Italian Office Snapshot | Q2 2023

Key takeaways:

• The Italian economy is expected to grow by 0.9% in 2023| The Italian economy posted a GDP growth of 0.6% in Q1 2023, mainly driven by consumption and domestic demand. This was an improvement from the -0.1% fall in Q4 2022. Looking ahead, latest market projections indicate an average GDP growth of +0.9% in 2023.

• Investors are prudent but Italian office market fundamentals remain solid| Office investments recorded a significant slowdown in H1 2023 across Emea. This trend has been exacerbated by a wait-and see approach and weak global sentiment driven by post-pandemic structural shifts in the way of working. Despite challenging economic conditions, Italian office market fundamentals remain solid, with high return to the office rates compared to other markets.

• Office occupiers' demand still high in Milan and Rome | In H1 2023 Rome reached a new record in terms of office take-up (+95% YoY). Milan recorded a slowdown after a very good performance in 2022, but with a positive variation QoQ in Q2 2023 (+7%). Occupiers’ demand is still high in both cities with an increasing focus on sustainability

From the capital markets standpoint, the office sector suffered in the first half of 2023 amounting to approximately €500Mn, with a -80% YoY contraction. The relatively sharp drop of the Italian market volumes is partly explained by the record performance during H1 2022 (€2.5 Bn). In addition, Q2 data showed increasing volumes QoQ with offices again the first asset class in terms of overall capital markets investment volumes.

From the occupiers market standpoint, after the record reached in 2022, Milan recorded around 170,000 sqm with a significant additional sub-lease portion for further 30,000 sqm. Despite YoY underperformance mainly due to the record reached in 2022, we had a positive QoQ variation in Q2 2023.

Take-up in Rome totalled around 160,000 sqm (+95% YoY), a significant increase mainly due to the portion represented by 2 big transactions.