ITALIAN REAL ESTATE MARKET TRENDS & OUTLOOK
2024/2025
A Cushman & Wakefield publication
01
ECONOMY
02
OFFICES
03
RETAIL
04
INDUSTRIAL & LogIsticS
05
HOSPITALITY
07
INVESTMENT
08
09
SUSTAINABILITY
AGENDA
06
LIVING
Economic Indicators
2024
Economic activity in Italy remained sluggish in Q4 2024, with ongoing challenges in manufacturing and a slowdown in services, reflecting broader trends in the euro area. Full-year GDP growth for 2024 was revised down to 0.5%. Despite a slight improvement in manufacturing, the sector continued to underperform, while services also faced a slowdown. The labor market showed resilience, with historically low unemployment rates and strong wage growth in the private sector, helping households gradually recover purchasing power. Inflation remained below 2%, with modest consumer price increases. In the summer of 2024, household consumption grew by 1.4%, supported by rising real wages and a strengthening labor market. Private consumption is expected to grow by +0.4% in 2024 and +1% in 2025. In December 2024, the ECB cut its reference rates by 25 basis points, thus leading to Government bond yields to further decrease in the latter half of the year, strengthening the Italian real estate market attractiveness': the yield spread between Italian real estate and the 10-year bond is confirmed positive, fostering renewed optimism among real estate investors.
GDP
PRIVATE CONSUMPTION
UNEMPLOYMENT RATE
10YRS GOV. BOND YIELD
INFLATION
INDUSTRIAL PRODCUTION
+0.5%
6.5%
+1.3%
+0.4%
3.7%
-1.5%
Italian bond yields increased standing at ca 4.4% as tightening policy continues to be in place. After peaking in the first quarter of 2023, the Italy-Germany 10-year bond spread is forecasted to converge to a longer-term equilibrium just above 1% by 2024. Rising interest rates are starting to weigh on firms’ physical capital investments as evidenced by lower capital goods production.
Against a backdrop of high inflation (7.8%), the Portuguese economy still recorded a 6.7% increase in GDP in 2022, the highest in the European Union, largely thanks to the positive performance of private consumption (+5.8%) and exports (+17.3%).
2024*
source: Moody's (10th January Update); * Industrial Production Index as at November 2024 (ISTAT); ** ISTAT, data at June 2024.
Click over to view the notes
2024**
10YR GOV. BOND YELD
INDUSTRIAL PRODUCTION
Outlook
2025
Italy’s economic outlook for 2025 is cautiously optimistic, with moderate growth, contained inflation, and stable employment levels anticipated. These factors, alongside supportive fiscal and investment policies, should help the country recover from recent challenges and pave the way for steady, though modest, economic expansion. Economic growth is expected to strengthen, with GDP projected to grow at an average rate of around 1% annually from 2025 to 2027. This growth will be driven primarily by a recovery in domestic consumption and exports, signaling a potential rebound after the recent slowdown. Inflation is expected to remain well-contained, with consumer prices rising only modestly. For the next few years, inflation is forecasted to average 1.5% in 2025 and 2026, gradually reaching 2% by 2027. Employment is expected to continue growing, although at a slower pace than GDP. The unemployment rate, which declined to 6.1% in the summer of 2024, is likely to remain stable between 2025 and 2027, reflecting a gradual improvement in the labor market. While investment may be somewhat restrained by the scaling back of residential construction incentives, it will benefit from the continued implementation of projects tied to the National Recovery and Resilience Plan (PNRR). Additionally, a gradual reduction in financing costs should support business and household investment activity.
EXPORTS
0.8% 2025
+0.8% / +6.6%
1.5% 2025
+0.4% / +1.8%
+3.8% / +1.2%
6.1% 2025
A steady reduction in inflation across Europe, will allow the European Central Bank's medium-term objective of 2% to be reached by 2025, which has justified the current monetary policy normalisation process and repeated interest rate hikes.
Source: Bank of Italy , "proiezioni macroeconomiche per l'economia Italiana, 13th Dec. 2024
MILAN
Italy
Milan
TAKE-UP
NEW COMPLETIONS
AVERAGE DEAL SIZE
UNDER CONSTRUCTION
VACANCY RATE
372,000 sq.m (-10%)
1,200 sq.m (-15%)
10.1%
255,000 sq.m
530,000 sq.m
Note: variations refer to 2024 on 2023.
(New/ Refurbishment)
(Speculative and Pre-let)
AVERAGE SIZE
Take-up by semester and average deal size
In the second semester of the year, the Milan occupier market recorded an absorption of 198,000 sqm, reflecting a 19% decrease compared to H2 2023. This brings the total annual absorption to 372,000 sqm, a figure in line with the 10-year average but 10% below last year’s performance. However, it is important to highlight that the H2 2023 figure includes a pre-lease transaction by ENI in San Donato for 45,000 sqm. Excluding this transaction, both the semester and yearly volumes would align with last year’s results. Additionally, since the beginning of the year, 15,000 sqm of sub-leased space have been added to the market. These spaces—high-quality, recently leased, and offering "plug & play" solutions—represent a competitive alternative to prime assets, bringing the total annual absorption to 385,000 sqm. Market activity continues to be characterized by a reduction in the average size of transactions, with a predominance of small to medium-sized deals. Over the year, 60% of the total volume was represented by transactions involving spaces of up to 3,000 sqm, representing more than 80% of the total number of deals. The central and established areas of the city, located in contexts characterized by a wide range of services and amenities for employees, public transportation options, security, and a business environment that ensures long-term attractiveness and competitiveness, along with high-quality spaces and a focus on environmental sustainability of buildings, are essential requirements for office seekers today. At the same time, there is a growing disparity in availability between the increasingly sought-after central areas and the more peripheral ones.
Source: Cushman & Wakefield
Main transactions
Note: variations refer to H1 2023 on H1 2022
“1.17 million sqm of new and refurbished office (Under construction and Potential) expected by 2027. The volume of under construction projects, with circa 530,000 sqm, recorded a decrease of 21% compared to the end of the first semester 2024. Of this volume, 35% represent pre-lease spaces, while 65% will be available on the market. On the top of these, there will be 645,000sqm of potential developments” “Approximately 108,000 sqm were completed during the second semester, including both new developments and refurbishments, with 66% pre-let. Over the full year, a total of 255,000 sqm were completed, of which 47% were pre-let.”
Main new completions
Vacancy rate by zone
Main projects under construction and potential pipeline
Greater
Lisbon
Main projects under construction
Take up H1 23: 52,000 sqm Prime Rent: 700 €/sqm/year Prime Yield: 4.00% Pipeline UC 2023/2026: 245,000 sqm - pre-let: 31%
Take up H1 23: 10,000 sqm Prime Rent: 530 €/sqm/year Prime Yield: 4.50% Pipeline UC 2023/2026: 55,000 sqm - pre-let: 96%
Take up H1 23: 49,000 sqm Prime Rent: 470 €/sqm/year Prime Yield: 5.00% Pipeline UC 2023/2026: 256,000 sqm - pre-let: 39%
Take up H1 23: 39,000 sqm Prime Rent: 350 €/sqm/year Prime Yield: 6.00 % Pipeline UC 2023/2026: 349,000 sqm - pre-let: 28%
Take up H1 23: 23,000 sqm Prime Rent: 250 €/sqm/year Prime Yield: 6.50% Pipeline UC 2023/2026: 149,000 sqm - pre-let: 63%
CBD
CENTRE
SEMICENTRE
PERIPHERY
HINTERLAND
Click on
MIND Pipeline UC+Potential 2023-2026: 157,000 sqm CITY LIFE DISTRICT Pipeline UC+Potential 2023-2026: 85,000 sqm
SCALO FARINI Pipeline UC+Potential 2023-2026: 123,000 sqm PORTA NUOVA Pipeline UC+Potential 2023-2026: 244,000 sqm
SCALO DI PORTA ROMANA Pipeline UC+Potential 2023-2026: 252,000 sqm
SANTA GIULIA Pipeline UC+Potentia 2023-2026: - sqm
CBD Take up 24: 138,000 sqm Prime Rent: € 730/sq.m/yr Prime Yield: 4.25% Pipeline UC 2025/2027: 150,000 sqm pre-let:28%
CENTRE Take up 24: 20,000 sqm Prime Rent: 550 €/sqm/year Prime Yield: 5.00% Pipeline UC 2025/2027: 8,500 sqm pre-let: 65%
SEMICENTRE Take up 24: 55,000 sqm Prime Rent: 480 €/sqm/year Prime Yield: 5.50% Pipeline UC 2025/2027: 185,000 sqm pre-let: 65%
PERIPHERY Take up 24: 100,000 sqm Prime Rent: 320 €/sqm/year Prime Yield: 7.00 % Pipeline UC 2025/2027: 172,400 sqm pre-let: 23%
HINTERLAND Take up 24: 59,000 sqm Prime Rent: 250 €/sqm/year Prime Yield: 7.50% Pipeline UC 2025/2027: 29,000 sqm pre-let: 100%
MIND
SCALO FARINI
SCALO PTA ROMANA
CITY LIFE DISTRICT
Pipeline UC+Pontial 2025/2027: 77,500 sq.m
Pipeline UC+Potential 2025/2027: 83,000 sq.m
Pipeline UC+Potential 2025/2027: 254,000 sq.m
Pipeline UC+Potential 2025/2027: 157,000 sq.m
PORTA NUOVA
Pipeline UC+Potential 2025/2027: 119,000 sq.m
BICOCCA
Pipeline UC+Potential 2025/2027: 23,000 sq.m
Pipeline UC+Potential 2024/2027: 103,000 sq,m
Prime rents
The limited availability of office spaces continues to drive upward pressure on prime rental rates in central areas. Over the past year, the semi-central sub-market recorded the highest premium on the weighted average rent for green-certified spaces, compared to high-quality but uncertified properties, with a 43% premium. This was followed by the central area, where the premium reached 19%. In the CBD, Prime Rents have risen by 4% in the last semester, now standing at 730€/sqm/year. Despite this, the premium on the weighted average rent for green-certified spaces, compared to high-quality but uncertified properties, remains lower (approximately 6%). This is attributed to the increasing willingness of companies to lease lower-quality spaces in order to secure a prime location.
(*) Prime Rent for the peripheral office market in Milan has been revised following a redefinition of the southern boundaries between the semi-central and peripheral areas. This adjustment reflects a major urban redevelopment project which is taking place on the site of a former railway yard that previously separated the district from the semi-central area.
