Italian shopping centres are experiencing an increase in footfall, but liquidity remains limited due to the scarcity of prime venues, says Marco Montosi.

Italy’s economy has been more resilient than expected after Covid. GDP grew by 1% in 2023, surpassing the average of the Eurozone, UK and Germany. This was primarily attributable to the services sector and construction.

Among services, tourism played a crucial role, mainly due to spending by international tourists (€49 billion in the year to date as of November 2023). By the end of 2023, employment reached a peak, with unemployment down to 7.2%, the lowest level since December 2008.

Italian households maintain one of the lowest levels of debt among European countries, and the debt-to-GDP ratio has declined since 2020. In February, inflation in Italy was 0.8%, in line with the previous month and well below the European average (3.1%). The slow deceleration of prices in many European countries could postpone the expected reversal of monetary policy to the second half of 2024.

The Italian retail sector showed signs of recovery in 2023, with nominal sales growing both nationally and in the Eurozone. Large-scale distribution proved more resilient, with 5.3% sales growth with a 0.4% variation for small-scale operators. In 2024, retail spending is expected to return to positive in real terms.

E-commerce

Only 51% of the Italian population uses the internet for purchases. This is significantly lower than the European average of 69%, while countries like the UK, Norway and the Netherlands exceed 90%.

E-commerce has transformed shopping habits, but its growth is decelerating in Italy. The e-commerce proportion of total sales increased at a slower pace compared with other European countries, rising from 12% to 13% in 2023. After Spain, this is the lowest figure in Europe. The UK, France and Germany had penetration rates above 20%. The share of goods in total sales fell to 65% in 2023; services, especially tourism and transportation, recorded the highest growth (23% year on year in 2023, accounting for 35% of total e-commerce sales).

Shopping centres in Italy

Italian shopping centres are experiencing an increase in footfall, although pre-Covid levels have not yet been reached and it is 9.2% lower than in 2019. Consumers typically visit shopping malls less frequently, but their propensity to make purchases is increasing, especially in categories like personal care products and food and beverage, which show strong growth. The fashion sector struggles to return to pre-pandemic levels but is strongly influenced by lifestyle changes and seasonal weather conditions.

The visitor-to-consumer conversion rate is higher, because visitors are more focused on purchasing and this trend is reflected in revenues. In fact, turnovers are almost back to 2019 levels, but the recovery is at least partly due to high inflation.

‘Location remains crucial. The appeal of a shopping centre lies in its fundamentals and its ability to meet consumer needs.’

Marco Montosi, Savills Italy

In recent years, there has been polarisation between prime shopping centres with solid fundamentals and secondary centres experiencing vacancy growth. Nowadays, brands and retailers are more selective in planning new openings, choosing centres with good catchment areas and higher footfall. Landlords focus on diversification (healthcare, entertainment, food and beverage) and the variety of offerings to support visitor numbers and turnover.

Looking at neighbourhood shopping centres, other factors should be taken into consideration. Location remains crucial: premises must be easily accessible, convenient, and provide click and collect services, as they target consumers who visit the centre several times a week. Another important factor is the grocery anchor, which must be locally recognised and stand out for convenience and quality. The appeal of a shopping centre lies in its fundamentals and its ability to meet consumer needs.

Limited liquidity

Regarding investments, the liquidity for the out-of-town retail segment remains limited and primarily focused on retail warehouses and grocery stores. However, in 2023, the share of shopping centre volumes returned to growth, with approximately €150 million transacted during the year.

In the coming months, we expect a recovery due to ongoing price adjustments since 2019. For investors seeking profitability, the risk-return profile of the out-of-town segment might offer some interesting opportunities.

In Italy, liquidity remains limited due to the scarcity of prime shopping centres. However, new opportunities are emerging for products offering good key performance indicators, divestments and secondary assets. Risk premium could be a boost for the sector and turn it into one of the most competitive.

Marco Montosi is head of investment at Savills Italy