EY: Major Companies Survey on Real Estate Investments

More than 90% of executives surveyed by EY Retail Property Investments Barometer Italy plan to invest in retail real estate: primarily in shopping streets and shopping centers.

More than 80% of them will focus on Italy, with 40% expecting to invest more than 200 million euros, mainly in properties on shopping streets and in shopping centers.

The north and center of Italy are the main regions for investment.

Retail Property Investments Barometer Italy

This annual study, conducted by EY's Strategy and Transactions department from July to September 2023, to gauge perceptions and confidence in retail as an asset class in the Italian real estate market in order to understand sentiment towards investment and management strategies and prospects for the industry.

The study involved 50 senior executives from large companies, real estate managers and national and international investment funds.

The study involved 50 senior executives from large companies, real estate managers and national and international investment funds.

Marco Daviddi of EY said, "Our research confirms that there are various opportunities for retail recovery in real estate investment strategies. Italy has a product quality problem which, with the exception of facilities on shopping streets, is considered to be qualitatively below average in Europe. There are also perceived risks associated with the rise of online sales (33% still see them as the main risk in this area), increased operating costs (31%) and reduced consumer purchasing power (29%). At the same time, 85% of respondents are willing to invest in improving the performance of assets in their portfolio to reduce risk. Revising merchandising is one of the top goals (of interest to 54% of respondents), followed by improving energy efficiency (27%).

The focus on ESG criteria, which drive the strategies of 90% of respondents, as well as environmental and energy saving issues, will strongly characterize the sector. 61% of executives said they want to invest in improving the environmental impact of their real estate, mainly by reducing consumption, while the social and ESG aspect is present in the strategies of 37% of investors, who show interest in topics such as inclusion and solidarity.

9 out of 10 respondents said they plan to launch activities with important ESG aspects in the near future, including charity campaigns and inclusion, as shopping centers play an important role in certain communities.

When it comes to disinvestment, 30% are already in the process of divestment. 30% of respondents are also refinancing their retail real estate investments in Italy.

There is a strong focus on northern Italy and shopping streets.

The perception of the quality of retail real estate in Italy influences investment strategies: respondents rated shopping streets positively, considering them in Italy to be of a quality equal to or above the European average, while retail parks and shopping centers have an average quality generally equal to or lower than that of European assets of this type.

There is also a strong desire for the north of the country, which is the preferred region for 63% of investors (as opposed to just 20% for Central Italy and even 6% for the South).

It seems, however, that investors prefer a value-added approach and opportunities that match the perceived quality and risk of the products available.

High returns influence choice

The generally positive trend and operators' openness to retail real estate is influencing the prospects for higher returns offered by this asset class, for which revaluation has already begun.

These prospects may offset general risk factors such as the availability of financing and rising operating costs, as well as specific risks inherent to this asset class such as online channel competition, the risk of reduced consumption and, as noted