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Report

Retail runs thanks to tourists

A report by Savills takes stock of the retail sector, which gathered 500 million investments in the first half of the year

by Evelina Marchesini

4' min read

Key points

4' min read

Tourism is also driving Italian retail. The real estate sector specifically related to shops, supermarkets and shopping centres in general _ including outlets _ is progressing at a fast pace: this is revealed by the "Italy Retail Spotlight" report by Savills.

A thank you to tourism

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Thanks to the return of international tourists, the high street market remains dynamic, not only in Italy's main cities such as Milan, Rome, Florence and Venice, but also in more strictly tourist destinations such as the Costa Smeralda, Madonna di Campiglio and Forte dei Marmi (the Savills report points out). Rome is confirmed as one of the Italian luxury capitals and is showing renewed interest, thanks to the recovery of tourism and a revitalisation of the offer, as witnessed by several projects. Via Condotti maintains second place after Milan with rents averaging around 13 thousand euro per square metre per year.

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"The positive momentum continues for the high street market, especially in the main Italian tourist destinations where the number of new openings and rents are constantly increasing _ says Francesca Cattagni, head of high street leasing _. Rome is going through a phase of profound renewal supported by the arrival of the major international hotel brands and by constantly growing tourist flows. All this is bringing the interest of the grand luxury brands back to the city, and new openings are sustaining the level of rents'.

Malls recover

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The performance of shopping centres continues to show signs of recovery. In the asset portfolio managed by Savills there were 35 new openings in the first half of the year, with a focus on the clothing and personal care categories. Turnover in the centres has remained stable on average compared to the same period last year, but appears to be growing slightly in medium (20,000-40,000 sqm) and large centres (over 40,000 sqm). According to data from the CNCC (National Council of Shopping Centres), the footfall (i.e. consumer access) also increased in the six months compared to the first six months of 2023 (+1.2%).

"The shopping centre sector confirms its role on the market in terms of customer appeal _ says Alberto Albertazzi, head of retail management _. This is also due to the fact that the need to adapt to changing demand has led many facilities to adapt their mix and positioning in recent years. Tenant interest remains high, especially for shopping centres with a positive track record. The high average age of Italian shopping centres, the growing attention of the market to ESG issues, and the consequent search for energy and management efficiency on the part of owners and management companies, will generate a particular focus on management issues of a technical nature in the coming months".

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Retail investment volumes

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The half-yearly investment volumes of approximately EUR 500 million are recovering rapidly. Retail warehouses, supermarkets and shopping centres lead the volumes and the share collected by the out-of-town component is around 98% of the total volumes recorded. Tourist and luxury destinations remain at the heart of investors' and retailers' strategies with vacancy in the luxury streets of Italy's major cities remaining close to zero and a high street component that will continue to drive the segment in the coming quarters.

"The retail sector confirmed its recovery in the first half of 2024, recording a significant increase compared to the same period in 2023. Transactions in excess of EUR 100 million are also returning to the market, involving supermarkets and shopping centres _ specifies Marco Montosi, Savills' head of investment in Italy _. In addition, the current risk-return profile of retail assets is attracting growing interest from institutional investors, confirmed by relevant transactions in the pipeline'.

All business is growing

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The retail recovery is part of a more general positive trend in the commercial real estate sector. According to another report by Savills, approximately EUR 3.5 billion were invested in the Italian commercial real estate market in the first half of 2024: a value that is only slightly below the average of the last five years and that shows a significant recovery compared to the same period in 2023.

The market continues to be characterised by a numerical predominance of transactions with a value of less than 50 million, which account for about 85% of the transactions, while, by value, the four largest transactions of the semester account for over 30% of the volumes. Compared to last year, transactions with a value in excess of 200 million returned to the market, and two of these were in the Rome area. Development projects, redevelopment of large areas, and change of use accounted for 50% of volumes, with transactions in the former FS Farini and San Cristoforo yards placing the mixed-use sector in third place in terms of investment volumes. The Rome market's share of volumes is growing again, at 28% of the total, thanks mainly to the office sector but also to the hospitality and retail sectors.

The transacted volumes in the retail sector, at around EUR 500m, put the sector on a clear recovery from the lows recorded since 2020. Two of the largest transactions of the half-year were recorded in this segment: the largest one related to a shopping centre in Rome and the second one to a portfolio of supermarkets. Shopping centres, retail warehouses and supermarkets lead the volumes with a share of around 94% of total volumes. Tourist and luxury destinations remain at the heart of investors' and retailers' strategies, with vacancy (vacancy rate) in the luxury streets of Italy's major cities remaining close to zero and a high street component that will continue to drive the segment in the coming quarters.

Marco Montosi points out that the commercial real estate market in Italy confirmed its recovery in the first half of 2024, with EUR 3.5 billion invested in the period, a significant increase compared to the first half of 2023. Transactions below EUR 50m still accounted for 85% of the total volume for the period, but transactions above EUR 200m returned. Positive employment trends are driving a positive investment outlook for the end of the year, while the current risk-return profile of retail assets cannot be ignored, thus attracting institutional interest also confirmed by relevant transactions in the pipeline.

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