Milan prime office rents
ROME
Rome
UNDER REFURBISHMENT
166,000 sq.m (-32%)
1,200 sq.m (-23%)
6.3%
107,000 sq.m
17,000 sq.m
Note: variations refer to 2024 on 2023
(Speculative and pre-let)
Take up figures for the Rome office market reached 98,300 sqm during the second half of 2024, marking a modest 9% increase compared to the same period in 2023, driven by three transactions exceeding 10,000 sqm. However, with some deals postponed to 2025, the year-end total amounted to 166,000 sqm; while this represents an overall reduction year on year, it must be noted that 2023 was the second-best year on record. The public sector played a pivotal role in office leasing during both the second half of 2024 and the full year, accounting for 49% and 40% of the space occupied, respectively, with activity concentrated largely in the CBD and Greater Eur. Considering transaction size, despite increased activity for larger spaces above 5.000 sqm, the Rome market, remains dominated by small and medium medium-sized transactions, with 70% of transactions involving space of below 1,000 sqm.
“Circa 227,000 sqm of new and refurbished office (under construction and potential) expected by 2027. Although there is a significant trend shaping the market with many investors and developers shifting their focus on transforming properties into residential or hospitality spaces, good office market fundamentals and lack of quality office space has spurred an interest in repositioning strategic office buildings into top quality assets. With circa 41,000 sqm being completed during H2 2024, space currently under construction/ refurbishment amounts to 174,000 sqm – 53% is considered pre-let. Potential developments amount to circa 52,000 sqm”
Take-Up 23H1: 23,900 sqm Prime Rent: 550 €/sqm/year Prime Yield: 4.25% Pipeline UC 2023/2025: 43,000 sqm pre-let: 33%
Take-Up 23H1: 36,700 sqm Prime Rent: 380 €/sqm/year Prime Yield: 4.75% Pipeline UC 2023/2025: 107,600 sqm pre-let/EU: 97%
Take-Up 23H1: 4,600 sqm Prime Rent: 280 €/sqm/year Prime Yield: 6.25% Pipeline UC 2023/2025: 15,000 sqm spec: 100%
Take-Up 23H1: 72,700 sqm Prime Rent: 360 €/sqm/year Prime Yield: 5.00% Pipeline UC 2023/2025: 165,000 sqm pre-let: 50%
Take-Up 23H1: 14,600 sqm Prime Rent: 150 €/sqm/year Prime Yield: 9.00% Pipeline UC 2023/2025: 43,000 sqm pre-let: 23%
GREATER EUR
FIUMICINO CORRIDOR Prime Rent: 200 €/sqm/year Prime Yield: 7.75%
TIBURTINA CORRIDOR Prime Rent: 140 €/sqm/year Prime Yield: 8.25%
TUSCOLANA CORRIDOR Prime Rent: 180 €/sqm/year Prime Yield: 7.75%
CBD Take-Up 24: 17,400 sqm Prime Rent: 600 €/sqm/year Prime Yield: 4.75% Pipeline UC 2025/2027: 34,900 sqm pre-let:13%
CENTRE Take-Up 24: 12,200 sqm Prime Rent: 400 €/sqm/year Prime Yield: 5.00% Pipeline UC 2025/2027: 42,600 sqm pre-let/EU: 100%
SEMICENTRE Take-Up 24: 11,800 sqm Prime Rent: 300 €/sqm/year Prime Yield: 6.75% Pipeline UC 2025/2027: 0 sqm spec: 0%
GREATER EUR Take-Up 24: 56,000 sqm Prime Rent: 370 €/sqm/year Prime Yield: 5.75% Pipeline UC 2025/2027: 197,200 sqm pre-let: 91%
PERIPHERY Take-Up 24: 10,760 sqm Prime Rent: 150 €/sqm/year Prime Yield: 9.50% Pipeline UC 2025/2027: 0 sqm pre-let: 0%
TUSCOLANA CORRIDOR
FIUMICINO CORRIDOR
Prime Rent: 190 €/sq.m/yr Prime Yield: 8.25%
Pipeline UC+Potential 2023-2026: 123,000sqm
Pipeline UC+Potential 2023-2026: 252,000sqm
Prime Rent: 160 €/sq.m/yr Prime Yield: 8.50%
TIBURTINA CORRIDOR
Piepeline UC+Potential 2023-2026: 46,000sqm
Prime Rent: 140 €/sq.m/yr Prime Yield: 8.75%
Like in the capital, considerable interest in Greater Porto and the quality of new buildings led to an increase in headline rents in most areas.
The continued scarcity of Grade A green office spaces in line with sustainability and ESG criteria in Rome’s central areas has impacted the market in two key ways. Firstly, it has driven prime rents to an unprecedented level of 600 €/sqm/year, reflecting the high demand for quality office spaces that meet modern environmental and efficiency standards. Secondly, this shortage has led to a narrowing of the gap between prime and secondary rents, as tenants unable to secure prime spaces increasingly turn to secondary properties, pushing up demand and rental prices in this segment.
Souce: Cushman & Wakefield
Note: correction in values with the Semi Centre is due to an adjustment of the submarket borders.
Outlook 2025
FLIGHT TO QUALITY
SUSTAINABILITY AND GREEN CERTIFICATIONS
LOCATION & RE-THINKING
RENT STABILISATION
EFFECTIVE CLIMATE RISK MANAGEMENT
Corporate demand in both Milan and Rome is expected to remain robust, with forecasts aligning with the 10-year average for both cities. The ongoing "flight to quality" trend will persist, leading to an increased absorption of secondary-quality spaces as premium options become even scarcer. Rents for these secondary spaces in prime locations will see an increase in value
Office spaces are no longer viewed as an area where people exclusively work, but have become spaces to meet, collaborate and share. Larger projects extend their range of services and create both work and leisure experiences.
"Location" will remain the key factor driving future demand, leading to increased interest in both prime and secondary spaces in central areas. Less desirable urban areas are likely to see waning tenant interest, resulting in slower rental growth. In these locations, alternative value-enhancement strategies should be considered, such as converting properties to more in-demand uses. These may include hospitality, residential, or diverse living solutions like student housing, senior living, and co-living spaces.
Rent in all areas has stabilised, following a steady period of growth.
Reduction of carbon emissions and effective climate risk management will remain key drivers shaping long-term strategies. European regulations are anticipated to exert further influence on asset values, rental trends, and tenant demand. Repositioning efforts in Milan and Rome are anticipated to enhance rental growth in key office locations.
What occupiers want
TOP CRE STRATEGIC DRIVERS
OFFICE COMMUNAL SPACE PROPORTION TO DOUBLE
OFFICE OCCUPANCY LEVEL
COST, TALENT SOURCING / RETENTION AND ESG are the top three strategic drivers for real estate decisions in EMEA. This is not surprising given the elevated uncertainty since mid-2022, as inflation peaked, and interest rates began to rise. Given that cost pressure is the top challenge facing occupiers in 2023 and real estate is typically the second-largest expense category (after talent), CRE executives are looking for ways to thoughtfully reduce spend: reducing floorplans, subleasing space, mothballing underutilized or unused floors, and expanding in lower cost markets. That said, occupiers are willing to spend money on the right investments. This includes buildings that offer sustainability features and green certifications, as well as offices that increase employees’ attendance and engagement; talent attraction and retention is one of the main drivers of the demand as companies want to offer their employees a better workplace and experience than their competitors.
As difficult as the pandemic was on urban cores, any talk of a mass exodus out of Central Business Districts (CBDs) is overblown. They remain the most desirable location for companies’ office headquarters. Two-thirds of occupiers prefer headquarters locations in the CBD (57%) or in emerging creative urban areas (12%). Occupiers are signaling that they intend to remain in urban cores with their major offices. Eighty percent of firms have not considered moving their offices out of the CBD. In Italy, the demand concentrates in the CBD areas, as confirmed by the analysis of the average absorption in the last 10 years, which is equal to 27% of the total in Milan and 20% in Rome.
The targeted amount of communal space within the office has doubled compared to pre-pandemic levels (40-50% vs 20-30%), with majority of occupiers (89%) seeing the office as a place for creativity, innovation and a planned meeting point. Along with increasing communal spaces at their HQs, occupiers are looking at flexible offices and co-working spaces as a solution for an increasingly hybrid workforce.
Most occupiers are at occupancy levels that are below the pre-pandemic levels. Hybrid and remote work schedules have meant that employees are not in the office at the same rate as they had been prior to the pandemic. Among survey respondents, just over half of occupiers indicate that their office space is 31%-60% full on any given day. This will vary greatly by day of the week (Tuesdays are typically the highest and Fridays the lowest), but the weekly average remains below the 60-80% pre-pandemic norm.
CBD REMAINS THE PREFERRED HQ LOCATIONS
ESG IS RISING IN IMPORTANCE
ESG ranks #3 in EMEA (#5 globally and #6 in Americas). Companies’ focus on ESG has accelerated in the past two years. Goals and implementation plans for various ESG components are increasingly seen as essential to organizations’ long-term financial performance, corporate reputation, and ability to attract clients, investment and talent. Two-thirds of CRE executives indicate their firm has ESG goals that they have already begun to implement (42%) or are planning to implement. Companies appreciate the environmental value of incorporating sustainability into workplace designs and portfolio strategies. Accordingly, occupiers are ready to pay a premium to incorporate sustainability into the workplace and their office portfolios. On average, they are willing to pay up to a 22% premium for buildings with green credentials. In Italy corporates tend to lease smaller spaces but of higher quality and pay higher rents for green certified spaces reflecting ESG criteria, such spaces registered a 10-20% increase over other high quality assets without green certifications.
Top takeways
Fit out cost guide
COST, TALENT SOURCING & RETENTION AND ESG AS STRATEGIC DRIVERS
OFFICE COMMUNAL SPACE TO DOUBLE AS COMPANIES SEEK TO FOSTER CREATIVITY, INNOVATION AND COLLABORATION
OFFICE OCCUPANCY REMAINS LOW, DRIVING FURTHER FOOTPRINT REDUCTION
Cost, talent sourcing / retantion and ESG are the top three strategic drivers for real estate decisions in EMEA. This is not surprising given the elevated uncertainty since mid-2022, as inflation peaked, and interest rates began to rise. Given that cost pressure is the top challenge facing occupiers in 2023 and real estate is typically the second-largest expense category (after talent), CRE executives are looking for ways to thoughtfully reduce spend: reducing floorplans, subleasing space, mothballing underutilized or unused floors, and expanding in lower cost markets. That said, occupiers are willing to spend money on the right investments. This includes buildings that offer sustainability features and green certifications, as well as offices that increase employees’ attendance and engagement; talent attraction and retention is one of the main drivers of the demand as companies want to offer their employees a better workplace and experience than their competitors.
As difficult as the pandemic was on urban cores, any talk of a mass exodus out of Central Business Districts (CBDs) is overblown. They remain the most desirable location for companies’ office headquarters. Two-thirds of occupiers prefer headquarters locations in the CBD (57%) or in emerging creative urban areas (12%). Occupiers are signaling that they intend to remain in urban cores with their major offices. Eighty percent of firms have not considered moving their offices out of the CBD.
