• The first quarter of 2024 concluded with a robust €1.9 billion in commercial real estate transactions, maintaining the upward trend from late 2023.
• Office spaces lead the market due to two major deals, followed closely by mixed-use properties, comprising around 60% of the total quarterly transactions.
• Investors are still prioritizing sectors with strong fundamentals such as logistics, residentially-focused redevelopment, and prime office spaces, all of which show consistent demand and potential for value appreciation.
• Italy’s economy appears healthy, with stable inflation and consumer confidence; high-interest rates are persistent, but a shift in monetary policy is anticipated by June.
In the first quarter of 2024, the Italian commercial real estate market saw about €1.9 billion in investments. This not only aligns with the five-year average but also marks a notable increase from the same period in 2023. Most deals were under €50 million, but the three largest transactions represented over half of the invested sum. Over 50% of investments were tied to development and change-of-use projects, with significant railway yard deals placing the mixed-use sector in the spotlight. International currency remained dominant in the number of deals. This quarter reflects cautious market sentiment regarding monetary policy, yet with inflation decreasing, and interest rate reversal expected from June. Prime yield compression was common across all asset classes in 2023, and for some areas, this adjustment persisted into early 2024.
With an investment of just over 500 million euros, offices have emerged as the leading asset class, paralleling the active occupier market. Milan’s office space uptake shrunk in comparison to 2022, but still saw a 10% annual increase. Strong but unmet demand for quality spaces is expected to further drive rental prices.
Logistics, ranking third in investment volume, accounted for roughly 17% of the quarter’s total. The sector remains attractive to international investors, displaying robust demand and rental growth (+8% YoY), offering optimistic price balance expectations, with the potential for yield compression by the end of the year.
The hospitality sector is exceeding 2019’s international tourism spending, with €200 million in investments marking a better performance than in 2023’s comparable period. Major cities are experiencing a limited supply, prompting investors to explore new locations and innovative asset types with 50% of deals focused on value enhancement.
The living sector is seeing restrained volumes, especially in student housing and new-gen residential aspects, with the majority of activity relating to redevelopment projects for build-to-suit assets.
Retail sector investments remain modest at about €100 million, but show positive dynamics, driven mainly by retail warehouses and supermarkets. Shopping centers are recovering, now representing roughly 28% of the sector’s total. High-end retail locations, particularly in major cities, remain a focus area, sustaining nearly full occupancy and poised to guide market trends in the upcoming quarters.
Marco Montosi, Head of Investment at Savills Italy, notes: “Initial 2024 transactions confirm market stability, with attention on sectors that promise medium-term strength. A rise in dynamic smaller and mid-sized deals is evident, with significant influence from Milan and Rome on the quarter’s largest deals that make up over half of the total volume.”
Elena Zanlorenzi, Head of Research at Savills Italy, adds: “The Italian economy remains on a positive track, with unemployment declining and inflation stabilizing, supporting positive forecasts for businesses and consumers. We’re approaching a change in monetary policy, though uncertainties about future interest rate levels and reduction pace remain. For 2024, a steady recuperation in investment activity is anticipated, with a focus on market segments that align with overarching macroeconomic trends.”
