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In a shift from retail, 2015 saw investors focusing on offices

by Paola Dezza

In 2015, offices were the preferred asset class by investors. The office market is improving across Europe, despite the discontinuity of the economic scenario and still only a modest increase in construction activity. “The majority of markets have reached a good balance,” says Scenari Immobiliari, “and with an increase in demand of around 10% compared to last year. And a strengthening of the absorption, especially in the main cities of southern Europe, in addition to London and Paris, the drop in the vacancy rate, which is currently around 10.5%, with predictions for further drops in the next two years”.

In Italy the investments of international players were focused on this type of building. Today, because of strong competition on the few quality properties, requalification operations and secondary locations are being looked at.

“In Italy in 2015, volumes stood at around €6.5-7 billion, with a significant contribution to the office sector,” says Cristiana Zanzottera, head of research for JLL. “In the first nine months of 2015 investments in office were equal to €1.9 billion on €4.9 billion, just less than 50%. This remains the trend. Therefore, offices have taken the place of retail spaces in real estate portfolios”.

Italy therefore remains a country of interest to investors, thanks to the relatively low cost of debt compared to returns, which are still high especially on secondary products.

“The expected recovery in consumption and employment will have a direct effect on the real estate market in particular on residences and offices,” explains Leo Civelli, CEO of Reag, “the recovery of employment will lead to a growth in the absorption of office spaces, principally class A spaces”.

In the retail sector, quality products are always more appreciated, even in secondary locations like the South. “It is clear that these are properties that must have good performance and a good track record” says Zanzottera. The yields expected by investors today hover at around 7%.

Joachim Sandberg, Southern Europe CEO of Cushman & Wakefield, believes that the positive trend will continue throughout next year. Among the predominant sectors is that of offices, while retail fell not because there is no demand, but rather because quality properties are hard to find. “By now there are no more doubts about the country,” he continues, “and capital will continue to flow here”.

“Volumes are growing in the transactions of the capital market,” says Sandberg. “2015 closed with seven billion in volume, 6.2 billion if you don't count the Porta Nuova operation, therefore with a minimum growth of 20% over 2014. The largest contribution was that of foreign capital, 50% of which was European, 25% from North America, and approximately 20% from the Middle East and Asia”.

According to Reag, the growth in the sales of the GDO sector will consolidate, confirming this sector as one of the most interesting in all of Italian real estate, not unlike logistics thanks to e-commerce.

According to Scenari Immobiliari the European industrial segment showed significant signs of improvement, since the increase in industrial production triggered the growth of housing demand. Italy is still waiting for the recovery. Logistics with 7% of the total in the third quarter of 2015, as confirmed by CBRE at a time of strong interest from specialized operators: Logicor, Prologis, P3, Segro among the most active in Italy.

If we look at the tourism segment, the promotion of Sistema Italia and the global increase of travelers will bring about a further growth in the number of visitors with direct consequences on the hotel real estate sector. The volume of investments in hotel real estate has stood at approximately one billion, a marked improvement from previous years.