In the fourth quarter of 2016, take-up totalled 86,795 sq m, posting growth of 63% on Q3 but sharply lower compared to last year.
2016 closed with an absorption volume of 304,200 sq m, which was lower than the record high of 2015 but was still higher than the average for the last 10 years (2007-2016).
The year was characterised by various transactions >10,000 sq m that involved important international corporations. Milan confirmed that it is an interesting destination, with a market that is always buoyant and in line with other European cities.
Despite the forecasts of the impact of the referendum on the real estate market, investment activity in the last part of the year was high with over 900 million Euro of capital invested just in the Milanese office sector.
Prime net yields and good secondary net yields edged down to 3.75% and 5.50% respectively.
Absorption for the whole of the year 2016 totalled approximately 150,300 sq m, confirming the positive trend compared to the previous years (+43% compared to 2015 and +73% compared to 2014).
Prime rents were stable in the CBD and were up in the EUR area at 400 and 330 Euro/sq m/per year respectively.
During the quarter there was a large lease deal in the EUR Laurentina area of around 10,000 sq m which involved an Italian company in the energy sector; this deal, together with two other lease deals reported in the EUR Centre area, accounted for approximately 45% of the total absorption in the quarter.
The pipeline of developments was lower, with 92,000 sq m under construction/refurbishment with delivery expected between 2017 and 2018; two projects of approximately 52,000 sq m were completed in the quarter. These were the new HQ of BNP Paribas in Tiburtina and Block C of Via dell’Arte 25.
Investments were higher in Q4, totalling approximately 200 million Euro; prime yields were stable at 4.00% net.
Absorption in the quarter was sharply higher than in the previous quarter (+32.5%); the volume absorbed in the whole of 2016 reached 1.4 million sq m (+81% compared to 2015), an all-time record for the logistics sector in Italy.
The most dynamic region was Piedmont with take-up of 209,000 sq m; Lombardy remained a step behind with some 78,000 sq m of leased spaces.
28.7% of the absorption in the quarter was driven by E-commerce operators, who are becoming more and more aggressive in the market.
The volume of investment in the logistics sector was also considerably higher with around 400 million Euro in the fourth quarter; there are still a high number of deals in the pipeline.
Speculative developments are still limited but some developers expect a timid recovery in 2017.
Almost 1.8 billion Euro were invested in Q1 2016, a decline of 6.7% on the same quarter of the previous year.
Quarterly volume confirms 36% more than the quarterly average for the past four years.
At approximately 1.3 bn Euro, foreign capital is still the major driver of Italian CRE investment volume in Q1 16.
European investors lead the quarterly foreign capital (51%), with German on the top of the list.
The office sector, with 46% of total quarterly volume, is still the investors’ preferred asset class while retail follows whit 32%, thus improving its market share compared to previous quarters; the mixed use properties sector (mainly non-core investments to be re-positioned) fell at 6% .
The beginning of 2016 has been marked by an increased cautiousness among investors compared to the end of 2015 but the interest in the Italian real estate is confirmed sound.