The Italian logistics sector is emerging as a focal point for investors, with projections indicating that investments could reach between 1.7 and 2 billion euros by the end of 2024. This renewed interest is partly due to the economic challenges faced by Germany, which has shifted the spotlight to Southern European markets, particularly Italy and Spain. These markets are currently perceived as more stable and are seen as lacking in prime class A products, making them attractive to investors. In the first half of 2024, logistics real estate investments in Europe amounted to 16.5 billion euros, marking a 17% increase compared to the second half of 2023 and a 24% rise from the first half of 2023. According to Savills, these figures typically represent just under half of the annual investment volumes, suggesting that by the end of 2024, investments could reach approximately 35.9 billion euros. Carlo Walder, head of industrial & logistics at Savills Italy, notes that investments in Italy have reached 1.2 billion euros over nine months, showing a 17% year-on-year increase. Although the number of deals has decreased by 14 compared to the previous year, there is a sentiment of a more vigorous recovery expected from 2025. Current yields stand at 5.5%, with increases of 30 and 20 basis points in Milan and Rome, respectively, compared to 2023. The latest European Logistics Update H1 2024 by Cushman & Wakefield highlights Italy's attractiveness due to its competitive annual rental rates per square meter compared to major logistics hubs in France, Germany, the Northern ports, and even Spain. While two million square meters are under construction for 2025, the take-up has decreased by 25% this year, with the absorption rate stabilizing. However, there is a diversification in demand, particularly for class A spaces. Faustino Musicco, head of logistics, last mile, and data centers co-head I&L practice group EMEA at Colliers, explains that for the first time in the third quarter of 2024, retailers and end-users have surpassed 3PLs in terms of absorption. Nevertheless, a significant portion of the demand for logistics spaces still comes from 3PLs, accounting for about 36% of the total market demand. The demand for ESG-compliant assets is driving companies to seek new facilities, resulting in high absorption rates for new developments, with many projects being leased before completion. Older structures, on the other hand, are quickly exiting the market. Marco Grassidonio, managing director and country head of Garbe, notes that since the summer, investor sentiment has shifted, with Germany's difficulties prompting a renewed focus on Italy and Spain. There is cautious optimism and anticipation of a strong recovery in 2025, especially if further interest rate cuts occur. Investors are primarily value-add and core+, but there is a gradual return of core investors. As the cost of money decreases, phenomena such as supply chain shortening, regionalization of supply chains and warehouses, and reshoring of production will drive demand for spaces that may not be available due to the current financial constraints. The market is particularly lacking in logistics buildings with specific and tailored characteristics for long-term owners or tenants, such as properties for cooling (grocery, pharmaceuticals) and frozen goods.

Emerging Trends

The logistics sector in Italy is poised for significant growth, with potential impacts on the broader European market. As the demand for ESG-compliant assets increases, there will be a shift towards more sustainable and efficient logistics solutions. The regionalization of supply chains and the reshoring of production could lead to a greater need for localized logistics facilities, further driving investment in the sector.

Insights

The Italian logistics market is becoming increasingly attractive due to its competitive rental rates and the perceived stability of Southern European markets. The shift in demand patterns, with retailers and end-users surpassing 3PLs, indicates a changing landscape that could influence future investment strategies. The focus on ESG compliance is also shaping the market, as companies seek to align with sustainability goals.

Opportunities

1. Investment in ESG-compliant logistics facilities to meet growing demand.

2. Development of localized logistics hubs to support regional supply chains.

3. Expansion of logistics infrastructure to accommodate reshoring of production.

4. Exploration of innovative logistics solutions to enhance efficiency and sustainability.