Logistics has become ‘the queen of real estate’ in Italy

Logistics has come a long way in Italy, going from zero to hero in a decade. It is now the Number One asset class, delegates heard at the European Logistics Real Estate Markets briefing, organised by Real Asset Media and Garbe Industrial Real Estate, which took place online recently.

Marco Grassidonio, MD, Country Head Italy, Garbe

“After ten years of uninterrupted growth, logistics has become the queen of real estate in Italy,” said Marco Grassidonio, managing director and country head Italy, Garbe. “It now attracts more than double the investments of retail, which for fifteen years was king.”

In H1 2023 retail accounted for 17% of transaction volumes, a far cry from the 49% of a decade ago. In contrast, the logistics sector attracted 38% of total investments, while ten years ago it represented a paltry 1% of volumes. “It has been quite a journey,” he said.

The forecast for the full year 2023 is €1.5 billion total investments in the sector, in line with the ten-year average.

Transactions have declined in Italy, as in other European countries, mainly due to higher interest rates. Higher construction costs and restrictions on building new logistics assets have also led to a slowdown in new developments.

However, “logistics has contracted less than other asset classes in the current difficult economic climate”, said Grassidonio. “The Italian market has some peculiarities, it’s more resilient because of historically lower rents, higher yields and low capital values.”

Values are around €1,000/sq m in Italy, which is much lower than similar quality buildings in northern Europe.

In other respects the Italian market follows European trends: the scarcity of land and difficulty in getting permits has led to a switch from greenfield to brownfield developments, also pushing developers into locations that were not on their radar screens.

“As A buildings are all let or pre-let if they’re being built, people are turning to B and C assets,” said Grassidonio. “The same applies to second-tier locations, which are gaining in importance. Finally the south, from Rome to Naples to Bari, is attracting investments and new logistics corridors are being created.”

The combination of a lack of modern stock and high demand has pushed down vacancy rates, which are now below 2%, and has led to an increase in rents, which are now well above the inflation rate.

“We’re seeing rental increases of 15-17%, three times the rate of inflation which is currently at 5.4% in Italy,” said Grassidonio. “We believe that this trend will continue into next year, when we will see more rental growth and yield corrections.”

Garbe opened its first office in Italy in 2021 and since then has been very active in the country, first doing acquisitions and more recently development as well.

“It’s too early to tell whether logistics will continue to be the queen of the Italian market,” said Grassidonio. “But it has certainly already proved to be a very resilient asset class.”

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