ESG ranks #3 in EMEA (#5 globally and #6 in Americas). Companies’ focus on ESG has accelerated in the past two years. Goals and implementation plans for various ESG components are increasingly seen as essential to organizations’ long-term financial performance, corporate reputation, and ability to attract clients, investment and talent. Two-thirds of CRE executives indicate their firm has ESG goals that they have already begun to implement (42%) or are planning to implement. Companies appreciate the environmental value of incorporating sustainability into workplace designs and portfolio strategies. Accordingly, occupiers are ready to pay a premium to incorporate sustainability into the workplace and their office portfolios. On average, they are willing to pay up to a 22% premium for buildings with green credentials.
Below, we have summarized the most relevant elements for the Italian market, to find out more link here for the C&W global report
With sustainability targets increasingly becoming the norm, the focus, for many landlords, has been on ensuring their assets are aligned with legislative requirements as well as increasingly meeting tenant expectations, thus future-proofing their assets against obsolescence. In the office sector most, if not all, major companies have adopted some form of hybrid working model as well as more visible practices to foster and promote diversity, equity, and inclusion (DE&I). The role of technology has increased in importance: both as an enabler of change and as a means of measuring its impact. Together, these factors mean that the fitting out of space goes beyond looks, to include how the space contributes to a company’s financial, social, and sustainability goals whilst also reflecting corporate brand and culture. Over the last couple of years costs of energy and materials has risen exponentially. Inflation has proven to be more persistent than many economists originally envisaged, forcing downstream pricing to rise. On top of this sharp increases in fuel costs have increased transport costs adding to pricing all along supply chains. In line with this, fit out costs have risen, though with little change across the proportionate share of cost splits (A/V, furniture, Fit out and professional services). Italy recorded an average increase between 15-20% compared to the 2021/22 values considered in the 2023 Cost Guide, which in some cases is now lessening. Moreover, the issues with material shortage which was linked also to the Superbonus 110% (a maneuver intended to boost the construction industry strongly hit during the pandemic) has also decreased compared to 12/18 months ago and is now in line with normal timescales. For more detailed information, please check out Cushman & Wakefield's Fit out cost Guide [link here]
Average office fit out cost (€ per sq.m)
LOW
MEDIUM
HIGH
- Limited meeting facilities less than 10% of space. - Paint to all walls. - Low specification finishes and carpet throuhout. - Vinyl flooring to cafeterias. - Minimal alterations to air conditioning and ventilation. - Data points to equal desk positions. - Locally procurement furniture workstations.
- Meeting facilities around 10%-20% of space, with part single glazed partitions. - Alterations to less than 25% of ceiling. - Plasterboard ceiling to meeting rooms. - Feature wall finishes to reception and cafeterias. - Medium specification carpet and finishes. - Hard flooring to reception. - Alterations to ariconditioning & ventilation to sult cellurosation. - Multiple data points to each desk position.
- Meeting facilities to over 25% of space, with double glazed partitions. - Alterations to ove 25% of ceiling. - Features & plasterboard ceiling to reception and offices. - High specification carpet. - Bespoke joinery to meetings rooms and offices. - Hard floating to cafeterias and finishes. - Modification to air conditioning/ventilation along with new air- conditioning units. - Additional feature lighting. - Wired data provision (future flexinility). High and and /or imported furniture
Quality space is decreasing rapidly as tenants seek to upgrade; strong competition for prime spaces is leading rents to a futher increase of the coming months especially in strategic locations
"All-in" fit out costs
Fit out cost (€/sq.m)
Reinstatement cost (€/sq.m)
Rome prime rents
Lack of readily available quality offices coupled with tenant demand centered around the seat of Government, is behind the rise in rents within the CBD, while other submarkets confirmed values. (NB correction in values with the Semi Centre is due to an adjustment of the submarket borders) Moreover, Stock in strategic locations is decreasing due to conversion to hospitality or residential use.
CONSUMER CONFIDENCE INDEX
The retail market in Italy is undergoing a renaissance, with retailers striving to provide customers with genuine experiences that go well beyond mere sales. E-commerce has become a reliable partner for physical stores, with multi-channel sales forming the foundation of retailers' strategies. Brick-and-mortar retail remains essential for delivering an authentic shopping experience and serves as the vital link between brands and their customers. Despite the positive atmosphere, consumers' spending power has declined due to inflation. By the end of 2024, online purchases in Italy were in the order of 60 billion euros, up 6% from 2023. The share of e-commerce in total Retail (online + offline) rose by half a percentage point to 13% from 12.5% in 2023. The most dynamic sectors, with above-average increases, are Furniture and Home Living (+12%), Beauty&Pharma (+12%) and Food&Grocery (+7%). This is followed by Computers & Consumer Electronics (+5 percent), Apparel (+5%) and Auto & Parts (+4%).
96.8
+0.6%
Online shopping growth (YTD @Nov 2024 on 2023)
E-COMMERCE
RETAIL SCHEMES
83,000 sq.m
New Completions 2024
Pipeline 2025
Calendar and seasonal effects adjusted deflated; Index base 2015 = 100
Source: INE
In the quarter preceding the survey
Until 2025
Click hover to view the notes
Sources: Istat, Consumer and Business Confidence, December 2024 Osservatorio eCommerce B2c Netcomm – School of Management del Politecnico di Milano (October 2024)
13%
Online purchases penetration on total (online + offline) retail spending
December 2024
(+0.2% since Q1 2024)
(stable)
E- COMMERCE
The decline in online sales is driving retailers to strengthen their physical presence, exploring several innovative formats to enhance the shopping experience and adapt to changing consumer preferences, positively impacting vacancy rates, especially in prime locations. These formats aim to blend the convenience of online shopping with the tangible benefits of brick-and-mortar stores, creating a more dynamic and engaging retail environment. Retail parks offer several advantages that make them increasingly attractive to both retailers and consumers. Their lower costs, larger spaces, and fewer structural constraints allow for more flexibility in store layouts and designs. Additionally, the ample parking and easy accessibility often found in retail parks enhance the overall shopping experience.
Dados deflacionados e ajustados de efeitos de calendário e da sazonalidade; Índice com base 2015 = 100
Fonte: INE
No trimestre anterior ao inquérito
Até 2024
Retail stock evolution
Source: Cushman & Wakefield * Forecast
Out of town
Schemes
Retail stock evolution | recent opening
In 2024, three extension projects and two new shopping centers were launched, adding approximately 83,000 sqm of gross lettable area (GLA). Looking ahead to 2025, several projects are poised to make their debut in the Italian retail landscape, including Waterfront in Genoa, Waltherpark in Bolzano, and Torino Outlet Village in Turin.
Main luxury transactions
Retailers' emphasis on key luxury streets has made these areas exceptionally resilient in terms of demand. Vacant spaces on these prime streets are extremely limited, with some having no vacancies at all. As a result, rents in these key luxury locations have experienced significant increases over the past several years, driven by brands' determination to establish or maintain their presence. High-end brands are also exploring new locations to enhance their market positioning, particularly in holiday resorts. Here, they are introducing new formats such as food and beverage corners or capsule stores.
560 (=)
New openings
64%
High Street Retail
45%
F&B
5
Non-random sample of retail demand aggregated by Cushman & Wakefield based on public sources and targeted fieldwork
Demand
Mouse hover to view the notes
Luxuy Market
In the latter half of the year, the mass market experienced a surge of activity, as numerous international retailers either launched their first stores or reinforced their presence in Italy. Milan, Rome, and Florence were the most dynamic and in-demand cities, followed by smaller towns where brands are eager to broaden their reach.
230 (+16)
89%
57%
High street market
The trend at the end of 2024 sees F&B as always very relevant in marketing dynamics. We have seen the emergence of healthy concepts with a variation on KM0, Veg formats with a lot of attention to raw materials, especially in the most requested markets. The historic centers and the main city food streets remain the first choice both for new emerging formats and for restaurant chains already established on the market. Some players who up to now have mostly been affirmed in Shopping Centres opened in primary cities with an interesting catchment. As far as the Shopping Center world is concerned, food courts continue to play a significant role in the dynamics of galleries. There have been numerous redevelopments of food courts aimed not only at improving the food offering but also of attracting visitors and involving them in a complete experience within the shopping centre, especially if linked with leisure and entertainment.
100 (+71)
90%
56%
F&B market
Main high street transactions
Main F&B transaction
Retailers' interest in prime locations persisted in the second half of 2024, underscoring the importance of physical stores in their strategies and maintaining the stable rental values seen in the first half of the year. In comparison to the previous year, prime rents have seen an average annual growth in the order of 2%. From an out-of-town perspective, a 10% growth in rental values was recorded over the year both for shopping centers and retail parks, reflecting retailers' interest in larger and better stores to enhance their physical offerings.
* for unit of 100-200 sqm. Retail values may change depending on positioning along the street and number of shopping windows.
LOCATION AT THE CENTRE OF SUCCESSFUL RETAIL OPERATIONS
THE ROLE OF PHYSICAL STORES
PIVOTAL STRATEGIES FOR APPEALING RETAIL SCHEMES
• Retailers' competition for prime locations remains intense as they increasingly adopt city-focused strategies to attract both tourists and local shoppers in high-traffic areas and top-tier shopping centers. • The intense desire to secure prime locations and the limited availability of stores on Italy's most sought-after high streets have propelled Via Montenapoleone in Milan past New York's Fifth Avenue. This marks the first time Europe has topped the global ranking of the most expensive retail destinations (Main Streets across the World).
• Physical stores reaffirm their crucial role in retail strategies, acting as hubs to enhance customer experience, strategically boosting brand recognition, and leading to higher customer satisfaction. • Looking ahead, retailers will continue to strategically expand, focusing on key locations and high-quality stores. This approach will help them attract more customers, enhance their brand presence, and stay competitive in the market.
• In 2025 demand from institutional investors is expected to increase, with new players entering the market. Supported by lower financing costs and greater confidence in the sector's resilience, this influx could lead to a compression in yields, particularly for high-quality assets in prime locations. • The retail market fundamentals are anticipated to strengthen, leading to increased investment. This positive trend will mainly benefit high-quality assets like prime high streets, retail parks, and top-tier shopping centers. • Conversely, properties in secondary or less desirable locations are expected to continue facing challenges regarding market fundamentals and investor interest.
- Renewal and modernization are essential for the future of shopping centers. - Retail schemes are enhancing their green commitment through energy-efficient and cost-saving technologies, thereby improving building efficiency and resilience. - Asset management strategies will be increasingly crucial in attracting investors’ interest to this asset class."
RISING INTEREST FOR RETAIL
RETAIL IS BACK IN THE INTEREST OF INVESTORS
- Retail investment doubled at ca. €500M in comparison to the first semester of 2023. - Roma Est transaction represented the first regional shopping centre deal in the last 7-year period. - OOT assets are primarily in the sights of retail investors due to potential significant returns. - Interest in retail investment is gradually improving.
