Italian Office Snapshot | Q1-Q3 2022

Key takeaways:

• The Italian economy shows some resilience| The Italian economy decelerated in 2022 amid higher geopolitical uncertainty stemming from the war in Ukraine, but latest GDP numbers in Q2 came in higher than expected, largely supported by consumption and investment.
• Investors remain prudent but rents will rise further| Looking ahead, risks to GDP growth are skewed to the downside because of rising inflation and tightening financial conditions. Although investors remain cautious, properties are now more institutionalised, and this should increase broader market liquidity. Additionally, the occupiers' market is recovering from the pandemic lows, with Milan already at a higher level than 2019. This should continue to drive profitability and push rents further over the coming months. 

Although the Italian economy decelerated in 2022 amid higher geopolitical uncertainty, GDP growth in Q2 surprised on the upside, largely supported by consumption and investments. 

The office sector confirmed to be the first asset class for Capital Markets investors and the most dynamic in Q1-Q3 2022, representing around 40% of the investments. Milan continues to drive the volumes, representing around 70% of the total.

Office leasing side increased in take-up both in Milan and Rome: corporate occupiers will continue to seek to ensure flexibility within new leases, while employees will also seek a measure of flexibility in their working lives. Takeup in Milan is up by +40% YoY in Q1-Q3 2022, with the demand dominated by deals below 1,000 sqm (61%) and by grade A office spaces. Around 35% of the demand targeted offices in central submarkets (CBD, Historic Centre, Centre).
Take-up in Rome increased too (+24% YoY), with a demand mainly focused on the E.U.R. submarket (36%), Centre-Semicentre (26%) and CBD (21%), while grade B spaces seem to be the most sough after (60%) because of the low offer of grade A assets in the capital. ​