09 February, Milano Finanza
The most recent operation concerns the Excelsior gallery in Corso Vittorio Emanuele: the homonym movie theatre has been reconverted into a retail asset after having been sold for little less than one million euro. It will accommodate a Victoria’s Secret store. Another operation concerned an office building in the development phase included in the requalification project SeiMilano, in Bisceglie, for a similar amount. The two examples are similar in terms of amounts and project dimensions, confirming the interest of international investors in Milan’s real estate market. The city alone absorbs about one-third of the Italian real estate investments, especially for what concerns offices. In 2018, the city attracted office purchases for 1.7 billion euro. And the list of international investments in Milan keeps growing: from the precursors Hines (which developed Porta Nuova, together with the Catella family) and Blackstone (arrived in 2012-2013, at the height of the recession, operating in Italy through Kryalos). There are also the sovereign fund of Qatar, the Asian Fosun, the Anglo-Saxon York, and familiar names such as Goldman Sachs, which is ready to return to Italy. Among the Italian players, Dea Capital Sgr, Coima Res, Covivio (formerly Beni Stabili), Generali, Unipol are the most active, either operating on their own or on behalf of institutions, especially retirement funds.
What attracts them? The dynamism of the city reflects on the real estate market, perceived as liquid, safe and profitable. The promises have been kept: the returns had gotten closer to those of the leading international markets. “Returns for offices in Milan are set at 3.75% gross near Duomo, and around 4.75% in Porta Nuova”, explains Simone Roberti, Colliers Internationals head of the research department. “Returns for some iconic buildings in Porta Nuova might decrease to 4-4.25%. The references of the tenants and the outstanding duration of the lease contract are also factors to be taken into consideration, but for this type of building there’s a wide choice of potential tenants”.
Large development projects such as CityLife and Porta Nuova have contributed to the economic growth of the city. Porta Nuova, having overcome the challenges represented by the recession, ended up driving the whole sector. CityLife follows, to the point that the construction of a fourth tower has been rumoured. The city is thriving with new projects, especially concerning requalification: from the former Poste building in Piazza Cordusio which has become the first Starbucks in Italy, to the old Inps offices that have gone to Coima Res in Via Melchiorre Gioia (with the reconversion project Gioia 22). The estimated value once the works will be completed in 2020 is 600 million, considering that the average leases are 500 euro/Sq m/year and returns are close to 4% for a 50 thousand Sq m surface. It will undoubtedly become one of the most valuable assets in the city, but it won’t be the only one, and certainly not the most expensive. Surprisingly, the former Rinascente building in Piazza Duomo dominates the chart, although it’s neither new nor innovative. The asset was acquired in 2011 by Enpam through the Ippocrate fund of Dea Capital SGR for 472 million euro. The asset is worth 850 million. If it were available on the market, Galleria Vittorio Emanuele would be worth even more. According to the experts, the shops alone would be worth at least 25 thousand euro/Sq m, roughly 50% more than the 17,500 euro/Sq m estimated for Rinascente. Thanks to a more careful management, the returns from the rental of the assets owned by the City of Milan have gone from 8 to 32 million over the last ten years.
And this is not all. Among the most expensive buildings, there is the Unicredit tower in Porta Nuova, a symbol for the whole district and an icon in Milan’s skyline. Today, it’s estimated at 600 million euro. It’s followed by Gioia 22 and the CityLife towers: the one occupied by Allianz (Isozaki tower) is worth 460-480 million, while the one accommodating Generali (Hadid tower) is estimated at 390-410 million. In the old town, there is Palazzo Broggi in Piazza Cordusio, formerly known as the Unicredit offices, which is worth 345 million. Its intended use hasn’t been determined yet, but if it becomes a commercial asset, its value will increase even more. At the bottom of the top ten, there are the Diamante building in Porta Nuova, occupied by Bnp Paribas (350 million), the PWC tower in CityLife (270-280 million), the Edison headquarters in Foro Bonaparte (270 million), the former Banca di Roma offices in Piazza Cordusio currently occupied by an international legal firm, and finally the Corriere Della Sera offices in Via Solferino for which Blackstone paid 120 million in 2011 and whose value has doubled at present. Finally, it’s also worth to mention big hotels. The three most expensive hotels are Gallia, Four Season and Mandarin, all estimated between 200 and 250 million each.
Source: Milano Finanza
Translator: Cristina Ambrosi
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