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Italy’s retail real estate volumes up 13% in first quarter from 2015

by Paola Dezza

The decision by real estate trade fair MAPIC to hold an Italian edition that ended yesterday was dictated by the importance of Italy in the retail industry’s landscape on a European level.

Italy’s luxury retail real estate sector has seen rents growing by double digits. And the opening of the Continent’s largest shopping mall at Arese outside Milan has put Italy at the center of the debate about shopping centers.

According to a study by CBRE, retail investments in Italy increased in the first quarter of 2016, reaching a quarterly volume of €600 million, up 13% from the previous quarter and more than three times the volume of the same period of last year.

Sixty-two percent of the volumes was concentrated in the High Street segment, a choice dictated by the high volatility of the markets, which, therefore, reflects a change in strategy towards less risky investments.

The slight growth in consumer confidence in March compared to the previous month was positive, reaching the highest levels since 2011. An important sign comes from an increase in the development activity of malls, with estimates of new projects today under construction for approximately 331,000 square meters.

“The higher number of retail projects under construction continues to be represented by malls, even if interest grows for the development of business parks and of new concepts,” said the CBRE report.

The Italian market, as has emerged from MAPIC Italy, proves to be an important destination for international retailers who are looking for spaces to open new sales points in the main Italian cities.

“Retailers’ demand continues to be strong, and 2016 will be a year characterized by a significant number of new entries on the Italian market,” said the CBRE study.

“Under the investment profile,” states Cristiana Zanzottera, head of research for JLL, “retail has registered a performance of approximately €700 million in the first quarter of 2016, half of the entire 2015 volumes.”

The retailers in Italy continue to open physical spaces, a trend that remains important. The spaces are increasing created with innovative concepts.

“The role of the physical space is and will remain important,” explains Pierre Marin, the CEO of JLL Italia, “but its use is increasingly evolving, with new ways of utilizing the space and with different buying intents. The retail spaces will become multi-dimensional areas with a mixed purpose, with a broader offering, with social areas that can increasingly offer a real shopping experience.”

In the first quarter of 2016, according to JLL, the stock in the retail sector amounted to approximately 18,542,000 square meters, a figure that includes malls, business parks, factory outlets and even, in a residual way, the so-called leisure, entertainment and lifestyle centers.

In terms of geographic distribution, for modern retail the situation remains unchanged: concentration in the North of the country (approximately 58% of the total), the predominance of malls (86%) and of small areas or nearby centers (48%). Even today examples of larger centers (over 80,000 square meters) are few, representing, in fact, only 2% of the total.

“The scarcity of the regional and supra-regional product, combined with the appetite of the retail investors for this type of asset, is pushing the players towards development or turnaround projects, contributing to the growth and the renewal of the existing stock,” according to JLL.

By the end of 2016, the completion of another 11 projects already under construction (six malls, three factory outlets, two business parks) is scheduled for a total of approximately 477,000 square meters, 75% of which is concentrated in Northern Italy. An average of 400,000 square meters per year can be added to this, which is foreseen for the 2017-2020 period (between projects under construction and planned).