“For the first time also Chinese and middle-eastern have become active and not only on hotels.” – says Leopoldo Andreis de Gregorio, Partner, Head of Italy, Benson Elliot Capital Management

Leopoldo Andreis de GregorioQ. Where do you see Italy in the real estate investment cycle?
A. At the bottom of the market. Values either flat or slightly decreasing for some time. Larger portfolios or good quality assets increasing in value but mainly driven by non-domestic financial players. “Main-street” fundamentals do not justify yet increase in values. Investment Market to be driven by opportunistic investors for a couple more years, then domestic players will come back.

Q. Do you see more international investors becoming more active? What do they look for in Italy?
A. International Opportunistic investors have already been very active for the last 12/18 months and will continue like this for 12/18 months and more players will show up, but core institutional Investors have not come back yet (other than on prime). For the first time also Chinese and middle-eastern have become active and not only on hotels. Mainly looking for high yield, but now starting to look at refurbishment and development plays.

Q. Should investors continue to look at Milan & Rome? And which are the most interesting secondary cities?
A. Milan & Rome will always attract most interest across all asset classes. Out of town retail interest instead spreads more widely, but mainly from the centre to the north. Secondary cities such as Venice, Florence, Bologna, Turin (besides prime street and out of town larger schemes) will only attract interest (but very selectively) on hotels and high-end residential.

Q. Retail: How do you see retail format evolving in the next 10 years?
A. Dominant regional schemes either newly conceived or in need of turn-around will continue attracting significant interest. Old but well-located stock will be improved by non-domestic specialised investors/operators. Secondary cities can offer interest opportunities for new/modern developments due to historical under-supply. Weak/ill-conceived schemes will slowly die unless with up-grade potential due to good location. Prime street retail in secondary cities such as Turin, Bologna, Venice, Florence, Naples, Bari will attract interest and grow both in terms of value and covenants quality.

Q. Offices: where do you see the best opportunities?
A. mainly Milan and Rome on assets that can offer the opportunity to provide refurbished Class A space at affordable rents on a relative basis depending on location (not only city centres but also semi central and peripheries).

Leopoldo Andreis de Gregorio will be co-chairing a discussion about “Offices – Which cities will occupancy rates and good tenants lead investors to?” at Italia GRI alongside Cristina Bianchi, CEO, First Atlantic Real Estate.