Real Asset Insight #6 June 2020

Getting back to business
Adobe Stock/Sergii Figurnyi
One of the hardesthit
by Covid-19,
Italy’s reliance on
tourism and foreign
investment leaves
it economically
vulnerable. But experts
predict a bounce back
next year.
By Nicol Dynes
Everything was going so well. 2019 was the
best year ever for the commercial real estate
market in Italy, with investment volumes up
40% to €12.2bn. 2020 started on an equally high
note, with important portfolios on the market and
great expectations for the year ahead.
Then the coronavirus crisis struck, with Italy the
first and for many weeks the hardest-hit country
in Europe. Many deals that had already been
negotiated received the final signature, but new
activity pretty much froze across the market as a
strict lockdown was imposed.
Now the restrictive measures have been eased
and the country has opened up again, there is
a tentative resurgence of activity in the market.
Two types of investors were quick to stick their
heads above the parapet: opportunistic capital;
and developers with a medium-term horizon.
Most investors, though, are adopting a waitand-see
attitude. Some are hoping that prices
may fall, others fear a second wave of the virus
may disrupt the market again in the autumn.
The feeling among market participants and
experts is that 2020 will be largely a damage
limitation exercise. The expectation is of a fall in
transactions and lower investment activity across
the board for the first time in six years.
FOREIGN INVESTORS
The closing of borders and travel restrictions
have been particularly negative for Italy, as
foreign investors have dominated the real estate
market, accounting for 75% of the total.
Many opportunistic investors looking for bargains
and distressed sales, especially in the hotel
sector, have been disappointed, as government
measures to support the economy have largely
prevented fire sales and prices have not
collapsed so far.
Investors and developers with an eye on post-
Covid-19 Italy, when the market will return to its
previous buoyant self, are having better luck.
Some are long-standing believers in the Italian
market, including Hines, which has invested
€3bn in Milan since 2016 and plans to invest
another €2bn.
‘The serious health emergency that has struck
Italy will strengthen real estate investment activity
from those with longer-term horizons,’ says Mario
Abbadessa, Hines’ Italy CEO.
Allianz Real Estate is another company that
believes in Italy’s prospects. The company has
made two significant acquisitions during the
pandemic, buying an office in central Milan for
34 Real Asset Insight | Issue 2 July 2020