The Italian Real Estate Market 3Q 2014

Transcription

1 The Italian Real Estate Market 3Q 2014 Amundi Real Estate Italia SGR SpA Piazza Cavour, 2, Milan 16/12/2014

2 Milan Office Property Market Demand and TakeUp Demand Demand for office spaces in Italy has reduced considerably since the financial crisis began in 2008, driven by cost cutting and space rationalization and it remained still weak. Only in Milan demand got stronger since the end of 2013, at about 150,000 sqm, oriented to mid size surfaces in the CBD, driven by the reduced level of rents in an improving outlook context. Drivers of demand are yet the consolidation of spaces, in high class buildings at low price. 78% of absorbed space in the quarter was classa quality. When the target is to cut expenses, price is a driver at the expense of quality, but also the quality of buildings in new large development projects attract investors and occupiers. The demand from Manufacturing is buoyant, while the one from the Financial Sector is increasing. (Sq.m.) 350, , , , , ,000 50,000 Milan Quarterly TakeUp TakeUp The TakeUp of office spaces in 3Q14 was 55,400 sqm, in slight decrease compared to 2Q14 (93.5K), 17% below the last 10 years quarterly average (65K). The 12m rolling volume (306k sqm) is 69% above the previous 12m, thanks to the strong performance of 2Q14 and 4Q13. Main transactions were the occupation of 17,000 sqm in Via Meravigli by E&Y (CBD) at 350 /sqm/y and the occupation of about 6200 sqm by BCG in via Foscolo (CBD) at 470 /sqm/y. Breakdown of 3Q14 TakeUp: Prime rent 50% of 3Q14 floor occupation interested sizes in excess of 5,000 sqm, while only 13% the size between 1,000 and 5,000 sqm. Over the 3Q14 the central areas accounted for over 50% of total takeup volumes. The Industrial business was still the major contributor to the 3Q14 takeup volume, followed by the Financial Service. 78% of quarterly transactions concerned class A buildings. According to main Advisory Houses prime rent in CBD maintained stable at 480 /sqm/a. Increasing downward pressure regards more the average rent. In the other areas prime rents have remained stable: 400 /sqm/a in the center/porta Nuova, 260 in the semicenter and 200 in periphery. Thanks to the new development brought to the market, Assago has maintained a higher appeal thus recording a higher prime rent (220 /sqm/a) compared to Sesto San Giovanni and San Donato Milanese (200 /sqm/a). Incentives in lease agreements are still above 12 months for standard structures, as owners prefer to maintain stable headline rents, while tenant are aware of their increased negotiation power. Incentives set in the area of 1224 months, reflecting a discounted effective rents from prime by 8% in central areas and by 20% in periphery. Increased vacant spaces, doubled compared to 2008, and a demand, still not able to sustain the market, will keep downward pressure on rents in On the other side the reached level of rents is appealing to firms long term plans., Amundi RE ( /sq.m./a) Milan Prime Rent 10ys Q3/04 Q3/05 Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Milan CBD Milan Milan SemiCentre (Ring 3) Milan San Donato Milan Milanofiori Milan Sesto San Giovanni MILAN 3Q14 MAIN LEASE TRANSACTIONS Address Submarket Tenant Floor Area Class Rent /sqm/a Via Meravigli, 12/24 CBD Ernst & Young 16,743 A 350 Via Foscolo, 1 CBD Boston Consulting 6,222 A 470 Group Viale Abruzzi, 94 Periphery Mazars 2,500 B NA Via Paleocapa, 5 Centre BSI Bank 1,985 A 327 Via Inverigo, 2 Periphery DeAgostini Scuola 1,819 B 160 Piazza Freud Semicentre Linkedin 700 A 400 Via Turati, 25 Centre Fondo Italiano di Investimento 270 A 440 Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 2

