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‘Resi is the best opportunity in Italy’

The Italian residential sector is becoming a magnet for foreign investors and attracting institutional capital even from notoriously risk-averse German companies, market experts told Real Asset Media’s Real Estate Capital Flows & Investment Opportunities – German and Italy, which took place at PwC’s headquarters in Milan last week. 

Christiane Conrads, Head of German Real Estate Desk, PwC Legal AG, Douglas Edwards, Head of Group Equity Raising & Client Services, CORESTATE Capital Group, Gabriele Pompei, Managing Partner PURE Investment Management and Lia Turri, Partner, Real Estate Leader PwC, Italy discuss and compare the opportunities for Real Estate investment in Italy and Germany.
Filmed at the Italy & Germany Investment Briefing, Milan, November 2019 by Real Asset Media

‘There is growing interest in Italy’s residential sector,’ said Lia Turri, Partner & Real Estate Leader, PwC Italy. ‘The best opportunity we see is the conversion of office buildings into serviced apartments or other types of resi with services similar to hotels, which is much in demand’.

Germany’s Corestate Capital Partners has already zoomed in on the market it wants to invest in for its first foray into Italy.

‘We see opportunities especially in student housing and micro living in Italy, which are very underserved markets’, said Douglas Edwards, Head of Group Equity Raising & Client Services. Corestate. ‘There are around 11 students for every bed, while in Germany the ratio is more like 2 to 1, so the supply and demand imbalance is striking’.

Italy will become part of Corestate’s pan-European operational platform. For its first venture into the market the group will focus on student housing and will widen its horizons beyond Milan, where most foreign investors tend to land.

‘Land in Milan is very expensive,’ said Edwards. ‘We are looking at several university towns like Bologna, Turin and Venice. We plan to finalise our first deals in Q2 next year’.

Companies’ need to diversify is working in favour of alternative and niche sectors.

Resi, in particular, is on the up because of positive sentiment. At a time of economic uncertainty and political instability, resi is seen as a defensive play and a safe haven, experts agreed.

‘Student housing is the sector that has the biggest potential in Italy, especially in university towns like Florence, Padua and Bologna that have a high number of foreign students coming on the Erasmus or other exhange programmes,’ said Gabriele Pompei, Managing Partner, Pure Investment Management.

Resi is the biggest trend for the future, but at present the traditional office sector continues to dominate investors’ radar screens. Last year the office sector reached a €2.3 bln investment volume, an increase of 50%, according to PwC data. Milan’s status as favourite market is confirmed, as the city accounted for 65% of all investments.

Foreign investors’ presence in Italy has strengthened further this year. In 2018 international investors accounted for 65% of the total, while in 2019 the percentage has risen to 84%, while domestic investors’ share has shrunk to 16%. ‘The switch started in 2012 and has progressed gradually, but this year the pace has accelerated considerably,’ said Turri. ‘Until recently Italy attracted mainly opportunistic investors, but now more core and core plus investors are coming. We are seeing substantial capital flows and more and more big international players in the market’.

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