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Investments slow down, boost in yields

18 August 08 | Michele Cibrario
Michele  Cibrario

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What is the level of real estate in Italy?

What is the level of real estate in Italy?
The Italian real estate sector has evolved a lot during last years: in terms of invested volumes it grew steadily, thanks to increasing interest of institutional investors both Italian and international, till the second half of 2007. Since then we are facing a decrease in invested volumes and a less marked decrease of prices, but this does not represent a period of crisis instead the market is simply adjusting itself to new market conditions. The Italian RE market in the near future will be more selective, by the way it will continue to present interesting opportunities.

What is your opinion about the international credit crisis? Which is the immediate impact according to you?
Unfortunately I think that interest rates in Europe will stay on an high level for a long while in order to stabilize the inflation pressure which is increasing too fast, mainly because of the increasing price of oil and food all around the world. In Italy the impact should be limited as the Italian families traditionally do not use a lot of debt and high interest rates will not have a big impact on them. Clearly in the real estate market this situation, as we are seeing in this moment, will cause a slowdown of investments because of the limited availability of debt and the higher cost of it, but higher interest rates should also boost yields.

At which sector do you activate the most? Which is your strongest asset? The sectors in which we are more active are the office and the retail sector but are investing in a broad range of sectors, in order to diversify our asset allocation but also to exploit higher returns which characterize some niches in the real estate market. Within the specialized funds two examples are the retail fund Estense Grande Distribuzione specialized in shopping centre and Italian Business Hotels fund which was one of the first funds in Europe for institutional investors investing exclusively in hotels.

Which are at the moment the most successful sectors of development of Italy, and which are the yields per region? (Could you mention some projects in which you participate either as consultants or as agents?)
Traditionally the Italian real estate market was focused in office and retail sectors and geographically in the Milan and Rome areas. In this moment market operators are looking for a more effective diversification in sectors like hospitality, student housing, care homes as well as geographically trying to invest not only in Rome and Milan but also in the other major Italian cities like Torino and Bologna for example. However Milan remain the most attractive city, actually it represents the financial centre of Italy and it will also host the 2015 Expo which will have a lot of positive effects on the economy of the city and in particular on the real estate market.

Do you think that it is possible to see Italian REIT's in the future?
In Italy we already have two different vehicle for indirect real estate investments: the property funds established in the late '90s and the Siiq (listed real estate investment companies) which were established recently. The property funds industry in Italy is growing faster, in 2007 29 new funds were established and asset under management signed an increase of almost one fourth reaching more than ­31 bln.

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