Investors in Italy opt for prime low risk assets as retail market appetite grows (IT)
Thursday 18 November 2010
According to international real estate advisor Savills, Italy is seeing an improved interest from investors as yields stabilize at 6.25-6.5% for prime shopping centers and 7-7.25% for retail parks.
The research shows that the supply of quality products in the investment market has improved, and this has caused prime yields to stabilize. Whilst overall transactional levels have continued to decrease since 2007, significant deals have been recorded such as Le Vele & Millennium shopping and leisure centers in Cagliari, and Porta di Roma in Rome. These transactions at €103.3 and €440 million respectively were purchased by Corio and by a JV between Allianz Immobilier and Corio, showing renewed foreign investor interest in the Italian market.
Lionello Rosina, head of Savills Italy, says: “Even though investors continue to be very selective and more cautious in their investment choices, looking mainly at prime products, they also appear more optimistic than the past years. The supply of quality products on the market is slowly improving and the interest of investors for the Italian retail market is growing.”
Retail tenants have, Savills says, showed more caution in terms of development strategy, choosing prime, low risk centers, with a solid track record and high foot falls. Although expansions are very limited, new brands such as Banana Republic and GAP, which have chosen Milan for their first stores, have showed an interest in the market. Rents have begun to stabilize, following a decline in 2009 and in the first half of 2010, and prime market rents are at €750/m²/year for shopping centers and €200/m²/year for retail parks.
The research finds that, as at the end of October 2010, development levels had dropped by 38% year on year with approx 280,000 m² of gross lettable area delivered to the market in the first 10 months of 2010. More than half of this figure was delivered to Southern Italy. Savills forecasts that new development stock will continue to focus on Central and Southern Italy.