3 Milan Office Property Market Supply and Investments Stock and Supply The stock of office in Milan and Hinterland is estimated by CBRE at the end of September 2014 to be mln sqm. Over the 3Q14 just 7k sqm were delivered. The amount delivered is in strong decrease. The total surface to be delivered to the market in 2014 (including the 104K sqm YTD) amounts to 107K sqm. The forecast for future completions for 2015 amounts to 166 K sqm (57% speculative). The remaining pipeline of projects approved but not started yet (including the two towers Libeskind and Hadid of the project City Life) amounts to 310 K sqm, which could arrive to the market by The volume of vacant office premises has doubled since 2008 to 1,58 mln sqm according to CBRE, equal to 12,90% of the total stock (12.62% in 2Q14). Main projects involving offices in construction in Milan: Investments GaribaldiRepubblica, >100,000 sqm in Porta Garibaldi area delivery 12/2015; RogoredoSanta Giulia, >100,000 sqm in the Linate Tangenziale East motorway, Fiera Citylife, initially >100,000 sqm in Fair area, Isozaki Tower is under construction, for the other 2 towers delivery delayed to According to CBRE in 3Q14 there were 340 mln investments in offices in Milan, compared to 149 in 2Q14 and 173 mln in 1Q14. Main transactions included the acquisition by Cerberus of 2 office portfolios. In 3Q14 is computed an important transaction completed across the 2 quarters, regarding a building close to the Duomo square leased to Credit Suisse (mainly) at a yield lower than the market ones. The total 1012 mln volume recorded in the last 12 months, is a 70% increase compared to the previous 12 months. Prime yield The discrete volume of investments contributed to the stabilization of yields. According to CBRE the CBD prime yield reduced in 2Q14 to 5.75 % by 25 bps, survey confirmed in 3Q14; the minimum hit in the boom period was 5.00%. Out of the CBD prime yields are confirmed at 7.75%, only Assago holds at 7.50% and San Donato 7.25%. (%) Milan Vacancy rate Q3/98 Q3/00 Q3/02 Q3/04 Q3/06 Q3/08 Q3/10 Q3/12 Q3/14 mln Source: DTZ, CBRE Milan Quarterly Transactions Volume (%) Milan Prime Yields 10ys Q3/04 Q3/05 Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/ Milan CBD Milan Milan SemiCentre (Ring 3) Milan San Donato Milan Sesto San Giovanni Milan Milanofiori, BNPPRE, DTZ, JLL Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 3

4 Rome Office Property Market Demand and TakeUp Demand The potential demand for new office space in Rome coming from the private sector remains weak. Over the last 2 years demand has increased in periphery while a positive trend has recently configured for the demand for office space in downtown. Cost Saving seems to be the main driver of demand in this phase, often reached with renegotiation (even 20% reduction), while space consolidation is difficult due to the lack of efficient buildings available on the Rome market. Periphery and especially the EUR area is still appealing as the supply of less expensive class A available units of midlarge size has increased. Spending review policies is keeping both demand of spaces from PA contracted and many investors waiting for a stable scenario to invest. TakeUp The TakeUp in 3Q14 reached 20,600 sqm (CBRE), +69% compared to 2Q14. The trend remains very negative: the quarterly takeup is 55% below the last 10 years average. The 3Q14 occupation figure does not record large transactions (>10,000 sqm): the largest is the occupation by Ismea of about sqm in Via Liegi in the Centre area. Follows the takeup by Bplus of sqm in the Semicentre. 63% of the lease transactions concerned leases in the sqm size range. Computers & HiTech represented 22.9% of the total quarterly takeup, while Manufacturing and Professional service 15% and 11% respectively. 48% of total quarterly takeup is concentrated in the CBD area, while 30% of transactions volume regarded buildings in the EUR area. Prime rent In 3Q14 prime rent for Grade A buildings in the Rome CBD was stable at 380 sqm/a since 2Q14, while the average rent reduced to 260 /sqm/a from 240 /sqm/a level in 1Q14. Prime rents were stable at 330 /sqm/a in the EUR submarket (where Banca Intesa SP leased at 340 /sqm/a in 3Q13) and 270 /sqm/a in Torrino. Even if sustained by scarcity of supply, prime rent in Rome is expected to feel a downward pressure over next quarters as demand is weak and incentives cannot exceed the reached levels. (Sq.m.) Source: DTZ, Amundi RE ( /sq.m./a) Source: JLL, CBRE Rome Quarterly TakeUp Rome Prime Rent 10ys Q3/04 Q3/05 Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Rome CBD Rome Greater Eur TiburtinaRoma East Periphery 3Q14 ROME MAIN LEASE TRANSACTIONS Class Address Submarket Tenant Floor Area Rent /sqm/a Viale Liegi, 26 Centre Ismea 3,000 A 330 Via di Torre Rossa, 66 Semicentre Bplus 2,000 B 180 Via della Sierra Nevada, 60 EUR Sole 24 Ore Group Via Barberini, 67 CBD Studio Legale Via Barberini, 36 CBD Studio Legale 1,013 B B B 350 Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 4