LOCATION AT THE CENTER OF SUCCESSFUL RETAIL OPERATIONS
In 2022, trading activity in Portugal maintained an upward trend, with the export and import of goods recording year-on-year growth of around 20%, against a backdrop of a slowdown in price increases in the final months of the year.
PIPELINE UNDER CONSTRUCTION
PRIME RENT MILAN - ROME
20,300 sq.m
1M sq.m
880,000 sq.m
€67 sq.m/yr
(+5%)
(BTS/BTO/ Speculative)
(Speculative)
6
Excluding fuel and lubricants
Note: Data refer to the comparison between the first half of 2023 and the first half of 2022.
(+3%)
(-21%)
(+245%)
2,200,000 sq.m
(-20%)
PRIME RENT MILAN & ROME
Total take-up for the second half of the year reached 1.1 million sqm, maintaining stability compared to the first semester and showing a 9% decline from the same period in 2023. However, it remains in line with the five-year average: year-to-date absorption stands at approximately 2.2 million sqm, marking a 19% decrease from 2023. This decline is largely due to occupiers delaying decision-making amid ongoing economic and business uncertainty. Additionally, the steady rise in asking rents for high-quality spaces has led 3PLs, traditionally the most active players, to adopt more cautious expansion strategies. This shift is largely driven by their clients’ reluctance to bear the higher rent costs, which prevents them from winning tenders and the consequence preference of End-Users to stay with their current providers by investing directly in long-term projects.
Take-up by semester
Source: Cushman & Wakefield; IPI
The share of demand facilitated through speculatively developed space has decreased, accounting for 32 % of the annual take-up, as demand for BTS/BTO saw an increase accounting for the 57% of yearly take-up. From the beginning of the year the speculative pipeline has been growing Q-on-Q, more than tripling in volume by the end of 2023 to 1 Mln sqm.
Over the past three years, the logistics occupier market in Italy has consistently seen 3PL, retailers, and e-commerce as the most active players. 3PLs, which, while remaining the most active players with 50% of the total absorbed volume, experienced a reduced share due to the slowdown in their expansion plans. This was primarily driven by their clients’ reluctance to absorb higher rental costs, making it difficult for 3PLs to secure tenders, as end-users preferred to stay with their current providers and invest directly in long-term projects. As a result, the share of Retailers increased, making them the second most active players with 27% of the absorbed volume. E-commerce, despite slowing down from 2020, maintains an active demand, as consumers are opting for the convenience of online shopping; Follow the Manufacturing and Food sector, which increased their share year on year, accounting for 4% of the yearly volume respectively.
Among the main future supply currently under construction is the development of the second phase of Aquila Capital's project in Azambuja; and the entry into the market of Montepino, which recently reached an agreement with Leroy Merlin to build what will be the largest logistics platform in the country, in Castanheira do Ribatejo.
Take-up by tenant sector
Excluindo combustíveis e lubrificantes
LOGISTICS WAREHOUSE
(>10,000 SQ.M)
€67/sq.m/yr
Big Box Distribution Centers are logistics facilities exceeding 10,000 sqm, primarily used for the storage and distribution of goods. These centers are typically situated on the outer edge of the city, in the proximity of major road junctions, and often close to other transportation hubs (such as road, rail, air, or water networks). Approximately 3-5% of the space is allocated for office use. In some regions, units of this size may not be available; therefore, rents and yields should be adjusted to reflect the characteristics of major logistics facilities in those markets. The typical building coverage ratio is 50%.
Porto
LAST MILE / COURIER LOGISTICS
(5,000 - 15,000 SQ.M)
€110/sq.m/yr
Last Mile/for Courier – units will typically be in the region of 5,000-15,000 sq.m. Ideally located in the city hinterland or in proximity of motorway junctions in the vicinity of major metropolises – within about 20 minutes from the city center. The unit could be used for courier activities and/or for urban distribution of goods. Units may provide cross-docking for transfer of goods between truck and vans; in this case the width of the warehouse should be in the range of 40/50 meters. Units are likely to have ca. 5%-10% office content. The characteristics of this type of assets are: high number of loading bays, floor to ceiling height not necessarily over 7 meters, good maneuvering areas and quantity of parking lots. Typically, the building coverage ratio is 30%.
INCREASing PIPELINE AND END USER ACTIVITY
STEADY RENTAL GROWTH AND DeMAND FOR QUALITY ASSETS
The robust pipeline of available spaces, driven by ongoing new developments, has the potential to create a temporary oversupply in the short to medium term. This may exert downward pressure on rental growth, particularly for less competitive assets. However, properties characterized by high-quality construction, adherence to sustainability standards, and strategic positioning in prime locations are expected to demonstrate resilience and outperform the market average. These assets continue to attract strong demand from End Users who are increasingly prioritizing operational efficiency, environmental credentials, and access to key logistics hubs.
In a context where End Users are intensifying their activity, Retailers are emerging as the most dynamic players. There is a growing interconnection between the logistics sector and the retail landscape, where the pivotal role of property owners and developers becomes increasingly evident in helping retailers navigate their challenges. New developments must not only be modern but also flexible, sustainable, and designed to meet the future needs of a constantly evolving sector. Retail logistics currently accounts for 27% of total logistics occupancy in Italy, in line with the European average, with even greater expansion through the 3PL market. This topic is explored in depth in the report "Retail Logistics."
In 2025, rental growth in Italy's logistics sector is expected to continue, albeit at a more moderate pace compared to previous years, with Milan and Rome forecasted to see prime rental increases of approximately 2%. The market continues to prioritize high-quality, sustainable assets in strategic locations, but a large pipeline of new developments may lead to a temporary oversupply, potentially moderating short-term rental growth.
Sustainability is increasingly becoming a defining factor in the logistics sector, influencing not only the design and management of spaces but also the ability to attract and retain high-quality tenants. The drive for sustainable logistics is therefore established as a priority, not only for environmental considerations but also for the profitability of real estate investments. This trend is confirmed at the European level, where the logistics real estate market is experiencing a growing appreciation for sustainable assets, as highlighted in our report, “Sustainable Logistics”. Investors are willing to pay a significant premium for warehouses with high sustainability credentials, recognizing that these buildings not only address rising environmental demands but also deliver long-term economic benefits. The price differential between properties with high certifications and lower-quality assets is particularly pronounced, with rental rates for top-rated buildings increasing by 10% to 30%.
RETAIL LOGISTICS: A SECTOR IN EVOLUTION
INCREASING PIPELINE AND END USER ACTIVITY
retail loGistics: a sector in evolution
STEADY RENTAL GROWTH AND DEMAND FOR QUALITY ASSETS
Tourism
Indicators
Following a rapid recovery post-pandemic, Italy’s tourism sector is thriving due to a mix of domestic resilience and increasing international interest. Overnight stays continue to grow across both leisure and business travel. In 2024, domestic tourism slowed, with just under 200 million overnight stays recorded between January and November, a 4% decline from the same period in 2023 . In contrast, international tourism experienced growth, with 235 million overnight stays recorded in the same timeframe, reflecting a 4% increase from 2023. Air travel also rebounded strongly, with over 200 million arrivals at Italian airports in the first eleven months of 2024, up 11% year-over-year, with foreigners making up 67% of arrivals. Italy remains a top global destination, with travelers from the U.S., Germany, France, and the U.K. driving demand, especially in cities like Rome, Venice, and Florence, as well as coastal and mountain regions. Key Performance Indicators for the hotel sector remain positive: ADR reached €223 in 2024 (+4.5% YoY), RevPAR hit €154 (+4.5%), and occupancy rates held at 69%. This resilience underscores the sector’s adaptability to shifting traveler demands.
DOMESTIC BEDNIGHTS
INTERNATIONAL BEDNIGHTS
REVPAR
ARRIVALS AIRPORT
OCCUPANCY RATE
193.7M
INTERNATIONAL BEDNIGHTS JAN-NOV 2024
Average ADR
Sources: ISTAT, Jan-Nov 2024; Assaeroporti, Jan-Nov 24; STR December 2024
(-4% on Jan - Nov 2023)
(+4% on Jan - Nov 2023)
(+4.5% 2024 on 2023)
(2024 alligned on 2023)
Foreigners 46%
DOMESTIC BEDNIGHTS JAN-NOV 2024
91M
ARRIVALS AIRPORT JAN - NOV 2024
204M PASSENGERS
(+11.2% on Jan - Nov 2023)
FOREIGN PASSENGERS SHARE
67%
€223
€154
69%
FOREIGN PASSENGER SHARE
AVERAGE ADR
235.1M
RevPAR index (2024 vs 2019)
Building on the strong momentum from 2023, Italy's hotel sector further solidified its position as Europe’s second-best performer in 2024, following Greece in terms of growth since 2019. Southern Europe dominated the rankings, with its top six destinations remaining among the most sought-after globally. Hotel occupancy rates remained robust at approximately 69%, slightly surpassing 2023 levels, while RevPAR reached €154, driven by an ADR of €223 (+4.5% compared to 2023). The sector’s strong fundamentals were supported by inflation-driven room rate increases, which directly boosted GOP, as well as the industry's resilience in the post-COVID era. Hotel demand has now exceeded 2019 levels, particularly from international markets, leading to significant growth in operational margins. Additionally, ISTAT adjustments and higher revenues from variable components have contributed to rising rental income.
Hospitality performance index Italy
Source: STR
7
The Short-Term Rental segment attracted 9.8 million overnight stays and 4.1 million guests, in line with the hospitality sector a growth of about 90%, but still below 2019 (4% and 10%, respectively). Total revenue also doubled compared to the previous year and was 14% above 2019, standing at €437 million; and compared to this latter year, RevPAR recovered 17%, to €36.7.
New Supply
The second half of 2024 saw a significant acceleration in new openings, including rebranding's, conversions, renovations, and developments, totalling around 100 new properties for the year. There was a notable surge in serviced apartments in major cities, while new resorts primarily opened in mountain and countryside destinations. Among the most noteworthy debuts were the refurbishment of Hotel d'Inghilterra in Rome, Casa Brera Milano (Marriott Int.) the quintessential Milanese lifestyle hotel, and Ruby Bea, the German hotel chain's first property in Italy.
Main openings H2 2024
Até 2025
Supply will continue to grow in the coming years, with close to 130 projects expected to open by 2025, totalling 11,300 keys mostly 4- and 5-star hotels (30% and 33%, respectively) in the metropolitan areas of Lisbon and Porto.
+51
Hotels opened in 2022
+2,910
New Keys
ROME, attracts tourists from all over the world thanks to its longstanding history and cultural heritage. The Eternal City, has the biggest historical city centre of the world and a multitude of cultural attractions.
29,3M
XX million
63.3%
€158
So far in 2023 the city has seen 10 new openings in the 4 and 5 star category, for a total of 1,315 rooms; a further 3 openings are expected by year end with an additional 256 rooms. The estimated pipeline for the next two years, totals 8 new openings (rebranding and conversions) for a total of 1,005 rooms.
