The situation of the global economy is highly uncertain, due to the Covid-19 emergency, and the outcomes are hard to predict. As the situation will become clearer in the following months, information and related predictions will become more reliable
The uncertainty caused by the pandemic reflects on tenant’s behavior, which has slowed down the decision process for new spaces, in order to better understand their new needs in terms of footage and number of work stations. Absorption figures fell far below the 10 year average, mostly characterized by small-medium transactions in grade A buildings. In Milan, the development market continues to be active and characterized by strong interest on pre-let spaces for building in prime location. Prime rents are stable, while tenants ask for higher incentives package due to the economic environment. In Rome, prime quality spaces in core locations are still scarce with prime rents recording a small increase, sustained however by increasing tenant incentives. On the investment side, Office was the sector which performed better, accounting for 45% of overall volume invested since the beginning of the year.
Following the rebound experienced by the national economy, traditional retail appears to have regained relevance. Even if pre-crisis levels haven’t been reached yet, turnover and footfall figures have improved since the beginning of the pandemic. However, the threat of new restrictions makes the outlook uncertain. High Street continues to suffer from the lack of tourist flows in some cities and the widespread remote working policies. As a result, several streets have recorded decreases in rents. Rent stability is strongly tied to the current situation and relies upon its evolution, as the threat of a second wave of infections is closer. Uncertainty pervades the industry – together with the whole economy.
After a contraction in absorption figures due to the period of lockdown and a general uncertainty, the Italian logistics market witnessed a rapid growth in the third quarter of 2020, with take-up volume totaling roughly 1,45 Mln sqm since the beginning of 2020, marking an increase of 9% compared with the same period of 2019. Built-to-suit/Built-to-own projects continue to be the preferred transaction type, despite their higher rents due to the level of customizations required by tenant. Demand is still driven by 3PL, GDO and e-commerce operators, whilst business such as automotive and fashion continue suffering more uncertainty. Demand for Industrial & Logistic investments has increased even above pre-Covid levels, thanks to tenant expansion (especially e-commerce) as well as investors looking to diversify their portfolios. Overall there has been no evidence of repricing and yields have contracted on prime opportunities.