculative developments capable of satisfying the "ready to go" needs of tenants with new, grade A logistic solutions. Finally, rents remain substantially stable following the increase already registered in recent years, with a slight growth in the prime locations of Bologna, Rome, and Milan.

As for the investment market, the third quarter recorded € 2.3 billions of transactions, up 9% compared to Q3 2020. The total YTD, € 5.5 billions, is essentially in line (-6,5%) with the same period in 2020.

The boom of logistics continues unbated, representing as much as 42% (approx. € 960 million) of the total investment volume for the quarter; the strong interest of international investors is reflected in a further compression in net prime yields, which fall to 4.4%.

On the other hand, the office market contributed with about € 690 millions (30% of the total), down 28% on the same period in 2020. Prime office yields remain stable compared to the second quarter.

The "Alternatives" and Living sectors continue to attract the interest of investors, reaching € 160 millions (+ 20% compared to Q3 2020) and € 92 millions (+ 129% compared to Q3 2020) respectively.

The retail market essentially continues to stall with € 90 millions in transactions (-18% compared to Q3 2020), as does the hospitality market, which records transactions for €292 millions (-13% compared to Q3 2020).

The outlook for the Italian investment market is particularly positive also thanks to a solid pipeline of transactions that should close in the next six months, approx. € 3 bn - € 3.5 bn. This primarily consists of large transactions in the logistics, Milan office core, mixed use and residential sectors and a number of  portfolios with a particularly interesting size for the Italian market.