OVERNIGHT STAYS
AIRPORTS FIUMICINO
AIRPORT CIAMPINO
OCCUPANCY RATES
TOURIST ARRIVALS
(XXX% vs 2021; XX% vs 2019)
(+98 on 2021)
(+143% on 2021)
PASSENGERS
(+152% on 2021; -33% on 2019)
3,5M
(+49% on 2021; +41% on 2019)
Source: ISTAT
In touristic establishments
8
9
In hotel establishments
10
11
Source: Study of the Economic Impact of Cruise Activity in Lisbon, promoted by the Administration of the Port of Lisbon in partnership with Lisbon Cruise Port and carried out by Netsonda and Nova SBE.
AIRPORT FIUMICINO
RevPAR
1,261
HOTELS
58,433
KEYS
118,937
BEDS
Milan, capital of fashion, represents one of the most important market reference for business-oriented tourism due to its economic and manufacturing industry and the widespread transport network.
21,3M
59%
€130
Since the beginning of 2023 ther have bee 5 new openings in the 4 and 5 star category, for a total of 307 rooms; a further 6 openings are expected by year end with an additional 515 rooms. The estimated pipeline for the next two years, totals 8 new openings (rebranding and conversions) for a total of 1,005 rooms.
MALPENSA AIRPORTS
LINATE AIRPORT
(+XX% vs 2021; +XX% vs 2019)
(+65% vs 2021)
(+99% vs 2021)
(+123% vs 2021; -26% vs 2019)
7,7M
(+78% vs 2021; +17% vs 2019)
Source: iSTAT
12
13
14
Fonte: Estudo de Impacto Económico da Atividade de Cruzeiros em Lisboa, promovido pela Administração do Porto de Lisboa em parceria com a Lisbon Cruise Port e realizado pela Netsonda e Nova SBE
AIRPORT MALPENSA
AIRPORT LINATE*
AIRPORT ORIO AL SERIO
13,1 M
(+103 vs 2021; - 51 vs 2019)
442
27,204
50,874
AIRPORT
* Linate Airport closed for 6 moths during 2019 with air traffic diverted to Malpensa
ORIO AL SERIO ARIPORT
LEADING CITIES AND LUXURY RESORTS DRIVING GROWTH
NAPLES AND PALERMO STAND OUT AMONG SECONDARY DESTINATIONS
SUSTAINED INVESTMENT MOMENTUM AHEAD
Blurring lines between traditional hospitality and living
Leisure and lifestyle at an advantage
Major tourist cities like Rome, Venice, Florence, and Milan, where leisure activities such as events, fairs, exhibitions, shopping, sports, theaters are booming, have been the first to benefit from the strong recovery in hotel performance and margins, with some of the highest growth rates in Europe. Luxury resort destinations such as Capri, the Amalfi Coast, Taormina, Lake Como, Valle d’Itria, Tuscany, and Costa Smeralda have also seen exceptional and record-breaking performance on an international scale. In these areas, international luxury demand is significantly driving tourism and investor interest. In both primary markets and luxury resort destinations, there is a substantial pipeline of new hotel openings, particularly in the high-end market segments where performance is highest (sometimes with no limit on rates), leading to the greatest expected returns for value-add and opportunistic investors. Where the luxury market is strong, all hotel categories benefit by aligning their rates upwards.
Interest in other destinations such as Genoa, Verona, Bologna, Turin, and Catania is more selective, relying on property quality and the reputation of the hotel operator. These markets present significant management opportunities due to lower competitive pressure and the limited presence of international hotel brands. Under these conditions, real estate operations can guarantee interesting returns. Among these destinations, Naples, and also Palermo, stand out for their potential, international visibility, and low penetration of hotel chains, making them top of the list for investor interest among secondary markets
Looking forward, the hotel sector will remain driven by private capital, institutional investors, and hotel groups. Following a dynamic year, Italy’s hospitality industry approaches the future with confidence, supported by ongoing negotiations for numerous hotel assets, with over 600€M in opportunities currently in exclusive and due diligence phases. The sector is poised to sustain its strong momentum into the new year. The luxury segment continues to drive hotel investments. Italy’s highly fragmented hotel ownership—primarily consisting of private owners and family-run businesses—combined with the limited presence of international chains and strong operational performance, makes the market particularly attractive for value-add opportunities such as conversions and repositioning. These investments are especially profitable in the luxury and ultra-luxury segments. Given the sector’s relatively low institutionalization compared to major European markets like Spain and France, this trend is expected to persist over the next two years.
The resilience shown during the pandemic and the rapid evolution of mobile lifestyles led investors to look for unconventional forms of hospitality, with hotel concepts increasingly integrating long-term stays, co-living, student accommodation and housing. Developers and brands will be more aware of consumer trends and more agile in responding with new real estate products.
Investors will continue to invest in the strong recovery and prospects for continued growth in the leisure and lifestyle segment. Several funds were capitalised during 2022 with a view to source investment in leisure products during 2023 and beyond. Demand for investment opportunities will shift from resorts to urban lifestyle projects in popular and safe destinations, in key southern European geographies, including Portugal.
The hospitality sector is witnessing a significant upswing in investment (ca €800 M in H1 2024), buoyed by robust performance and increasingly favorable lending conditions. This positive trend is underpinned by a strong future outlook, attracting a greater number of buyers interested in value-add opportunities. The current market dynamics suggest a shift towards a buyer's market, with a focus on strategic investments that promise long-term growth and profitability.
INVESTMENT ON THE RISE
Freehold
Milan & Rome
ITALY In 2024, after a 2023 that marked the first year of a reversed growth trend—with transaction numbers and volumes declining by approximately 10% compared to 2022—home exchanges saw an increase across all regions. Declining mortgage interest rates continued to drive a rise in the share of purchases financed through loans. Milan and Rome remain the largest residential markets in Italy, consistently recording the highest number of transactions nationwide. However, during the first half of 2024, sales in Milan and Rome experienced a decline. MILAN MARKET In H1 2024, the Milan freehold market registered a 6.3% year-on-year increase in the average price of dwellings, accompanied by a 10.1% decrease in the number of transactions compared to H1 2023, totaling 11,228 sales. Additionally, there was a slight increase in sale times, offset by a marginal rise in the discounts applied relative to asking prices. ROME MARKET Rome remains the leading market in Italy in terms of the number of transactions. However in line with Milan trend, freehold market recorded a 1.5% drop in number of transactions in the first semester of 2024 compared to the same period of 2023, accompanied by a 0.5% year-on-year increase in the average price of dwellings. On the other hand, there has been a slight decrease in selling time, accompanied by a marginal increase in the discounts applied compared to the prices demanded.
TRANSACTIONS
AVERAGE VALUE
SALE TIME
SIZE CLASS
AVERAGE LOAN
Milan €9.5B
Milan €382,000 Rome €255,100
Milan 50-85 sq.m
SALE TIME H1 2024 (months)
Milan € 225,500
* Source : C&W relaboration on Agenzia delle Entrate data excluding Porta Nuova and City Life Data refers to dwellings in good and excellent conditions ** Source: C&W on Agenzia delle Entrate data Data refers to dwellings in normal conditions Source: OMI (Agenzia delle Entrate - data H1 2024), Rapporto Imobiliare Agenzia delle Entrate, Nomisma
(+51% os 2021)
(+42% on 2021)
(+% on 2021)
Milan 4 vs 3.7 Rome 5.5 vs 6
(+63% on 2021)
Milan 11,228
AVERAGE PRICE H1 2024
Number H1 2024
Milan* €4,795 /sq.m
AVERAGE UNIT VALUE 2023
DISCOUNT
Milan 4% vs 3.7% Rome 7.5% vs 7%
Volume 2023
- 5% vs 2022
Rome €8.7B
- 14.2% vs 2022
-10.1% vs H1 2023
Rome 17,159
-1.5% vs H1 2023
+9% vs 2022
stable vs 2022
+6.3% vs H1 2023
+0.5% vs H1 2023
Rome** €2,830/sq.m
SIZE CLASS 2023
Rome 50-85 sq.m
44%
42%
LOAN 2023
Rome € 176,000
-7% vs 2022
-8.2% vs 2022
vs H1 2023
Leasehold
ITALY In the first half of 2024, the Italian residential rental market showed steady growth, driven by increasing demand in urban centers and university towns. Rental prices experienced moderate increases, particularly in major cities like Milan and Rome, driven by persistent demand and limited supply. MILAN MARKET The Milanese rental market has been abbastanza in linea with the same period last year, with a slow down of only 0.3% in new leases. however, there was an increase in rents of +10.7% in H1 2024 compared to H1 2023 with an average rent of almost €181/sqm/year. Lease times in the first semester 2024 have decreased slightly, staying under two months. ROME MARKET In the first half of 2024, the residential rental market in Rome demonstrated sustained demand, with new leases increasing by 9.4% compared to the same period last year. The average rent saw a steady rise, driven by continued pressure from the limited supply in central and well-connected areas, growing by approximately 2.5% relative to H1 2023, reaching an average of nearly €132 per square meter per year. Lease durations in the first half of 2024 shortened, remaining below two and a half months.
