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“Italian commercial property delivered modest capital depreciation over the first six months of 2010, at -0.3%, as measured by the The re-pricing in Italy’s commercial property markets since the global financial crisis struck has been mild, at just -5.3% over the last two and a half years. Across this period, rents have declined -1.7%, while initial yields have expanded by 30 basis points to 6.2%.
Over the six months to June the slight capital depreciation, together with a 2.7% income return, contributed to a six-month total return of 2.4% – the largest biannual total return since Italian commercial property starting re-pricing. This attenuation in the pace of writedowns is the result of fractional weakening rents and yield expansion.
At the sector level, the retail market saw the return of capital appreciation, albeit at a modest 20 basis points, followed by the industrial sector, which was virtually flat. Finally, in the office sector, depreciation continued – although at half the rate on the previous six
month period – at -0.5%.
Capital growth in central Milan and Rome offices were either side of the all office average
– Milan underperformed the market, at -0.8%, while Rome outperformed but remains in negative territory, at -0.1%. Rental declines for the two city office markets were -0.3% and -1.0%, respectively. Shopping centres notably underperformed the rest of the retail market, with a six-month capital growth of -0.4%, driven by -0.7% rental decline.
Luigi Pischedda, Country Manager Italy at IPD, said: “Like a number of markets throughout Continental Europe, the Italian property market is governed by stable property fundamentals which have helped insulate against the full force of the global financial crisis.
Rents and yields, the drivers of capital growth, have moved only marginally compared to that seen in the UK and US. As a consequence, Italy is failing to reap the recovery bounce other markets have started to benefit from.” (CS della Società)
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