Milan attracts over a third of real estate investments in Italy and stands out for its marked openness to capital esteri, with an average of 55% over the last decade – significantly higher than the European average of 46%.
The Office sector continues to dominate the Milanese real estate landscape, supported by an economic fabric strongly oriented towards services. The occupier-side fundamentals remain solid, with a stable take-up (173.000 sqm in the first half of 2024) and a low vacancy rate (9% overall, only 3% for grade A properties). Milan stands out positively in international comparison, especially compared to US cities, for the high rate of return to the office (85%) and the efficiency of public transport, in a city of smaller dimensions than other realities, which favor reduced commuting times and a greater propensity for socializing.
In the wider macro-area, outside the municipal borders, the development of the manufacturing sector drives demand in the Industrial & Logistics sector, with a growing interest in urban logistics. Milan's international fame as the capital of fashion and luxury also favors the Retail sector, which is positioned in the foreground with an important High Street transaction in Q3 2024.
An emerging sector of particular interest is that of student accommodation (PBSA – Purpose-Built Student Accommodation). Over the past five years, approximately €400 million has been invested in this segment, including assets of other intended uses to be converted. The pipeline initiatives include the addition of over 10.000 beds by 2027, bringing the provision rate from 6% to 10%, although still insufficient to fully meet demand.
“The most up-to-date data, available up to the first half of 2024, paint a picture of a market still cooled by global geopolitical instability and high interest rates”, they continue. Assolombarda. “Furthermore, in Milan there are regulatory and procedural uncertainties that, over the past year, have resulted in a slowdown in the submission of new building applications and a freeze on potential real estate transactions.”
The Milan area is central to the national picture but its openness to foreign capital is also significant, so much so that in the last decade the cross-border component has represented on average 55% of the total investments in the city. One of the highest shares in the European comparison: just above is AAmsterdam (58%), then London (65%) and Barcelona (70%), conversely, below are Berlin (50%), Paris and Munich (37% both), explain the authors of the report.
“Despite the various strengths and solid fundamentals of the market, some challenges remain for Milan,” he underlines. Francesca Fantuzzi Head of Research Italy Jll. "From a Capital Markets perspective, the recent rate reduction cycle could help encourage the return of real estate investments, although expectations of a lower cost of future debt could delay some operations. Furthermore, the regulatory and procedural uncertainties that emerged in the last year are impacting investments and the Residential pipeline with an increase in competition with other Italian cities such as Rome, Bologna and Florence".
