JLL: office sector takes lion’s share of investments in Italy

The office sector has taken the lion’s share of investments in Italian real estate in H1 this year. According to a new report by JLL, investment in offices reached €2.5 billion in the first six months of the year, an increase of 186% year on year. The 39 office transactions represent a 40% share of the total real estate market.

The new Porta Nuova CBD in Milan

“The macro-economic and geopolitical context is leading investors to take a more cautious approach in terms of pricing and investment strategies,” said Luca Vaj, head of office capital markets, JLL. “However, in a medium to long-term view, the growing presence of international institutional investors in Italy is a reason to believe these higher volumes will continue in the future.”

Milan is investors’ favourite destination, attracting €1.3 billion and accounting for 24 deals, 54% of the total. Italy’s business capital’s performance was better than in H1 2019, before the pandemic, JLL said.

Take-up increased by 39% to 252,000 sq m as occupiers sought space in Milan, both in the historic business district and in locations away from the city centre. Only 38% of demand was for buildings in the CBD, while 41% of transactions were for smaller offices of 500 sq m and below.

Luca Vaj, Head of Office Capital Markets, JLL

“Take-up in Milan has been very strong this year, especially in the city centre and the new Porta Nuova CBD, where rents are rising,” said Eros Chiodoni, head of office agency leasing, JLL. “Occupiers are paying attention to offices’ ESG performance.”

Rome came a distant second with eight transactions and €740 million in investments, 27% in the CBD, 33% in the EUR district and 25% in other areas of the Italian capital. Take-up was 82,000 sq m, an 18% increase on H1 in 2021.

“Rome’s numbers have been positive in H1 and we expect an improvement in the second half of the year,” said Massimo Livi, head of transactional business, Rome leasing, JLL. “There’s strong demand for the city centre, where offer is limited, while in EUR demand is for grade A buildings.”

Total office take-up in Italy increased by 30% compared to H1 last year, despite yield compression and increasing rents.

Prime net yields were stable in Q2 at 3.05% in Milan and 3.5% in Rome compared to Q1 2022, but have compressed since H1 2021. Rents have increased to €650/sq m in Milan and €520/sq m in Rome.