AVERAGE RENT
AVERAGE SALE TIME & DISCOUNT
TIME TO LET
Milan €639M
Milan €181
Milan 1.9 vs 2 H1 2023
AVERAGE SALE TIME (months)
Milan 67.8 vs 67.6 in 2022
Source: OMI (Agenzia delle Entrate - data H1 2024), Rapporto Imobiliare Agenzia delle Entrate, Nomisma
Milan 3.8 vs 3.6 Rome 5.6 vs 4.7
Milan 49,975
AVERAGE PRICE 2023
Milan* €4,552 /sq.m
AVERAGE RENT H1 2024 SQM/YR
AVERAGE DISCOUNT
Milan 3.6% vs 3.9% Rome 7% vs 5.6%
- 5.3% vs 2022
Rome €574M
- 0.8% vs 2022
-3.6% vs H1 2023
Rome 52,220
-6% vs H1 2023
+10.7% vs H1 2023
+2.5% vs H1 2023
+7.5%
– 1.4%
Rome** €2,760/sq.m
TIME TO LET H1 2024 (months)
Rome 2.4 vs 2.8 H1 2023
AVERAGE SIZE 2023 SQM
Rome 80.1 vs 79.6 in 2022
-8.2%
Rome €132
ITALY In 2023, the number of new leases was 1.28 million, -1,1% less than last year. The Milan and Rome markets, which almost had the same number of new leases, account for about 8% of the total market of new contracts in Italy and 21% of the total rent of new contracts in Italy MILAN MARKET N. Transaction Q1 2024: 11,826 (-1.8% Vs Q1 2023) The Milanese rental market has slowed down, less than the buying and selling market, with a -3.6% increase in new leases compared to 2022. Even in this case, however, there was an increase in rents of +8.8% in 2023 compared to 2022 with an average rent of almost €190/sqm/year, resulting in an increase of +5 in the total rent of new contracts. The most signed rental contract is confirmed as the ordinary long term one, which accounts for 64% of new leases. Lease times in 2023 have increased slightly, but still staying under two months, and the average leased area is currently about 68 sqm, slightly higher than in 2022 ROME MARKET N. Transaction Q1 2024: 12,330 (-8.2% Vs Q1 2023) The Roman rental market has slowed down, less than that of buying and selling, in terms of new leases with -5.3% compared to 2022. The average rent increased by around +5% compared to 2022 with an average rent of almost €137/sqm/year. The increase in rents balanced out the decrease in new contracts, keeping the total amount of rents in line with the previous year. With 57%, the most subscribed being regarded as agreed/facilitated leases. Lease times have decreased, and the average lease is currently slightly above 80 sqm, up from 2022
AVERAGE TIME TO LET
Milan €350,000 Rome €255,100
Milan 67.6 sq.m Rome 79.7 sq.m
AVERAGE TIME (months)
Milan € 241,900 Rome € 194,400
Source: OMI (Agenzia delle Entrate - data 2024), Rapporto Imobiliare Agenzia delle Entrate, Nomisma
Milan 1.6 Rome 2.6
Milan 51,821 Rome 55,557
AVERAGE PRICE*
NUMBER
Milan €152* €/sq.m/yr Rome €125* €/sq.m/yr
AVERAGE UNIT VALUE
Milan 3.9% Rome 5.6%
TRANSACTION VOUME
AVERAGE PRICE
NUMBER OF TRANSACTIONS
AVERAGE UNITS VALUE
NEW
€10,008 million
(+15%)
TOTAL
11,060
(+1%)
€350,00
(-1%)
4,220 sq.m
80,4sq.m
-7%
3,6%
6 months
KEY DATA 2022
80,4 sq.m
6,030
(-7%)
3,6 months
3,120 sq.m
(+9%)
3,9%
-6%
€ 241,90
8 months
AVERAGE TIME
PORTO
15
New and used
Source: SIR / Confidencial Imobiliário (SIR Ci)
Transactions are still growing +3.05% on 2021. 50-85 sqm band size results the most transacted, with c. 42% on total transactions Quicker sale time than 2021 with an average selling price that has remained constant
* Source: C&W relaboration on Agenzia delle Entrate data Data refers to dwellings in normal conditions Source: OMI (Agenzia delle Entrate), Rapporto Imobiliare Agenzia delle Entrate, Nomisma
TRANSACTION NUMBER
28,595
4,236 €/sq,m
AVERAGE SALE TIME
€241,900
€10,219M
€255,100
93.1sq.m
5.6%
Transactions are still growing +3.05% on 2021 50-85 sqm band size results the most transacted, with c. 42% on total transactions Quicker sale time than 2021 with an average selling price that has remained constant
40,064
2,799 €/sq.m
4.75 months
€194,400
VOLUME OF TRANSACOTIONS
152 €/sq.m
67.65 sq.m
1.6 months
Increasing number of new contracts and growing rental levels (c. +19% since 2016) 68% is represented by Ordinary long-term contract. Decreasing of time to let 1,6 months and increasing Average Rent The Average leased Area is slightly decreasing since 2016. In 2022 it is about 68 sqm.
125 €/sq.m
79.7 sq.m
2.65 months
Growth in number of new contract after covid emergency (2020). + 6.84% 58% is represented by Rent with Incentives. Decreasing of time to let 2.65 months and increasing Average Rent. The Average leased Area is slightly decreasing since 2016. In 2022 it is about 80 sqm
55,557
STUDENT ACCOMODATION
ca. 109,680
MARKET FUNDAMENT ITALY
-0.9%
STUDENT REGISTERED
(ETPs)
>500
First mover market activity primarily focused on development transactions. A diverse educational offer across some of the oldest universities in the world Lack of fit for purpose and modern purpose built accommodation. Most of the student accommodation are managed by Public entity
Source: MIUR accademic year 2021/2022
FULLTIME STUDENTS
ca. 1.8 Mln
INTERNATIONAL STUDENTS
Why invest in Italy?
STUDY IN MILAN & ROME
27.5%
35%
Italy Student Numbers and Yearly Change
Student by CIty 2021/2022
(2020/2021)
FOREIGN
+7.2%
STUDENT ACCOMMODATION
Potential demand
Milan is the leading student market in Italy and represents the most attractive market for Purpose-Built Student Accommodation (PBSA), due to the highest number of both domestic students studying away from their home region and international students. However, Milan's provision rate remains low by continental standards, despite it being the preferred destination in Italy for international students.
Sources: Miur (Ministero dell’istruzione) and C&W data
Amostra não aleatória da procura de retalho agregada pela Cushman & Wakefield baseada em fontes públicas e trabalho de campo direcionado
According to the Bank of Portugal, mortgages were granted to the total amount of €16.2 billion, the highest in the last 15 years.
16
Percentage values correspond to the variation between 2022 compared to 2021
Operating beds
Pipeline 2025 - 2027
c.11,000
NEW BEDS
TOTAL STUDENTS
210,082(*)
69,474
DOMESTIC STUDENTS FROM OUTSIDE REGION
17,238
Milan university demand
Potential demand of beds
c.63,200
c.12,500
(*) not considering students of online universities
Rome is Italy's second-largest market in terms of both students studying away from their home regions and international students. It is an exceptionally promising market, as even compared to Milan, the supply of beds in PBSA (Purpose-Built Student Accommodation) is more limited, and the current development pipeline is insufficient to meet the growing demand. The Eternal City has one of the lowest provision rates for student housing, creating a clear need for a significant increase in the number of available beds.
c. 1,650
209,079 (*)
50,986
13,184
Rome university demand
c.55,800
c.6,700
Sales price of apartments
In 2022, the average sales price (new and used), in Lisbon, stabilised at €4,220/sq.m, and at €6,260/sq.m for new apartments. The Traditional Zone and Historical Centre commanded the highest sales prices, standing at €5,260/sq.m and €5,220/sq.m, respectively. The average discount and adjustment rate remained at 7%; with the average take-up time decreasing slightly to 6 months. The difference between the final sales price and the initial price offered for the property. In terms of future supply, Lisbon recorded a sizable decline in the licensing of residential projects, namely 15% of both licensed and submitted projects.
Source: Cushman & Wakefield; SIR Ci
Price of apartments
17
The difference between the final sales price and the initial price offered for the property
18
In Porto, the sales prices of apartments increased by 9%, to €3,120/sq.m, and 3% for new apartments, to €3,910/sq.m. Foz and the Historic Centre were the most sought-after, with prices reaching €3,830/sq.m in both. The average discount and adjustment rate adjusted downwards to 6%; and like the capital, the average take-up time decreased by 1 month to 8 months. Future supply seems to stagnate in the volume of projects licensed and a 21% drop in projects submitted for licensing.
19
Lease of
apartments
NR. LEASED UNITS
AVERAGE ABSORPTION TIME
AVERAGE MONTHLY CONTRACTED RENT
AVERAGE DISCOUNT AND ADJUSTMENT RATE
170
(-18%)
3,050
€21.4/sq.m
(+30%)
€15.8/sq.m
(+22%)
-3%
3 months
LISBON
70
(-38%)
450
(-27%)
€15.1/sq.m
(+16%)
€12.5/sqm
(+20%)
-1%
Source: SIR Ci
Given the shortage of supply in Lisbon and Porto and with more stringent finance terms for mortgages, the appeal of the private rented sector (PRS) continues to grow, as well as the intention of developers to develop new built-to-rent (BTR) projects. Even so, there is still an enormous scarcity of supply, which worsened in 2022, with a decrease in the supply of housing for rent above 40% in both cities, potentially due to the revival in tourism (and the conversion of residential units to short-stay rentals), and the consequent reduction in the number of apartments leased, as well as an increase in average rents.
Rental
Em estabelecimentos de alojamento turístico
Em estabelecimentos hoteleiros
Rents in Lisbon reached €15.8/sq.m, for apartments (+22%), and €21.4/sq.m for new properties (+30%); with the Historic Centre continuing to take the lead, with a year-on-year growth of 31%. In Porto, the average rental price increased by 20%, standing at €12.5/sq.m/month, with new apartments reaching €15.1/sq.m/month (+16%). Like Lisbon, the same area remained popular, with Foz commanding the highest prices. The discount and adjustment rates also reflected the mismatch between demand and supply, adjusting between 3 to 6 p.p.; with the take-up time mostly falling by 1 month.
Market
Rental price of apartments
20
Like in recent years, and as a result of the continuous imbalance between demand and supply, student accommodation and CoLiving benefitted from significant development activity in 2022, with 2,170 new beds, spread over 7 units, all privately run. The LIV Student Campus Street in Asprela, with 775 beds, is now the largest accommodation in the country. The ratio of number of beds per student has slightly increased to 13%, as did the predominance of private operators, who now represent more than a third of the supply.
24,700
36%
Student Accomodation
/ CoLiving
TOTAL SUPPLY (nr. beds)
PrivaTE OperaTors
PROVISION RATE
(+10%)
(+1 p.p.)
21
Ratio between number of beds and displaced national and international students
22
Next 3 years
Continuous increasing demand, particularly for purpose-built accommodation, continues to attract the private sector and encourage public investment, with the supply forecast for the next 3 years standing at 8,800 beds. Noteworthy future private supply includes the Coletivo de Azúrem, a project in Guimarães, with 630 beds, the expansion of Xior, with two U.Hub projects, and the entry into the market of The Social Hub (formerly The Student Hotel), with projects in Carcavelos (Lisbon) and in Bonjardim (Porto).
Main openings
Main private pipeline
In the senior housing sector, the number of available beds is rising, currently standing at 103,400. Even so, the ageing of the population contributed to the fact that the equipment ratio has not improved, remaining at 14%. Under these circumstances, complemented by a high occupancy rate and scarcity of quality supply, there is increased activity by the private sector, particularly with the entry in the market, in recent years, of specialist international companies, such as the ORPEA group, which in 2022 opened a 100 beds unit in Braga. Looking ahead, for the next three years, an increase of 800 beds is projected from among the main private operators, with most choosing to develop projects of more than 100 beds, like DomusVi that will open 3 residences (in Leiria, Oeiras and Estrela).
103,400
92%
26%
Senior
Living
(+2 p.p.)
Source: GEP; INE; ACSS
23
Ratio between the number of beds and population aged 80 and over; 2021 population
14%
(=)
EQUIPMENT RATE
Source: Office for Strategy and Planning – Social Charter (excludes Madeira and Azores)
Supply
Main Private Operators Pipeline
Main Private Operators Openings
24
Outook 2025
GRADUAL RECOVERY IN ITALY'S RESIDENTIAL MARKET
2025: KEY DRIVERS AND OPPORTUNITIES
SHORTAGE in FUTURE PIPELINE IN STUDENT ACCOMODATION
From the second half of 2024, the residential market shows signs of gradual improvement, with an expected increase in transactions in 2024, slightly exceeding 700,000 deals, and a further growth of around 5% projected for 2025. This is supported by stable values despite a slowdown in prices observed in the second half of 2023 (Source: NOMISMA).
