Italy to see more pressure on rents in 2013, says JLL

The Italian commercial property market is forecast to see more downward pressure on rental values this year, says Jones Lang LaSalle’s Italian CEO Pierre Marin.

‘Tenants will be looking to renegotiate rental levels and we expect the occupier market to see further downward movements on top of what we have seen last year,’ Marin said.

Prime office rents have moved down from around €530 per m2 to around €500 over the past 12 months, while yields have held up at 5% but are expected to move up this year. Likewise in the retail sector, prime yields have increased to nearly 6.5% in the fourth quarter of 2012 from 6.25% previously.

Marin: ‘The retail sector is very much linked to consumer spending and retail sales which are going through difficult times. Retailers are looking for good locations at the best price.’

One sector that is weathering the crisis relatively well is high street, Marin said. ‘We are focusing on growing and developing our high-street capabilities because this sector has shown resilience and continues to have nearly no vacancies,’ he noted.

JLL’s Marin is also reasonably positive about the investment side of the business. ‘I believe we have already reached the bottom of the market and we should see a pick-up in activity this year, driven by a general repricing as well as the supply of assets on the part of funds in the process of liquidation and financial institutions.’

Italy saw as little as €1.8 bn of commercial property investment last year, one of its lowest volumes ever. The fall in transactional volumes was mainly due to a combination of a lack of finance, shortage of supply as well as a pricing gap between buyers’ and vendors’ expectations.

‘The corporate sector will also look into property sales as a way to release cash,’ said Marin, who has been co-head of JLL’s Italian office since 2001. In total, the broker has about 100 staff in Italy, across offices in Milan and Rome.