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City News - Q1 2018
1
MILAN
RESEARCH
A PREDOMINANT SEARCH FOR QUALITY
The Leasing market
Take-up in Milan during the �rst quarter of 2018 reached nearly
88,000 square metres across 60 transactions, producing one of
the best starts to a year (+40% compared with the average over
the last decade).
The year-on-year decline of 12% in Q1 2018 was due to the
exceptional �gure of 100,200 square metres in Q1 2017, which
included Amazon’s relevant transaction of approximately 18,000
square metres.
Some 40% of the �rst-quarter take-up concerned the Periphery
sub-market (+99% on Q1 2017) owing to two transactions, each
of approximately 13,000 square metres (one pre-let and the
other owner occupation). There was also increased activity
(+18% year on year) in CBD Duomo in Q1 2018 because of a
greater number of completed deals (18 versus 13), including
two of over 2,000 square metres each involving major
international �nancial companies.
However, there was a year-on-year decline in take-up for CBD
Porta Nuova (-66%), Centre (-70%) and Semicentre (-50%). The
fall in take-up was certainly due to a lack of adequate supply,
particularly in CBD Porta Nuova, where on the contrary remains
strong the interest from potential tenants.
During the opening quarter, 40 of the 60 completed deals were
for spaces of less than 1,000 square metres, a portion that is in
line with the average over the last decade. There were three
large deals, all concerning surface areas of between 12,500 and
13,000 square metres.
Looking at Q1 2018 deals by rental bracket, there was an equal
split above and below 300 €/sqm/year.
A few deals in CBD Duomo which were concluded at particularly
high rents caused the prime rent increase in Milan from 550 €/
sqm/year at the end of 2017 to current 560 €/sqm/year. In the
city’s other sub-markets, prime rents remained stable at the
following levels: 500 €/sqm/year in CBD Porta Nuova, 450 €/
sqm/year in Centre, 300 €/sqm/year in Semicentre and 260 €/
sqm/year in Periphery.
The vacancy rate was also stable at 11.7%, due mainly to the
presence of several dif�cult-to-lease spaces in Periphery and
Hinterland. Indeed, 87% of the total lower-grade spaces (grade
B and C) available for lease in Milan (and equal to 1,020,000
square metres) is located in these sub-markets.
The vacancy rate remains particularly low, between 2% and 4%,
in CBD Duomo, CBD Porta Nuova and Centre. As a result of new
instructions, the total amount of grade A real estate available to
lease in these three sub-markets increased from 25,000 square
metres at the end of 2017 to approximately 32,000 square
metres in Q1 2018.
MILAN OFFICE MARKET Q1 2018
TAKE-UP: 87,943 sqm -> -12% on Q1 2017
VACANCY RATE: 11.7% -> = on Q4 2017
PRIME RENT*: 560 €/sqm/y -> +10 €/sqm/y on Q4 2017
OFFICE INVESTMENTS: €210 M -> -55% on Q1 2017
PRIME NET YIELD*: 3.50% -> = on Q4 2017
*Prime rents and prime net yields have to be read as an indication of market trends. The
levels are established as a mix between market sentiment and deals actually closed during
the reference period.
BNP Paribas Real Estate Research Italy
City News - Q1 2018
2
MILAN
RESEARCH
The Investment market
Investments in commercial real estate market totalled
approximately 450 million of euro in Milan in the first quarter of
2018, representing 30% of the nationwide 1.5 billion of euro
(down by 25% compared with Q1 2017).
The city performance in Q1 2018 was down 35% year on year
and 19% compared with the long-term first-quarter average.
Similarly to previous years, Q1 2018 saw volumes mainly
concentrated in the Office sector (48% of the city total).
Specifically, 210 million of euro was invested in the Office sector
in Milan, down by 55% from approximately 460 million of euro
in the corresponding period of 2017. There were three Office
transactions in Milan, of which two located in the Semicentre
sub-market that prompted prime net yields there to drop by 25
basis points to current 4.50%. Yields also fell in Centre (from
4.25% to 4.15%) and in Maciachini (from 5.25% to 5%). However,
the yields in CBD Duomo and CBD Porta Nuova have remained
stable at 3.50% and 3.75% respectively for a year now.
This downturn in Office performance can be explained primarily
by a lack of core real estate products on sale and the high cost
of available ones, including when compared with other
countries. Consequently, it is reasonable to expect investors
interest in the coming months to shift towards value-added
deals and non-central locations.
With regard to other commercial real estate sectors in Milan in
Q1 2018, there was one High Street Retail transaction worth
around 140 million of euro (part of a portfolio deal that also
involved Rome) and two deals in the Logistics sector.
A PREDOMINANT SEARCH FOR QUALITY
OFFICE
€210 M -> -55% on Q1 2017 48% of Milan total Prime net yield: 3.50%
RETAIL
€139 M -> -19% on Q1 2017 32% of Milan total High Street prime net yield: 3%
LOGISTICS
€57 M -> +130% on Q1 2017 13% of Milan total Prime net yield: 5.50%
BNP Paribas Real Estate Research Italy
ITALY TOTAL Q1 2018
€1.5 bn
MILAN TOTAL Q1 2018
€441 M 30% of Italy total
OTHER (student housing): €35 M -> +50% on Q1 2017 -> 7% of
Milan total
3
CITY NEWS - MILAN - Q1 2018
OFFICE MARKET MAP - MILAN
Disclaimer
This document has been prepared by BNP Paribas Real Estate Italy through its Research activity. Forecasts and opinions
are referred to the Research Department of BNP Paribas Real Estate Italy and can change without notice. Information and
opinions reported in this document are based on reliable sources. The following document was produced with informa-
tional purpose. It is not part of and cannot be considered as a underwriting offer and sale of real estate products, includ-
ing fund shares potentially examined. The opinion expressed does not engage any responsibility of BNP Paribas Real Es-
tate Italy and of BNP Paribas Real Estate Italy Research Department.
All rights reserved. This report is completely protected by copyright. No part of this publication may be reproduced, translated, transmitted, or stored in
a retrieval system in any form or by any means, without the prior written permission of BNP Paribas Real Estate Italy Srl.