Italian Retail Snapshot | Q1-Q3 2022
The Italian Retail Market Performance in the first nine months of 2022
- Francesca Fantuzzi
- Carlo Cocuzzo
- Claudia Solarino
The Italian economy is now facing headwinds
The Italian economy decelerated in 2022 amid higher geopolitical uncertainty stemming from the war in Ukraine, but latest GDP numbers in Q2 came in higher than expected, largely supported by consumption and investment.
Retail warehousing remains appealing to investors
Retail investments still far from pre-pandemic levels
Retail investment volumes increased slightly in the first three quarters of 2022, however in Q3 the sector suffered a strong deceleration versus the same period of last year. Retail warehousing (which includes retail parks and big boxes) seems to stimulate investors appetite, but the overall number of transactions remains very limited.
Looking ahead, risks to GDP growth are skewed to the downside because of rising inflation and tightening financial conditions. Although retail investments increased in the first nine months of 2022, investors are now assuming a more cautious stance as the macroeconomic outlook has deteriorated and further uncertainty is mounting ahead.
The latest release by the Italian National Statistics Office (ISTAT) highlights a GDP growth of +1.1% in Q2 2022, mainly driven by consumption (+1.5%) and investments (+0.4%), while govt expenditure, net exports and inventories were all negative drivers. On the consumption front, the end of the pandemic restrictions and the re-opening of international tourism surely provided an uplift to growth; on the investment front, firstly, Italy’s Recovery and Resilience Plan (EUR 235bn) may be feeding through to GDP, and secondly, firms may be allocating more capital in response to challenges on global supply chains.
The retail sector is still recovering from the post-pandemic lows. In Q1-Q3 2022 investment flows amounted to €0.4 billion (+24% YoY). Of these, around 20% were in-town transactions while some 80% were out-of-town. Prime net yields remained stable in Q3 2022 compared to the previous quarter, while Retail Parks yields compressed on average around -20bps Y-o-Y.