JLL: over €4 billion invested in Italy’s office market this year

Investors in the Italian market strongly believe in the future of the office. Over €4 billion have been invested in the office sector in the first nine months of the year, according to JLL figures released yesterday, which represent a 95% growth on the previous year.

It is no surprise that Milan, Italy’s business capital, accounts for 70% of total investments, attracting €2.7 billion from investors involved in 38 deals both in the CBD and in suburban areas.

More surprising is the fact that most of the deals in the office sector have been done by domestic investors, with international capital only contributing €1.4 billion to the total.

The leasing market in Milan is also performing strongly with 224 leased signed for a total of 368,000 m2 to the end of September, a 40% increase on the previous year and a sign that things are returning to normal after the pandemic.

Grade A offices accounted for 76% of the leases, as tenants increasingly opt for quality. Rents have increased to an average of €657/m2 in Milan, but they are higher for sustainable modern buildings in good locations.

Rome comes a distant second to Milan, with 9 transactions worth €800 million, but the leasing market has also seen an increase of 24%, with demand focused on the EUR area, which has the most ESG-compliant buildings, and the Italian capital’s CBD. Average rents are stable at €550/m2.

“We’re seeing a continuation of a positive trend, especially in Milan”, said Marco Pancotti, Head of Office Agency Milan, JLL. “Take-up has increased and we expect that by the end of the year it will reach the record levels of 2019. The number of deals has also increased”.

Italy is following European trends, he said, meaning that tenants tend to gravitate towards high-quality offices that are ESG-compliant.