Milan’s office market is showing its resilience and posting good figures despite the Covid-19 pandemic and the fact that the pandemic hit the Lombardy region particularly hard and has led to many weeks of forced inactivity.
Total investment in the sector during H1 2020 was €1.27 billion. That represents growth of 7% compared to the same period last year.
Milan accounts for over 70% of the entire Italian office market, according to CBRE. Significantly, the vast majority of investments – over €900 million – took place in the second quarter, showing a rapid pick-up in activity as the epidemic eased its grip.
After a very negative start to the year, a cautious optimism is now returning to the market.
Investor profile has changed significantly this year. After years of dominance by foreign capital, domestic investors returned with a vengeance in H1, making the most of the Covid-19-induced lull in the market.
Domestic investors take the lead
According to CBRE 79% of transactions in H1 were done by domestic players and only 21% by foreign investors, a total reversal of roles compared to previous years.
There are significant exceptions to the rule, however. BNP Paribas Real Estate, for example, has been on a shopping spree in Milan, investing some €400 million in the space of a few weeks. It acquired an office building in via Mazzini in Milan’s CBD, fully let to WeWork and the following week bought the Bodio Center, an office complex of seven fully-let buildings.
The two acquisitions reveal the main trends in the market now: a flight to quality, with value-add being neglected in favour of core products, and a flight to safety, with a preference for strong tenants and long leases. Risk is out, but Milan is still in favour with investors.
A similarly positive picture can be seen in the logistics sector in Italy. This has seen a 15% increase in investment volumes to €270 million in H1, thanks to the growth of e-commerce during lockdown and to the continuing strong interest from international investors. Milan and the surrounding area accounted for 80% of volumes.