5 Rome Office Property Market Supply and Investments Stock and Supply The stock of office in Rome and Hinterlland surveyed by CBRE at the end of September 2014 is 7 mln sqm. Over the 3Q14 no schemes were completed, leaving the stock unchanged. Among the developments that are expected to be completed in 2014, the new headquarters of ATAC is confirmed, destined to occupy a portion of the 20,000 square meters of office space within the Europarco project, in Torrino. The speculative development activity remains subdued, while the possibility to realize the Campidoglio 2 project, the offices district in the Ostiense area, is back in the agenda of the public sector. Development projects under construction are sqm, 100% speculative, for 2014 and 48K sqm for The CBD and Semicenter recorded over the last quarter stable vacant spaces at 575 K sqm. In the Greater EUR the vacant space saw a 10% reduction reaching 364K sqm (here concentrate the most of vacant spaces of the Rome market). Overall vacancy rate stands at 8.21%. Class A offices amount to 9% of immediately available spaces, classes B and C respectively 65% and 26%. Other projects in construction: Tecnopolo Tiburtino, Nuova fiera di Roma, Europarco and Progetto MIllennio. Investments According to CBRE, in 3Q14 the volume of investments in office properties in Rome was 66 mln: 1 office space belonging to the Atlantic2 portfolio, sold by Idea Fimit to Cordea Savills sgr (Cerberus) and 1 office spae purchased by Prelios sgr. In Rome there is lack of prime product and most of the transactions carried out in the last 12 months, about 80% of the total amount invested, was kind of value added. The estimated current pipeline of investments in offices in Rome amounts to 300 mln. The changes in the tax and spending reviews are bringing out a more cautious attitude among investors. Prime yield prime yields to have remained stable in the center of Rome at 6.25% in 3Q14. Same trend might be extended to the Greater EUR and the periphery where prime yields stabilized at respectively 6,60% and 7,80%. However, given the current market conditions, it is possible that the prime yields will grow over the next few months. Some transactions were closed in late 2013 with increasing entry yields, which may lead thinking to a general asset repricing dynamic. (%) Rome Vacancy rate 9.0 8, Q3/98 Q3/00 Q3/02 Q3/04 Q3/06 Q3/08 Q3/10 Q3/12 Q3/14 Rome Quarterly Transactions Volume mln Source: JLL, BNP Paribas, DTZ, CBRE Italy Rome Prime Yield Prime Yield (%) Q3/04 Q3/05 Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 5

6 Italian Retail Property Market Demand The retail property segment is the one that less suffered the last 5 years crisis in Italy and at this stage maintains a general sentiment of further improvement. Retailers demand is sustained, still driven by cautiousness and selectivity and focused on primary locations in both the shopping centers and, principally, High Street Shops lines. The expenses for luxury goods amounts to 7% of total consumers expenses in Italy versus a 4% average in Europe. Plans to reinforce in Italy are getting more realistic for many retail operators, thus confirming the country as the 8 th world market to expand. Leasing activity in the luxury high street market continued to hold up well in 2014 due to scarce supply, with Milan, Rome, Venice and Florence the most requested locations. In Milan good secondary locations are experiencing a positive dynamic as appealing to already well positioned operators willing to strengthen their position. The limited supply of space in top locations is redefining the main streets shape of several markets. In Milan for example, according to CBRE, the demand for Via Torino is increasing (not considered retailbased historically), while via Dante is losing its appeal. Corso Matteotti is becoming an extension of the Fashion Quadrilatero, while Corso Vercelli and Corso Garibaldi are showing a vivid dynamic of new openings and renewals in brand offer. The fast food chain McDonanld s has announced a development plan for 145 new restaurants in Italy by the end of 2017, for a total 500 mln budget. Source: JLL, CBRE 5,000.0 Italy Retail Prime Rent Prime Rents Rental prices have generally been under pressure over last years, despite topprime locations even experienced a positive dynamic. In 3Q14 prime rents in the HS segment confirmed the levels reached in 2013: 4,500 /sqm/a in areas like Via Montenapoleone and Via della Spiga in Milan, as well as in Rome 4,000 /sqm/a in Via del Corso and Via Condotti. Prime rents for shopping centers are stable since 5 years at 760 /sqm/y in Milan and 800 /sqm/y in Rome, while for secondary locations values set in the range between 250 and 325 /sqm/a, with increasing downward pressure. In 9m14 new openings in Milan are Eataly, Brian&Barry and gruppo Miroglio. Recent openings in the High Streets in 2013 are: in Milan Prada (720 sqm) in Galleria Vittorio Emanuele and in Via Montenapoleone Hermes, Giada, Zanotti, Fendi, Ferragamo and Paul&Shark, while H&M in Via del Corso in Rome. Prime Rent High Street ( /sq.m./a) 4, , , , , , , , , , Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Prime Rent High Street Milan Prime Rent High Street Rome Prime Rent Shopping Centre, Amundi RE Prime Rent Shopping Centre Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 6

