Italian Retail Snapshot | Q2 2023

Key takeaways:

• Latest market projections for Italian economy indicate an average GDP growth of +0.8% in 2023
  In Q2 2023 the Italian economy posted a GDP decrease of -0.4% QoQ while increased by 0.4% YoY. Looking ahead, latest market projections indicate an average GDP growth of +0.8% in 2023. The impact of high inflation and interest rates persists, but there are a few signals of improvement.
  
  
• Retail warehousing remains appealing to investors
  From the capital markets perspective, the retail sector is still in recovering mode since the covid-19 pandemic lows and currently it’s still affected by the decrease of the purchasing power due to the inflation spike and high interest rates. Global geopolitical uncertainty continues to weigh on investment activity, with investors looking for assets with strong fundamentals and good defensive qualities but with high return.
  
  
• Retail leasing market shows some degree of resilience
  Pockets of rental growth have emerged in high street areas that are typically targeted by mainstream retailers, including cities in southern Europe that benefit from a recovery in tourism, such as Rome and Milan.

Conditions in the European retail investment market remain challenging: while a broad range of retail assets across the region are currently on the market and as additional stock is anticipated to enter the market in the coming months, prospective buyers remain selective. Many transaction processes are protracted due to financing challenges or a mismatch in pricing expectations from both vendors and buyers.  

The Italian retail sector is still recovering from the post-pandemic lows. In H1 2023 investment flows amounted approximately to €200 Mn (-47% YoY) of these, more than 90% were out-of-town transactions.