GRIGlobal Investments in Italy - Where is the capital heading?
GRI Club members gathered at the Shard to find out how Italy’s real estate market is perceived by global investors.
October 18, 2018Real Estate
GRI Club Members and their invited guests gathered at the Shard to find out how Italy’s real estate market is perceived by international investors and where value can be found for this cycle.
Moderated by Mario Pellò (Head of Investment, TH Real Estate Italy), the discussion was lively as participants exchanged views on the country’s economic outlook, product availability, local partnerships and exit strategies. After the discussion, guests enjoyed a sparkling aperitivo offered by the host of the meeting, Duff & Phelps REAG.
Macro Impacts Affecting Italian Real Estate
GRI Club partner Paola Ricciardi (Country Managing Director, Duff & Phelps REAG) kickstarted proceedings by delivering a statistical overview of the market. The data provided was complemented with an analysis of the general political situation, along with insights into global macro factors such as Brexit, US and Asian monetary policies and Italian populism that might influence and impact the Italian real estate market. At the same time, it was revealed that the city of Milan has moved down the rankings of being a top city investment destination, mainly due to a lack of product, in turn impacting the perceived lack of investment currently felt on the ground.
The moderator next led a show of hands to understand how many of the investors in the room were currently investing in Italy and how many were looking at this market for potential future debt and equity capital deployment. The room was divided in half with roughly 50% on the investors already having a presence in Italy and the other half actively exploring opportunities in the market.
Pierfrancesco Maran (Deputy Mayor for Urban Planning, Green Areas and Agriculture of the Municipality of Milan) spoke about the future policies of the city, as well as the current political framework. This was particularly useful for REITs and institutions present to understand what real estate projects were ripe for development as well as offering clarity on what infrastructure initiatives were in the pipeline. On a political level, the deputy mayor remarked how, despite the uncertainty sparked by the central government, local administrations are able to carry on their own agendas with a positive outlook for the overall investment appetite.
Common sentiments emerged about which assets would prove the most lucrative in Italy. Retail, Logistics and Hospitality were among the favourite topics of the discussion.
Rock on retail! Or is the party over?
In particular, it was remarked that retail investments in Italy tend to outperform other european markets. Whilst stable and still profitable, suspicions were raised on how long the party can continue. To answer this, we might draw on the impact of e-commerce in Italy vs existing distressed retail markets such as US and UK (where e-commerce popularity is especially high); take up on online retail is still relatively low in Italy. This points to a relatively stable retail outlook for Italy, however the problems facing UK and US may well be on their way to Italy. If so, what strategies might investors deploy now in Italy? Should we look to downsize portfolios, diversify into mixed use assets or is the party so good, we needn’t not worry?
One strategy might be to turn to logistics; a market on the rise where disruptive force of e-commerce is impacting positively investment appetite. Those present were bullish due to the growing demand. However, the large amount of capital into the sector and the low level of vacancies have pushed prices up so finding value is hard.
Redevelopment of hospitality, the new era?
Institutional investments in hospitality were felt to be on the rise, many decided that a ‘new sector’ had been created; especially true when looking at the redevelopments taking place in terms of mixed use hospitality and leisure assets. The main touristic cities remain some of the safest place where to look for future openings. Venice, Florence and Rome was considered to be the front runners among the participants in terms leisure hospitality assets. Overall Milan was voted as the ‘top riser’ through the ranks as a hospitality investment destination, benefitting from business travel footfall.
In conclusion, the pros and cons of crossborder and global institutional investors planting their seeds in Italy were weighed up and debated. Whilst it was felt that some assets were in dire of institutionalisation; especially all residential asset classes it was also felt that this could lead to increased pricing and competition on the local ground. Most asset classes are to remain stable for the short term, yet we need to see further development and bravery up the risk curve to diversify and grow investments outside of Milan and Rome.
Moderated by Mario Pellò (Head of Investment, TH Real Estate Italy), the discussion was lively as participants exchanged views on the country’s economic outlook, product availability, local partnerships and exit strategies. After the discussion, guests enjoyed a sparkling aperitivo offered by the host of the meeting, Duff & Phelps REAG.
Macro Impacts Affecting Italian Real Estate
GRI Club partner Paola Ricciardi (Country Managing Director, Duff & Phelps REAG) kickstarted proceedings by delivering a statistical overview of the market. The data provided was complemented with an analysis of the general political situation, along with insights into global macro factors such as Brexit, US and Asian monetary policies and Italian populism that might influence and impact the Italian real estate market. At the same time, it was revealed that the city of Milan has moved down the rankings of being a top city investment destination, mainly due to a lack of product, in turn impacting the perceived lack of investment currently felt on the ground.
The moderator next led a show of hands to understand how many of the investors in the room were currently investing in Italy and how many were looking at this market for potential future debt and equity capital deployment. The room was divided in half with roughly 50% on the investors already having a presence in Italy and the other half actively exploring opportunities in the market.
Pierfrancesco Maran (Deputy Mayor for Urban Planning, Green Areas and Agriculture of the Municipality of Milan) spoke about the future policies of the city, as well as the current political framework. This was particularly useful for REITs and institutions present to understand what real estate projects were ripe for development as well as offering clarity on what infrastructure initiatives were in the pipeline. On a political level, the deputy mayor remarked how, despite the uncertainty sparked by the central government, local administrations are able to carry on their own agendas with a positive outlook for the overall investment appetite.
Common sentiments emerged about which assets would prove the most lucrative in Italy. Retail, Logistics and Hospitality were among the favourite topics of the discussion.
Rock on retail! Or is the party over?
In particular, it was remarked that retail investments in Italy tend to outperform other european markets. Whilst stable and still profitable, suspicions were raised on how long the party can continue. To answer this, we might draw on the impact of e-commerce in Italy vs existing distressed retail markets such as US and UK (where e-commerce popularity is especially high); take up on online retail is still relatively low in Italy. This points to a relatively stable retail outlook for Italy, however the problems facing UK and US may well be on their way to Italy. If so, what strategies might investors deploy now in Italy? Should we look to downsize portfolios, diversify into mixed use assets or is the party so good, we needn’t not worry?
One strategy might be to turn to logistics; a market on the rise where disruptive force of e-commerce is impacting positively investment appetite. Those present were bullish due to the growing demand. However, the large amount of capital into the sector and the low level of vacancies have pushed prices up so finding value is hard.
Redevelopment of hospitality, the new era?
Institutional investments in hospitality were felt to be on the rise, many decided that a ‘new sector’ had been created; especially true when looking at the redevelopments taking place in terms of mixed use hospitality and leisure assets. The main touristic cities remain some of the safest place where to look for future openings. Venice, Florence and Rome was considered to be the front runners among the participants in terms leisure hospitality assets. Overall Milan was voted as the ‘top riser’ through the ranks as a hospitality investment destination, benefitting from business travel footfall.
In conclusion, the pros and cons of crossborder and global institutional investors planting their seeds in Italy were weighed up and debated. Whilst it was felt that some assets were in dire of institutionalisation; especially all residential asset classes it was also felt that this could lead to increased pricing and competition on the local ground. Most asset classes are to remain stable for the short term, yet we need to see further development and bravery up the risk curve to diversify and grow investments outside of Milan and Rome.