Quo Vadis Italia: A Year of Residential Investment and a visit to Milan BTR
I am looking forward to my second trip to Cannes and MIPIM with my colleagues from across Europe, the United States and Asia. After just over a year at DLA Piper I am able to look back on some real “international” highlights of the last twelve months. Along with visits to our offices in the Netherlands and Helsinki (as well as MIPIM) as part of our international team effort in Build to Rent (BTR) and other large residential investment, another high point was my trip to our Milan office in October. My aim was to attend our Quo Vadis Italia real estate conference and to meet with clients and contacts now working in Italian BTR.
There are a number of similarities between Italian BTR and the residential market as it was in the UK ten years ago which present hurdles to its development. There is still a certain amount of scepticism to be found when you discuss the market. As we saw in the UK, there was no established rental investment industry like those in some other European countries and Italians are regarded by many as a nation of homeowners. Furthermore, like everywhere else now, high interest rates have been making transactions difficult, valuations are uncertain and there are some particular tax/VAT issues to be solved. Nevertheless, Milan in particular is a city of growth and opportunity where BTR is taking hold.
Even if the present focus is very much on Milan, the potential for further BTR investment there may prove to be huge. This could readily replicate what happened in some UK cities. The demographics mean there is a young and professional workforce with high salaries who desire flexibility as well as good quality accommodation. With the potential economic benefits of the 2026 Winter Olympics following the successful Milano Cortina bid, the appeal of Milan is only expected to increase. The expectation is that this will bring more young professionals and more internationalisation. A target customer base who can pay the rental levels that are needed to underpin new investment and who are not yet looking to be tied into home ownership.
Not only is the home ownership backdrop similar to what we saw in the UK but, as with the UK market of the past, there is comparatively little residential operational management experience here yet. Developers are also more used to catering for the private sales market. Some of the major players are responding to the management need by repurposing existing commercial teams while others are importing experience from the UK and elsewhere. Whereas UK operators initially had to seek skills from the US, those in Italy now have more locations to select from.
I met Gabriele Magotti, CEO of Milestone Asset Management. He certainly saw the potential for growth and the demand for specialised management expertise. He talked about his company: "In Italy, the build-to-rent sector presents a compelling opportunity. Our ambition is to develop a portfolio of new, professionally managed, and energy-efficient residential properties for rent. The market is currently characterized by a significant demand-supply imbalance, with much of the housing stock being antiquated and inefficient. This is coupled with a robust demand, driven not only by secular trends but also by prevailing macro-economic conditions.”
This view was echoed at Lendlease who are developing in Milan at pace. Talking with Graeme Parry, Chief Executive of Lendlease Italy, he told me: “Lendlease is focused on leveraging the success of our 'Living By Lendlease' platform in the UK to expand our Build to Rent offering across Europe. Particular focus will be given to Milan which continues to confirm its position as a top European gateway city and where Lendlease is developing two large mixed use projects, Milano Santa Giulia and Mind. As we contributed to the establishment of the BTR market in London by offering a combination of quality construction with modern amenities and sustainable design, we look forward to leading the Italian and European BTR market by developing and operating a product highly sought-after among investors and residents alike.”
Milano Santa Giulia is a 110 hectare mixed use development with the potential for 3400 new homes along with a new commercial and entertainment district which is aiming for zero carbon emissions. The MIND-Milano Innovation District is a significant new mixed use precinct North West of the City Centre where Lendlease and its co-investors are developing over 1000 apartments for rental. Both are fabulous examples of regeneration and demonstrate the potential for rental homes to be the new anchors for significant new development areas, especially where the green credentials are at the forefront of the offering.
As we move through 2024 I will certainly be looking for more opportunities to work with my Italian colleagues while the range of our clients entering the Italian BTR market continues to expand. In fact we will be collaborating again at MIPIM.