In the rental market, demand remains strong, particularly among the younger population who opt to rent in major cities for greater flexibility. Additionally, the reduction in supply, driven by landlords' perception of limited profitability from traditional leases and their preference for alternative rental arrangements, is putting upward pressure on rental prices. In Italy's two main markets, Milan and Rome, both sales prices and, more notably, rental prices are expected to continue rising in 2025, particularly for new and modern properties. This upward trend will be primarily driven by the ongoing scarcity of supply, compounded by a slowdown in the development of new projects, a trend that is anticipated to persist throughout the year.
The outlook for 2025 confirms a positive trend for the Living sector, which stands to benefit from a combination of favorable factors. These include the resolution of urban planning challenges in Milan following the approval of the "Salva Milano" decree, an increase in PBSA developments, and the continuation of expansive monetary policies by the ECB, which will contribute to improved financing conditions for real estate transactions.
The living sector, more than other sectors, has a pivotal role in tackling social factors it also plays a central role in addressing many of society's major urban challenges in the years to come. The #11 SDG’s is about building Sustainable and Inclusive Cities: real estate capital could support and contribute to achieve this goal. Some of the patient capital is targeting the sector and the relatively more favorable outlook for capital markets we anticipate in 2024 should further help funding these type of new social and affordable projects
RESIDENTIAL MARKETS: STEADY GROWTH DRIVEN BY LIMITED SUPPLY AND HIGH DEMAND
THE “S” OF ESG TAKING THE STAGE
DEVELOPMENT
Development &
Purchase of buildings for refurbishment or land for development
Main urban development and regeneration deals
25
Activity in the urban development and regeneration sector picked up in 2022 growing by 48%, compared with 2021, with a total transaction volume of €786 million, spread over 55 deals. Amongst these, the development sites included in the Crow project (among other, Vale do Lobo), sold at the end of last year by ECS Capital to DK, for an estimated price of €200-250 million; and the purchase by AXA IM - Real Assets of Colombo Tower 3, for €40-45 million, stand out.
26
Information based on internal and public sources
PROMOÇÃO
Aquisições de edifícios para reabilitação ou terrenos para promoção
Real estate projects under licensing
Source: Pipeline Imobiliário Ci
Regarding future supply, during the last year 7.2 million sq.m were submitted for licensing in mainland Portugal, spread over more than 21,000 projects, reflecting increases of 11% and 21%, respectively, when compared with the same period of the previous year. In terms of area, although most of the projects are for residential use (73%) and new construction (78%), the office and tourism sectors benefitted equally from development and refurbishment projects, with each category accounting for around 50%.
Baseada em fontes internas e públicas
Real estate projects licensing
Licensing of construction projects in Lisbon followed an asymmetric pattern, with a decrease related to projects submitted and an increase in those already licensed. Regarding the former, there was still an increase (+13%) in the number of projects submitted, to close to 310. Contrary to country-wide data, there was again a balance in terms of the type of construction, with works in existing buildings marginally dominant.
337,200 sq.m
(-25%)
997,300 sq.m
(+91%)
LICENSED
Submitted for licensing
Licensed real estate projects
Próximos 3 anos
The area of licensed projects doubled, with the retail sector taking the lead, with 449 thousand sq.m, swayed by the permitting for the refurbishment and expansion of Centro Colombo. Construction costs continued to escalate, with average costs in Lisbon ranging from €1,450/sq.m to over €1,850/sq.m, in new construction, and from €1,700/sq.m to over €2,000/sq.m in refurbishment.
Construction costs by segment
Porto also showed an unlikely trend concerning the area of construction submitted for licencing and the licensed area. The former decreased by 28%, with the number of projects decreasing by 10%, to around 275. In Porto, new construction prevails, representing 72% of the total area.
214,500 sq.m
(-28%)
353,400 sq.m
(+6%)
LICENseD
Regarding new licensed area, the residential sector is the most popular, with a balance between new development and refurbishment. Additionally, in Porto, construction costs continued their upward trend, ranging from €1,400/sq.m to over €1,800/sq.m in new construction and from €1,500/sq.m to over €1,900/sq.m in refurbishment projects.
Trends
Residential development will continue to be a priority
Pressure on construction costs may be easing
The significant imbalance between demand and supply, especially in the mid-end segment, will continue to drive developers and investors to adopt innovative solutions to develop more homes for the middle class. The recent measures announced by the government to create more residential accommodation, do not include tax benefits for new construction nor the optimisation of licensing time for allotments, so several larger-scale residential projects are likely to continue to be delayed. Portugal is currently a very popular destination, so investment in residential projects for the high-end and luxury segments, fuelled by growing demand from international buyers, is likely to continue.
The need to develop more practical, modern and, above all, environmentally and energy-efficient offices will become increasingly evident, freeing up more buildings for conversion into housing or tourism in central locations, fostering a new cycle of urban regeneration in the cities of Lisbon and Porto.
A slight slowdown in the rising costs of construction materials and labour costs can already be observed, which may continue provided there is no global catastrophe, favouring the development of projects targeted at the mid-end housing segment.
The emergence of a new generation of offices
CAPITAL MARKETS
Commercial Real Estate
Investment
Investment volumes surged in the second half of 2024, signaling a robust recovery in the Italian real estate investment market. The annual volume reached nearly 10€B, marking a 55% increase compared to 2023. This recovery is primarily driven by improved market sentiment and a more favorable interest rate environment. Sentiment reached its highest level since the end of 2022, bolstered by a positive demand outlook and better debt availability. This optimism propelled H2 2024 investment activities to exceed 6€B, an 85% increase over H1. Confidence in pricing has strengthened, although variations exist across different sectors and assets. Yields have stabilized, and rental growth continued, contributing to improved Interest Cover Ratios (ICRs). These ratios indicate a lower financial risk for borrowers, reflecting a greater ability to meet interest obligations from earnings. This reduction in risk enhances lenders’ confidence, making them more likely to offer favorable loan terms, such as lower margins and higher borrowing limits. In 2024, the interest rate trend shifted, with the European Central Bank (ECB) implementing four rate cuts. Despite ongoing volatility, projections suggest a continued decline in rates across Europe, forecasted to drop to 2.4% by 2026. Although rates may not return to the historic lows seen after 2008, they remain attractive for property investors.
TOTAL VOLUME
Foreign Investment
risk premium
€9.9Bn
(+55%YY) 2024 TOTAL VOLUME
55Bps
27
Institutional investment in completed and income-producing real estate properties
FOREIGN INVESTMENT
The risk premium, measuring the spread between corporate (office) and government bond yields, back on positive territory, since its lowest peak in 2022
RISK PREMIUM
Investment by semester
28
In case of a range in the “Value (M€)” column, the calculation of this indicator is based on the range’s average value
Investment by sector
29
Overall, the second half of the year reinforced the trends observed in the first half, with continued strong performance in the non-traditional sectors, with the exception of retail: industrial, living, retail, hospitality accounted almost 80% on the half yearly volume, more than doubling the first half volume. They comprise 70% of the yearly volume. The retail sector topped the growth rankings, reflecting renewed investor confidence driven by resilient fundamentals and more sensible pricing. The industrial sector, which had slowed more rapidly since the onset of monetary tapering, is back on track, albeit at a slightly slower growth rate than in the first half. Demand for logistics and manufacturing facilities remains high. The office sector's rebound masks various underlying trends, such as repurposing and increased polarization between prime and non-prime assets and locations, with core capital targeting prime assets which are becoming very limited. These trends indicate a dynamic and evolving market landscape, with both continuities and shifts in investment patterns. As the investment landscape evolves, the focus is shifting toward active asset selection and management/operations in CRE. With real estate increasingly influenced by macroeconomic changes, technological advancements, and tenant expectations, understanding and navigating these performance drivers is essential for optimizing returns.
Mouse hover to see the notes
Main investment deals
Commercial real estate component
In the second half of 2024, the market saw a surge in large transactions, with single-asset and portfolio deals exceeding 100€M accounting for over 60% of total volume. Retail consolidated its renewed appeal among investors, recording the largest high street deal ever in Italy: Kering’s 1.3€B acquisition of Montenapoleone 8. Additionally, the nearly 200€M sale of Forum Palermo in Sicily signaled sustained momentum in the sector, setting the stage for further activity in 2025. In hospitality, the 300€M sale of the Bauer Hotel stood out as a landmark transaction. Like Montenapoleone in luxury retail, the property’s unique location justified its exceptional pricing. The industrial and logistics sector also saw a milestone deal with the 327€M SEGRO Portfolio acquisition. Comprising four logistics assets strategically positioned between Rome and Milan, this portfolio strengthens Italy’s logistics infrastructure in line with global trends prioritizing key hubs. Meanwhile, major players such as Blackstone and Brookfield continue to amass significant liquidity, deploying capital across multiple platforms to reinforce their foothold in critical markets.
30
32
33
Nr. of keys of the transacted hotels (circa 85% of the commercial real estate component, as it excludes the golf courses)
Unit value by keys (€/keys)
Unit value by keys (€/beds)
The second half of 2024, consolidated prime yields environment of the first part of the year with yields stabilizing in all asset classes compared to the first half 2024: - Offices remained stable at 4.25% in Milan and 4.75% in Rome; - Retail High Streets remained at 4.00%; - Shopping Centers prime yields stabilise at 7.00%; - Retail Parks prime yields stabilise at 7.25%; - Logistics remained stable at 5.50%;
Investimento institucional em produto imobiliário acabado e de rendimento
Prime
Yields
Outlook If 2024 was the year of consolidation for prime property yields, backed by ECB’s interest rate cuts, looking ahead to 2025, the downward trend in interest rates is anticipated to continue, further enhancing the attractiveness of real estate investments. As economic conditions improve and demand for quality properties increases, yields are expected to remain favorable. However, investors should remain cautious of sector-specific risks and regional disparities that could impact overall returns.
THE RATE-CUTTING CYCLE IS LIKELY TO SLOW, REMAINING HIGHER FOR LONGER
Real ASSETS: REAL Estate and Infrastructure GROWING TOGETHER
OPPORTUNITY
The rate-cutting cycle is likely to slow, with rates ending higher than those seen during the low-interest rate environment following the 2008-09 financial crisis. This is due to factors such as sluggish productivity growth, demographic changes, increasing global demand for safe and liquid assets, and central banks' cautious stance on lowering rates too quickly. If rates remain elevated or take longer to fall, the term-premium of bond yields could increase. If the expectation is that rates will remain higher for longer, bond investors may seek higher yields for long-term investments, which could push up the term-premium and vice versa. As central banks continue the rate-cutting cycle, the cost of capital for commercial real estate will decrease, positively affecting property valuations and potentially leading to lower yields for investors.
