Real estate on the market, JLL forecasts for 2024

Despite the challenging economic and geopolitical conditions, the last quarter of 2023 showed signs of recovery in investments in Italy's real estate sector. According to a recent JLL report, investor interest in quality assets in the market remains high, particularly in logistics and leased offices. Forecasts for 2024 suggest market stability, predictable conditions, a decrease in inflation, and the beginning of a cycle of declining interest rates. Although global geopolitical uncertainty still exerts pressure on investment activity, its impact will be less noticeable.

According to JLL, the global economy in 2023 has proven to be more resilient than expected. Forecasts for Italy indicate an average GDP growth of 0.7%, with a decline in industrial production of 2.3% and a drop in inflation to 5.9%. High interest rates and rising financing costs, along with economic uncertainty, have negatively impacted pricing and overall sentiment across all sectors, leading to a slowdown in commercial real estate activity in the EMEA markets.

After record figures in the first three quarters of 2022, investors showed caution in the following four quarters, up to the third quarter of 2023. However, in the fourth quarter of 2023, some signs of recovery were noted, with a 19% increase compared to the previous year. The industrial and logistics sector continues to hold the top position in the real estate investment segment in Italy, accounting for 30% of the total volume. It is worth noting that the hospitality segment is also showing increased interest, with hotels in major Italian cities and popular tourist destinations being put up for sale, confirming the strong fundamentals of the hospitality sector.

The office sector has shown little achievement due to a decrease in investment volumes, although strong positions for tenants remain. Milan continues to be the main center of attraction for investment capital, which is focused on key properties. The residential sector is also gaining popularity, showing an increasing share of the total investment volume, especially regarding properties intended for students, as well as for rental and sale.

Forecasts for 2024 suggest that, despite ongoing challenges, more stable and predictable conditions are expected. JLL anticipates a decrease in inflation and the beginning of interest rate cuts by the end of 2024.

According to forecasts, the logistics segments and real estate assets such as data storage facilities, housing, and hotels are expected to develop the best in 2024. Interest in shopping centers outside urban areas is also increasing, influenced by certain successful concepts. It is anticipated that the yield on prime assets will stabilize at the end of cycles, while the growth of rental rates will significantly slow down with the decrease in inflation.

Investments in high-quality Class A assets with excellent sustainable development metrics will be the main focus in the real estate sector in 2024. Hybrid work models are becoming established in the market, which will increase the occupancy of office spaces. Milan is already seeing higher rates of employee return to the office (85%) compared to other European markets and especially the U.S. In the office rental sector, a trend towards consolidation, optimization of office spaces, an increase in subleasing, and a growing interest in environmental goals is expected, which will be particularly relevant by 2030. Central and well-connected locations will continue to be in the highest demand.

I have been working in journalism since 2010 and have been happily collaborating with idealists since 2018. My focus is on economics and the real estate market inMilan, but I also enjoy giving home care tips. I have a son named Francesco, who is now eight, and I am crazy about my cat Sonic, whom I've had since 2022. In my free time, I practice krav maga, bake desserts, and sing soprano in a choir whenever I get the chance.