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Trends Real Estate 2016 – PWC REPORT

Pubblicato: 20 Gennaio 2016

Every year, Emerging Trends Europe ranks the real estate markets in major European cities according to their investment prospects. This section shows how their investment prospects have changed over time; the numbers in parentheses show the city’s ranking for investment in 2016 and 2015. The population, employment and disposable income forecasts for the metropolitan areas in 2016 by Moody’s Analytics are also shown, as is the annual change in these over the past decade. Where available, MSCI’s all-property returns for each city over 2006-2014 are also included.

Milan (2016: 8) (2015: 12). As interest in distressed opportunities refocuses on Italy, Milan is an increasingly popular target. “The economy there is strong.” Italy’s main industrial and financial centre, Milan was the eighth most active real estate market in Europe, with €4 billion invested between Q4 2014 and Q3 2015. Overseas investors are pouring capital into the city: Qatar Holding consolidated its interest in Milan’s new Porta Nuova project, while China’s Fosun group spent €345 million on its first Italian purchase, UniCredit’s former headquarters, the historic Palazzo Broggi, and Partners Group acquired two prime office properties in the centre of Milan for €233 million. The city’s development prospects have taken a big leap, up nine places to Number 14. “If you look at Milan, you’ve got a lot of occupiers moving to modern space on the edge of the CBD, freeing up a lot of redundant buildings in the CBD, and that’s going to present some opportunities in terms of positioning,” says an investor. The opportunities are fairly specific: “The best prospects in the next 12 months are modern offices near public transportation, shopping malls, luxury shops (street retail) and hotels.” Favoured areas include those close to Milan’s central station and Milan CityLife, the new urban district being developed by Italian insurer Generali on the site that formerly housed Milan’s trade fair, not far from the city centre.

Rome (2016: 25) (2015: 27) Rome is riding the market’s renewed interest in Italy, but compared with Milan, it is the less favoured of the country’s two main cities. “We are not the most transparent market in the world and so the amount of investment is not as great as it could be, but it is certainly increasing and will increase as long as government handles the economic situation correctly.” Alongside lack of transparency, there are other disincentives to investment. “The market in Rome is highly fragmented and dominated by the state,” says an investment manager who is planning to exit the market. While the Italian capital ranks a low Number 25 for investment, its development prospects are judged to have improved significantly with an nine-place leap to Number 18. The reasons for this hike are not immediately obvious, but there have been a number of portfolio purchases that may hold development potential. Several large hotel acquisitions may signal interest in “reconverting” historic buildings to hotels; Rome lacks the level of high-end luxury hotels that Milan has. Detailed and intimate local knowledge is important: “In Italy, we are seeing value in certain deals and are looking to build relationships with local operating partners, which is key in this jurisdiction.” Although Rome and Italy generally have attracted growing interest, opportunities to invest are not abundant: “We look for high-quality stuff – we are not opportunistic. We don’t see under-priced product anywhere. Wherever you start selling you will be surprised at the bids you will see.” However, supply could be about to improve as funds reach the end of their life-cycle: “A lot of closed-ended funds were set up in 2005-7 with a 10-year life and a lot of them have run out of road. The equity investors or the debt aren’t supporting extensions, so those funds are effectively forced sellers.” Rome could prove more interesting for residential investors. All-property return, 2006–2014 One says: “There is strong demand for renting in Rome.”