The report highlights a region poised for recovery, supported by stabilising economic conditions, improving financing costs, and structural growth drivers. Both investors and occupiers are shifting from a cautious stance to a more action-oriented approach, with a particular focus on prime, ESG-compliant assets.
Italy is broadly aligned with European real estate trends, while continuing to reflect the structural characteristics that uniquely shape its property market.
Sectors’ View
Office market:
Demand in prime districts drives rents upward
Demand for high-quality prime space continues to grow in the main business districts (CBD, City Centre, Semi-Centre in Milan and CBD/Greater EUR in Rome), where in 2025 60% of leasing activity in Milan and 68% in Rome was concentrated. Vacancy rates for Grade A assets are at decade lows, particularly in Milan, where central areas are around 2%. This supply shortage has continued to push rents higher: year on year, Milan’s CBD recorded a +10% increase. The development pipeline, among the smallest of the past decade, will not offset the shortage in 2026, with prime rents in central areas expected to grow by 2–2.5% per annum in both Milan and Rome. Peripheral areas and the hinterland show no growth signals, except for selected locations with high-quality stock and excellent accessibility. Leasing activity will remain constrained not by demand—which remains solid—but by the limited availability of suitable product. On the investment side, after still subdued volumes, confidence signals are emerging, with a focus on central locations and Value-Add/Core Plus assets. A compression of prime yields by 25 bps is expected by 2026 in key central areas, with yields forecast at around 4.0% for Milan’s CBD and 4.50% for Rome’s CBD.
Logistics:
In transition: more stable demand and improving financing conditions
2025 closes with take-up broadly stable compared to 2024, with over 90% relating to high-quality assets, confirming a market oriented towards modern, efficient and sustainable properties. Demand remains solid, driven by retail end-users, manufacturing and e-commerce, and further growth is expected in 2026, also supported by the defence and renewable energy sectors boosted by European investment. Vacancy, which increased in 2025 due to new completions, is expected to decline in 2026 as the pipeline becomes more selective and aligned with real demand. Prime rents are forecast to continue rising in 2026, with +1.4% per annum in both Milan and Rome, a more moderate pace compared to the strong increases seen in recent years. Investment volumes rebound in 2025, reaching around €2 billion and marking a strong recovery versus 2024. 2026 is expected to be a year of consolidation, with the gradual return of core capital and an improving financial environment likely to increase liquidity and lead to a slight yield compression.
Retail:
Institutional capital is back and sector repricing phase
2025 marks a turning point, with investment volumes among the highest ever thanks to the return of institutional capital—attracted by resilient fundamentals and more balanced pricing compared to other asset classes. The market is highly dynamic: on one hand dominant shopping centres and prime assets, on the other opportunistic transactions, while yield compression confirms the sector’s repricing phase. Retailers are expanding their physical networks by integrating high streets and shopping centres, focusing on experiential and phygital formats. Milan, Rome, Florence and Venice lead growth, driven by tourism and international brands’ interest in flagship stores in iconic locations. Luxury high streets and metropolitan retail parks remain among the most attractive products for investors. Prime rents in Italy have recorded one of the highest growth rates in Europe, with further consolidation expected in 2026 amid strong demand and limited high-quality supply.
Living:
Strong demand, limited supply and expanding new segments
Residential demand remains high across Europe, driven by demographic and social factors, while supply is limited. In Italy, this trend is particularly pronounced in metropolitan areas—especially Milan—where a lack of new developments is pushing rents and prices to historic highs. The still-uncertain regulatory framework may slow the expansion of BTR and Affordable Living in 2026. Conversely, strong interest is expected in Build-to-Sell, not only in Milan and Rome, alongside very intense demand in PBSA, co-living and, to some extent, senior housing, with growing focus on development projects. International investor interest will remain high, with new operators ready to enter the Italian market.
Hotels:
Strong tourism growth and market consolidation in 2026
International tourism and improving hotel performance continue to support the European and Italian hotel sectors, with overnight stays in Europe estimated to grow by +5.6% in 2026. In Italy, demand is driven primarily by international flows and the country brand, with excellent performance in urban markets (Milan, Rome, Florence, Venice) and prime resort destinations (Lake Como, Amalfi Coast, Capri, Tuscany, Puglia and major islands). Investor interest is strong for luxury assets as well as next-generation hostels, characterised by high profitability and diverse demand. 2025 confirms a solid sector, with numerous conversion, rebranding and development transactions in the lifestyle and luxury segments. For 2026, further consolidation is expected, a pipeline limited relative to demand, and resilient yields on prime assets. Investment volumes are set to grow further.
Data centres:
Unprecedented expansion and Italy’s growing role in EMEA
The sector remains among the most dynamic in European real estate, driven by hyperscalers, cloud providers and the acceleration of AI. Milan is Italy’s main hub and a European powerhouse, with estimated power capacity of around 1.1 GW including live capacity and pipeline. New areas in Central and Southern Italy are emerging thanks to available land, evolving energy infrastructure and improved digital connectivity. Investments expected by 2026 exceed €10 billion, while IT load in EMEA could grow by up to 32% per annum between 2025 and 2030. Power scarcity in major European markets will favour brownfield expansion and emerging clusters, with Italy increasingly positioned as a strategic Mediterranean gateway. 2026 will be characterised by strong demand, greater focus on sustainability, cooling innovations and growing regulatory complexity, a context that will continue to attract international capital.