JLL's new man in Italy: ‘We have reached the bottom of the market’

Italian office rents are expected to come under further pressure this year but deal activity should pick up, says JLL’s new CEO in Italy Pierre Marin.

The Italian commercial property market is forecast to see more downward pressure on rental values in 2013, according to Jones Lang LaSalle’s Pierre Marin, who earlier this year assumed the role of sole CEO of JLL’s Italian office following the departure of co-managing director Patrick Parkinson.

‘Tenants will be looking to renegotiate rental levels and we expect the occupier market to see further downward movement in addition to what we saw last year,’ the 52-year old manager said. Marin, a French national who moved to Italy in 2001, has been co-head of JLL in Italy for over 10 years. An economics graduate of Pantheon-Assas University in Paris, he started his career at Soprec, part of Groupe Caisse des Dépots, and subsequently worked three years for CB Richard Ellis before joining JLL France in 1997.

Italy’s prime office rents have declined from around €530 per m2 to around €500 over the past 12 months, he noted, while yields have held up at 5% but are expected to rise 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 currently going through difficult times. Retailers are looking for good locations at the best prices.’ 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.

Last month, JLL received a mandate from cosmetics retailer Marionnaud to look for 20 new stores across Italy, including high-street locations. The new openings would add to the retailer’s current portfolio consisting of 120 shops in the country.

JLL’s Marin is also reasonably positive about the investment side of the business. ‘I reckon 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 by funds in the process of liquidation and financial institutions.’ He continued: ‘The corporate sector will also look into property sales as a way to release cash.’

The property services group has just been hired by Aberdeen Asset Management to sell the Franciacorta Outlet Village in Rodengo Saino near Brescia in Northern Italy. The retail complex was bought by Aberdeen’s Degi subsidiary in January 2007. According to PropertyEU data, Degi spent €204 mln to buy the asset six years ago. The outlet centre, located 80 km from Milan and Verona, has 150 shops with a total lettable area of 21,700 m2. Main tenants include Levis, Nike, Benetton and Calvin Klein.

‘We have received several offers from international investors,’ said Marin. 'We are in the middle of an investors’ selection process in order to grant exclusivity for the due diligence process.' A sale of Franciacorta would represent a landmark deal in the country’s moribund investment market. Italy saw as little as €1.8 bn of commercial property investment last year, a decline of 50% on 2011’s €3.9 bn figure and one of its lowest volumes in recent history.

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. Offices represented the bulk of the investment market in 2012 with a 40% share while hotels surpassed the retail sector, accounting for 24% of activity. Retail, on the other hand, accounted for as little as 16%. JLL has been present in Italy since 1990. The agent currently has about 100 staff in the country, with offices in Milan and Rome.

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