7 Italian Retail Property Market Stock and Supply The development dynamic of large retail properties in Italy has been calm over the last 4 years, with new developments volumes subdued compared to the previous 5 years. The stock of GLA (for units above sqm) reached 14.4 mln sqm at the end of September 2014, thanks to the release in 2014 of Nave de Vero (Corio Center) and Shopinn Brugnato 5 Terre for a total sqm GLA. Density increased to 241 sqm of GLA per thousand inhabitants. 86% of the stock is shopping center typology. The volume of retail properties under constructions over the next 3 year is 630K sqm GLA, of which 490K shopping center. The activity of refurbishment and expansion of existing assets is continuing and expected to grow over next years. This is considered an appropriate strategy to compete with a new layout and new brand offer against the prime modern and dominant schemes., mln 2,500 2,000 1,500 1, Retail Investments in Italy N. transactions Investments The market of Investments in this segment was vivid in 2014 YTD with transaction volumes at 1.34 bln, thanks to the strong performance of 2Q. The Italian market is offering a window of opportunity that only foreign investors are taking advantage of. Italian purchasers have been essentially absent. In 3Q14 2 large transactions took place, for a total 90% of the quarterly volume. The first one is the purchase of a bank branches portfolio by Foncier LFPI for 70 M. The second transactions is the Shopping Centre Le Terrazze, purchased by Union Investments for over 100 M. In 3Q a major deal was recorded by the retail fund created by Antirion sgr together with GCI and containing 3 retail galleries anchored by Auchan: Mesagne (Brindisi), Mestre and Bussolengo. The dynamic that brought prime yields in the retail segment raising since 2007 seem to have smoothed in 2013 and reverted in Prime yields in Milan and Rome High Street are still at 5.25%, thus confirming 2Q surveys. Yields in the HS segment can increase to 7.75% when secondary locations are considered. Also shopping center prime yields have confirmed the previous quarter survey (6.75%), after having hit 7.25% in 3Q12, while in good secondary locations transactions close in the range of 8.50%9.50%. The dynamic experienced by the retail segment showed that the repricing process such asset class went through might be a trigger for boosting transactions volumes, by narrowing the gap between prices investors accept to pay and prices asked by sellers. The said dynamic could be the driver for animating the subdued Italian property market. Italy Retail Prime Yields Prime Yield (%) Investment Volume N. Transactions Q3/06 Q3/07 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Q3/13 Q3/14 Prime Yield Shopping Center Prime Yield High Street Milan Prime Yield High Street Rome Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 7

8 Italian Logistic Property Market Demand and TakeUp The demand for logistics in Italy has increased in 2014, confirming in 3Q the positive trend. Demand however is driven by the search for strategic locations. Among users the attention on energy efficiency, as a tool to optimize operating expenses, is increasing. The Rome market is confirmed as the favorite location for operators in the CentreSouth of Italy. The absorption of logistics space in the Italian market over the 3Q14 was 190K sqm, 8% over the previous quarter and +27% compared to the 3Q13. Lombardia was the most active region, accounting for 49% of total quarterly takeup, Piedmont follows with 28%. The 9m figure is perfectly in line with the 10 ys average and 33% above 9m13. The share of 3PL on the total takeup volume rose then to 58%, while Industry and Couriers accounted for 24% and 15% respectively. In 3Q14 prime rents in Milan and Rome was surveyed stable qoq at 48 /sqm/a (4%yoy) and 52 (6%yoy) /sqm/a respectively, 40 /sqm/a in secondary locations. The average rent increased to 42 /sqm/a. Stock and Supply The Stock at the end of 3Q14 has remained almost stable at 13 sqm mln. There is a potential pipeline of sqm in the area between Milano and Bergamo, where the major activity was recorded in the quarter, to which the expansion of the sqm of the Polo Logistico Roma Nord in Rieti should be added. The preletting is not anymore a sufficient condition for developers to undertake a project, a high attention is paid to counterparties rating, thus slowing down further the activity. Investments The volume of investments in logistics has increased in 3Q14 to mln, recording a in strong recovery from the tumble surveyed in 2Q14. The sale of a logistic portfolio, constituted of 5 buildings in Milan, of 200K sqm for about 100M in early 3Q gave the strongest contribution to the quarterly transaction volume. Another major transaction is the purchase by Corpus Sileo from Prologis of a 20 mln property in Paullo. However the volume invested in 9m14 exceeds by 27% the average yearly volume of the previous 10 years. Interest from institutional investors, cautious and focused exclusively on core investment opportunities (quality, location, leasing duration and tenant standing) over last years, is increasing driven by a high yield and high potential future growth driven by ecommerce. As a consequence of a buoyant investment activity in 3q14 prime yields in both Milan and Rome reduced to 8.00%. Source: JLL, CBRE Prime Rents ( /sqm/a) (sq.m.) 1,000,000 Investments ( mln) 900, , , , , , , , , Italy Logistic Prime Rents and Vacancy Q3/04 Q3/06 Q3/08 Q3/10 Q3/12 Q3/ Logistic Milan Prime Rent Logistic Rome Prime Rent Vacancy Rate (%) 110 Italy Quarterly TakeUp Italy Logistic Investment and Prime Yield Q14 Logistic Italy Investment Volume Logistic Milan Prime Yield Vacancy rate (%) Yield (%) Amundi Real Estate The Italian Real Estate Market 19/12/2014 page 8