The 2019 real estate outlook by Cbre

15 February, Mark Up

In 2019 hotels will be one of the most interesting asset classes concerning the capacity to attract investments, according to the Investor Intentions report by Cbre. In 2018, hotels in Italy drew total investments for 1.321 billion net, continuing the trend of 2017, and they’re expected to grow further this year reaching approximately 2 billion euro.

With 277, 000 bookings in a year, 33,000 hotels and 1.1 million rooms, Italy is the fourth market after the United States, France and Spain. International investors, generally representing the predominant quota of real estate investments in Italy, were 65% of the total investments in 2018, having decreased from the 76% recorded in 2017. Investors are particularly attracted by luxury hotels in the main tourist destinations, especially Milan, Rome, Florence and Venice. Several international companies have recently made their debut on the Italian market. In Milan, the Singaporean First Sponsor Group acquired Grand Hotel Puccini. In 2018, Swiss Life completed its first acquisition in Italy with Radisson Blu, always in Milan, and Novotel Malpensa.

For 2019, the main challenges of real estate acquisitions in Italy will still be asset availability (21% in 2019, aligned with 2017 and slightly decreasing from 2018 with 25%), cost of properties (15% in 2019, increasing from 2017 but aligned with 2018 which reported 16%), political instability (14% in 2019, decreasing in comparison with 2017 which recorded 15% but having sharply increased from 2018 with 8%).

A stable year

“Unless destabilising geopolitical events in 2019, we expect a steady year or even better than 2018”, commented Cbre Italy Ceo Alessandro Mazzanti. It will be, however, well below the results reported in 2017. The key sectors will be logistics and hotels. Retail will not register a significant growth, and it will require a careful selection. It will be necessary, in fact, to hunt for opportunities as prices have decreased. In 2018, the segment, in continuity with the 2017 trend, performed better than other European markets where the contraction was more dramatic since the stock was bigger. We’re currently in the middle of an evolution: bigger assets are benefitting from the rise of e-commerce, while shopping centres can be a good place where to experiment with different formats”.

Retail and logistics: the most resilient segments

Retail is the real estate asset class that reacted the best to the 2018 market contraction, with investments equal to 2.243 billion euro, decreasing by 6% from 2017. In 2019, we might see the completion of some critical operations concerning factory outlets, as the segment risks to be severely impacted by the law on Sunday closures.

18.43% of the people surveyed see logistic as the most interesting asset class of commercial real estate in terms of investments in the pipeline for 2019. Despite the segment has slightly reduced from 2017, in 2018 logistics doubled its transacted volumes, net of the Logicor transaction. Investments have gone from 5% as recorded ten years ago to 10% in the current economic cycle. The growth of e-commerce has positively influenced the performance of the entire sector, and it’s expected to grow further in 2019.

Student housing was one of the most dynamic sectors in 2018 in Italy. According to 32% of the people surveyed by Cbre, it will be the residential segment with the biggest potential, followed by senior housing (25.2%) and luxury houses (15%). 68.8% of the interviewed believes that student housing might become the leading asset class of Italian real estate.

For what concerns offices, the trends regarding serviced offices and co-working will consolidate in 2019, after the entrance in 2018 of new players. Requalification will be crucial for Milan and Rome. Milan has started with a rush, with the launch of some requalification and expansion projects already at the beginning of 2019. Meanwhile, Rome has a number of projects in the pipeline, and the demand is in excellent shape.

The healthcare sector has gone from 6% to 8%. The low birth rate combined with the longer life expectancy has brought to the progressive ageing of the population. In 2017, Italy had the highest old-age dependency ratio in Europe (34.8%) according to Eurostat, resulting in one of the most attractive countries for investors in the healthcare sector.

14% of the interviewed said to be interested in the NPL sector, placing bad loans second in order of interest, followed by offices and student housing with equal merits.

Source: Mark Up

Translator: Cristina Ambrosi

 

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