Cross-border investment boosts Italian CRE market: Savills

Italy’s real estate market had a boost investment the first two quarters of this year with over €3.4bn ($3.82bn) in transactions, nearly 35 percent higher than the same period last year, while more than half of those transactions were cross-border investment, shows a new report from Savills.

Italy’s real estate market has experienced a boost this year with over €3.4 billion ($3.82 billion) in transactions in H1 of 2016, nearly 35 percent higher than the same period last year, according to a new report from Savills.

The report also shows that nearly 65 percent total Italian investment volume in H1 2016 was cross border investment, and that 80 percent of the foreign capital came from Europe.

Milan, Italy
Milan, Italy

“We believe that investment demand for the remainder of the year will continue to be driven by European investors, however we also envisage domestic investors to up their buying activity,” said Eri Mitsosterigiou, director of research at Savills Europe, in a statement.

The increasing number of investors are attracted by Italy’s “better returns, the devaluation of the euro, interest rates at historic lows and larger liquidity in circulation thanks to the banks’ expansive policies,” the report states.

Investment into both the office and retail sector in Italy saw year-over-year (YOY) hikes. Office investment accounted for nearly 46 percent of all activity, over 40 percent above H1 2015 volume levels; and retail represented 26 percent of total investment, a 40 percent YOY hike, with the highest concentration of retail investment in Milan, Rome and Florence.

Mitsosteridiou added that international investors are still identifying the potential for capital growth and better returns from core Italian assets because the county is at “an earlier stage in the cycle” compared to France, Germany and the UK.

Marco Montosi, head of investment at Savills Italy, said that despite yields having sunk to “record lows” since prices peaked in 2007, that they still “compare favourably to the long-term government bond yields… which are also at historic low levels, meaning [that] commercial real estate in Italy is likely to remain an attractive investment for the foreseeable future.”