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Positive outlook for Italian commercial property market, report predicts

Even the summer period which is traditionally quieter from an investment perspective saw levels of activity reach €1.3 billion, over 40% up on the same quarter in 2008, the report from property analysts CB Richard Ellis shows.

The interest is concentrated on prime property with the retail sector attracting the highest levels of investor attention.

The upturn in both sentiment and activity is backed by increasing investment volumes, and in prime yields.

‘The stabilization of yields is clearly prerequisite for any recovery in values and thus is a positive sign that the market is moving in the right direction,’ the report says.

But it also points out that secondary markets have been facing more challenging situations, such as asset illiquidity and sharp increase in yields.
The majority of interest has been coming from equity investors who operate with a low level of leverage, such as Italian pension funds, German Open ended Funds and institutional funds.

Their investment is mainly in core property.

However, some Opportunity Funds are coming back, the report continues.

The improvement is helped by the fact that the Italian economy is showing clear signs of recovery and looks set to return to growth in the second half of 2009.

Recent data for trade and industrial production, as well as business and consumer confidence, are generally encouraging, the report says.

Looking forward to 2010, the report suggests that equity investors and debt providers currently active in the market will continue to focus on the quality of properties and length of income streams above all other considerations.
‘Therefore, it could be too early that invest interest will expands to include the semi-prime/ secondary part of the market in the short term.

But rents for Italian market have held up relatively well for prime property.

Looking forward, we expect them to be stable for good quality properties in good locations,’ the report concludes.