In light of the new levels of interest rates and inflation, investors should realign their strategies. The imperative to decarbonize affects every facet of property strategy, from trading and operations. Real estate must support occupiers in adapting to new ways of living and working while maintaining affordability, a key driver of demand across all sectors. Innovation and shifts in supply chains could lead to the emergence of new global hubs and clusters. These dynamics are reshaping the real estate landscape, fostering a shift towards more sustainable, adaptable, and innovative investment strategies that meet the evolving demands of both occupiers and investors.
Real estate and infrastructure are increasingly converging, driven by the growing interconnectedness and technological reliance of modern markets. Properties like hotels and data centers require the seamless integration of both sectors to operate effectively, with hybrid assets becoming attractive to investors seeking both immediate income and long-term value. Additionally, the infrastructure bucket opened to include “social infra” like schools and hospitals, which are already being considered by some real estate investors. While many are drawn to the integrated investment opportunities, not all investors are equipped or willing to manage operations directly. For those opting for less operational involvement, such as long-term leases, the underlying asset value plays a crucial role. However, in infrastructure assets like the railway stations, income generation tends to be the primary driver of value, not the physical asset itself (i.e. OMERS Infrastructure and DWS agreement to acquire Grandi Stazioni Retail from Antin Infrastructure Partners). As a result, the value structures of real estate and infrastructure can vary significantly depending on the operational mix.
The city of Milan, with a total investment volume of €1.2 Bln in the first half of the year, accounted for 34% of the overall H1 Investment Volume. The largest component was the Mixed-use sector (43% of the city's volume), which included the acquisition of Scalo Farini as part of the revitalization plan for Milan's railway yards, followed by the Office Sector (29%) represented by single-asset transactions in selected locations. The city of Rome follows, accounting for 28% of the overall volume in the first half of the year (almost €1 Bln), a share that has consistently grown over the last four semesters, highlighting the increasing interest in the city. In particular, Hospitality, Retail, and Office asset classes recorded the highest volumes, with each sector achieving a transaction over €100 Mln and surpassing Milan's figures in all asset classes.
INVESTMENT STRATEGIES: NAVIGATING INFLATION AND DECARBONIZATION
REAL ASSETS: REAL ESTATE AND INFRASTRUCTURE GROWING TOGETHER
CITY'S OVERVIEW
OFFICE
Looking beyond 2025, the reduction of carbon emissions and climate risk management will continue to influence long-term strategies. European regulations are expected to further impact asset values, rental rates, and tenant demand. An increase in property repositioning operations is expected, both in Milan and Rome, in consolidated office locations where rental rates could continue to grow. Conversely, in less attractive city areas, where the vacancy rate has reached 17% in the last 3 years, a decrease in interest from tenants is expected, with a consequent slowdown in rental growth. Here, it will be appropriate to evaluate alternative enhancement scenarios, such as conversion to more requested uses, from hospitality to residential and all various living declinations (student residences, senior living, co-living).
The industrial and logistics sector is highly sought after by investors, viewed as stable due to low vacancy rates, limited new supply, and high rents. Interest in Core/Core+ products is strong but limited by a gap in buyer-seller expectations. Interest will remain high for Sale & Lease back transactions, especially for industrial properties, for their stable, long-term returns. Value-add opportunities are attractive if supported by the possibility of an increase in value through the achievement of green certifications and a rising rental value. Last Mile close to the main cities also with assets to be re-developed and land to be developed in consolidated locations. Data Centers are increasingly important due to AI growth, making this product a critical infrastructure behind the digital economy; nevertheless the market remains limited due to the scarcity of products aligned with the expectations of institutional investors. Sustainability and Green Certifications are crucial due to net-zero commitments.
INDUSTRIAL & LOGISTICS
office
ALTERNATIVES
Over the next year, we will continue to see dynamic activity with growing volumes. We expect greater demand from institutional investors, with the entry of new players who, supported by lower money costs and greater confidence in the sector's resilience, could lead to a compression of yields, especially for high-quality properties in prime locations. Key concerns include the pricing spread between vendors and buyers, macroeconomic uncertainties (such as consumer purchasing power), and high operational costs. These factors may lead to a cautious approach among investors.
HOSPITALITY The hospitality sector is witnessing a significant upswing in investment (ca €800 M in H1 2024), buoyed by robust performance and increasingly favorable lending conditions. This positive trend is underpinned by a strong future outlook, attracting a greater number of buyers interested in value-add opportunities. The current market dynamics suggest a shift towards a buyer's market, with a focus on strategic investments that promise long-term growth and profitability. LIVING Investors are turning their attention and investments towards Rome, partly due to the current urban planning and administrative uncertainties in Milan. Although Milan remains an area of significant interest, it has experienced a slowdown in investment and development activities. The macroeconomic situation and pressure on yields are pushing Build-to-Suit (BTS) projects to the forefront, especially for value-add investors. Build-to-Rent (BTR) products are highly sought after, primarily by institutional investors, but their development is mainly seen in large urban regeneration projects and suburban areas. The Purpose-Built Student Accommodation (PBSA) market remains remains attractive due to the low offer of beds and incentives coming with the PNRR. Investors increasingly interested also in secondary markets and cities.
NEW MARKET CYCLE
Office investment market remains characterized by a very selective approach, highlighting investors' cautious attitude towards this asset class. Main focus remain on central locations and on assets with future reversion or potential repositioning. This attitude contrasts with office fundamentals, characterized by continued strong occupier demand and potentially rising prime rents. Confirmed also the strong attention to ESG: green certifications in place or potential improvements are now a “must have” for investors.
LOGISTICS
As hotel income growth slows, it is expected that yield compression will help sustain hotel values. Although revenue growth (RevPAR) could slow down its growth, with some markets experiencing declines, the availability of more favorable debt and a recovery in capital markets will drive confidence in the sector. This will lead to yield compression, which, combined with improved market conditions and positive long-term structural drivers, should support a rise in hotel values. The outlook suggests that, while growth in hotel income will be slower, investors can expect a pricing recovery in 2025, as the sector benefits from these dynamics. Active asset management and a focus on operational efficiency and sustainability will also be key factors for maintaining value, ensuring that the moderation in income growth is offset by these broader market shifts.
The prospects for 2025 confirm the positive trend for the sector, which could benefit from a combination of factors: the resolution of the urban planning impasse in Milan—expected to be addressed with the signing of the Salva Milano decree— an increase in core transactions in the PBSA segment, and the continuation of the ECB’s expansionary monetary policies, which are anticipated to enhance returns for real estate operations.
Commercial real estate certified buildings
The Portuguese real estate market continues to see growing interest to incorporate sustainability concept, as well as ESG criteria, in decision-making processes. In light of the increased regulation at European level, with the implementation of relevant policies and strategies, obtaining certificates such as Building Research Establishment Environmental Assessment Method (BREEAM), Leadership in Energy and Environmental Design (LEED) and WELL certification, in addition to the application of taxonomy to properties to classify their sustainability, is rapidly taking precedence.
Source: BREEAM and LEED
Portugal currently has several buildings in the commercial real estate market in different phases of certification (from design to operation). There has been a marked rise, over the last three years, of buildings awarded sustainable building certificates, for new construction / refurbishment and buildings in use.
34
New certification or renewal; only includes the projects listed by the respective entities (some projects are anonymous and therefore not published)
BREEAM has taken the lead, with close to 80 certified buildings, 90% of which are related to in use and more than half are in the retail sector. More than 30 buildings have LEED certification, and this is equally distributed between new construction / refurbishment and in use, mainly in the office sector. In terms of future certification, data of which is only available for LEED, currently almost 50 buildings are registered.
The WELL certification is focused on the use of the building and the well-being of its users. Although the implementation of this rating begins in the construction phase, it is only obtained in the operation phase, and there are yet no buildings with this certification. Even so, with nearly 40 projects registered, all in the office sector, it is expected that this situation will change shortly.
35
Response to climate change
Value chain integration
Reporting of non-financial indicators and classification of investments regarding sustainability
Reduction of the carbon footprint as a climate change mitigation measure, in order to comply with the goal to global warming to 1.5ºC. This reduction may involve the choice of construction materials to reduce embodied carbon locked in new buildings, or by measures to reduce energy consumption in the operation of existing buildings. Energy audits, Life Cycle Analysis or tools such as CREEM, which determine the carbon obsolescence of a building, are increasingly used and necessary, especially for existing real estate.
Workspace trends in 2023 are dramatically different from the pre-COVID-19 period. In this ever-changing environment, the valorisation of human capital continues to be a priority, and a determining differentiation factor. Consequently, there is a clear trend towards offices obtaining sustainability certification (LEED or BREEAM) and promoting the health and well-being of employees (WELL). The market clearly prefers to buy or rent properties with these certifications, and this requirement has become an integral part of the ESG policies of large companies. The residential market, especially the luxury segment, is also starting to adhere to sustainability certifications, with a focus on BREEAM.
The value chain is taking on considerable importance throughout companies’ activities, as these impacts need to be integrated into the reporting of non-financial indicators. Companies are now no longer analysing their own activity, but are beginning to consider the wider impact, for instance through their suppliers.
With the publication of the recent EU regulation on the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR), there is a growing focus on the classification of investments, in terms of sustainability, through the Taxonomy criteria. However, the market is still trying to understand the necessary changes and next steps, and how companies may incorporate ESG principles into their activity.
Valuing human capital
Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more. For additional information, visit: www.cushmanwakefield.com. To learn more, visit www.cushmanwakefield.com © 2025 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
RAFFAELLA PINTO Head of Business Development raffaella.pinto@cushwake.com ANNA STRAZZA Associate Director, Research Italy anna.strazza@cushwake.com GWENDOLYN FAIS Consultant, Research Italy gwendolyn.fais@cushwake.com
INVESTMENT David Lopes david.lopes@cushwake.com BUSINESS SPACE & RETAIL INVESTMENT David Lopes david.lopes@cushwake.com ESG Ana Luísa Cabrita analuisa.cabrita@cushwake.com ASSET SERVICES Bruno Silva bruno.silva@cushwake.com RETAIL ASSET SERVICES André Navarro andre.navarro@cushwake.com PROJECT MANAGEMENT Carlos Pueyo carlos.pueyo@cushwake.com VALUATION & ADVISORY Ricardo Reis ricardo.reis@cushwake.com BUSINESS DEVELOPMENT Isabel Correia isabel.correia@cushwake.com
FRANCESCA NEGRONI Bid Management and Retail Research, Italy francesca.negroni@cushwake.com NICOLAS VIVIANI Business Development, Data Analyst nicolas.viviani@cushwake.com CARLA NASINI Marketing Executive, Italy carla.nasini@cushwake.com
Graphic & design by Carla Nasini
