The Italian Property Market

A Question of Transparency
IRF
Italian Research Forum
Agenda
Introduction to IRF
Claudia Buccini, Associate & Head of Research – Cushman & Wakefield Italy

A European Lesson: Forum and Network across Europe

Susan Trevor-Briscoe FRICS, Associate & Head of Research - Savills Italy

IRF: Why, How, Where

Valentina Puleio, Research Analyst – BNP Paribas REA Italy

IRF Proposed Definitions: Stock, Vacancy, Take-up

Rezarta Tasellari, Director & Head of Research – DTZ Italy

IRF Proposed Definitions: Prime rent, Prime yield, Pipeline

Mirko Baldini, Director – CBRE Italy

Conclusion
Raffaella Pinto, Senior Research Analyst – JLL Italy
 Introduction to IRF
Italy Research Forum

Claudia Buccini, Associate & Head of Research – Cushman & Wakefield Italy
Introduction
Italian Research Forum (IRF)
• The IRF started in 2003 – first approach C&W and JLL
• Current and future market trends
• Macro level market data

• Progressively structured: BNPP RE, CBRE, DTZ, Savills

• Property market definitions

• Why have we decided to promote the IRF?

• Improve market transparency
• Professionally respond to our Clients’ requirements

• The Italian Property Market: the last ten years

• Increasing volume of activity
• International players
• Credit Crunch
Introduction
Italian Research Forum (IRF)
• Transparency  Confidentiality
• Improve market transparency
• Respect the confidentiality of sensitive information

• Sharing information  Independency

• Open discussion on facts and figures
• Company background  Interpretation of market trends

• Office sector as a starting point

• Broader availability of information
• Weight in the asset allocation
• Retail and Logistics are the next steps
 A European Lesson
Forum and Network across Europe

Susan Trevor-Briscoe FRICS – Associate & Head of Research, Savills Italy

A European Lesson
o Different types of market

o Different setups for data exchange

o No data-exchange structure required

Forums established

Informal networks
A European Lesson
1. No data-exchange structure required
2. Forums established
3. Informal networks

Russia
Ire-

. UK
land Nether
lands
Germany CEE: Poland

CEE:Czech Ukraine
Republic
France
CEE:
Hungary CEE: Romania
ITALY
Port-
ugal
Spain
A European Lesson
High transparency – e.g. UK

FEATURES
o Independent data providers
(e.g. EGi, Focus)
o Pre-existing co-operational
environment
o Data collection - Data analysis

WAY FORWARD
o Weakness - Basic data
o Birmingham
o Manchester?
A European Lesson
Good/Average transparency – e.g. Germany (GIF)

FEATURES
o Structured data exchange organisation
o Market acceptance and trust
o Shared definitions
o Agreed data series
o Independent publications
o Training seminars
o Data collection

WAY FORWARD
o Expanding membership
o Data analysis
A European Lesson
Low transparency – e.g. Spain

FEATURES
o No formal agreement
o Quarterly meetings
o Exchange letting info.
o Discuss markets
o Researchers / Agents
o Partial data collection

WAY FORWARD
o Formalisation
o Extend market coverage
o Complete data collection
A European Lesson

Market maturity
and transparency

Type of exchange
structures

o Data exchange Data analysis

o Agreed definitions … Data series … Publications …
o Privacy Confidentiality
o Reliability Market acceptance and trust
 IRF
Why? How? Where?

Valentina Puleio, Research Analyst – BNP Paribas REA Italy

Italian Research Forum (IRF)
The main reasons for lack in transparency :

o Young market

o No law to publish data

o Unwillingness to share knowledge

o Competition

o Direct transactions

o Research “culture”
Italian Research Forum (IRF)
Why?

o Before international real estate firms came in Italy, there were

really few official statistics on commercial property-related
issues in Italy.

o Sources
• Public

• Private
Italian Research Forum (IRF)
Our main activity

o Quarterly office market reports:

• almost all aligned in the content
• different according to the client’s distribution method
or in the timing of publishing
o Letting and sales activity: providing information on:
• supply (stock, pipeline, completions, vacancy)
• demand (take-up)
• values (prime rents, average rents and prime yield)
o Covering two markets:
• Rome
• Milan
Italian Research Forum (IRF)
How?
o Coordinating quarterly meetings
• Players exchange information on the office market
• Discuss deals and data
o Information shared:
• Leasing Transactions
• Key office indicators and Market views
o Confidentiality
• Tenant information is not shared by the group if confidential
• Only the business sector’s activity is shared
o Each company is not obliged to published data shared during the
meeting
• Data is subject to revision before publishing
• However, as for the key data, the gap between agents has been
reduced during the years
Italian Research Forum (IRF)
Where?
IRF next steps

o In the Short term:

• Unique shared glossary for the Italian market

• Introduction of agreed rules for the Forum

• Involvement of other local real estate companies in the Forum

• Extension to other markets, beginning from Rome: some activity

has already started in this direction
Italian Research Forum (IRF)
Where?
IRF next steps

o In the Medium–Long term:

• Agreement on clear geographical definition of markets areas for

Milan and Rome

• Increase the number of shared items: Investment transactions

• Publish an annual press release consisting of market facts and

market trends
Italian Research Forum (IRF)
Market indicators:

o Stock

o Vacancy

o Take Up

o Prime Rent

o Prime Yield

o Pipeline
Italian Research Forum (IRF)
These are currently characterised as follows:

o Independently-determined Market Indicator figures for each

company.

o Agreement of Market Indicators shared by all IRF participants

has not yet been fully achieved.

o Quantity and quality of market evidence and other relevant

inputs remains variable within the IRF group.

o Professional ‘expert opinion’ may differ between companies.

IRF Proposed Definitions
Stock, Vacancy, Take-up

Rezarta Tasellari, Director & Head of Research – DTZ Italy

IRF Proposed Definitions : Stock
EXISTING STOCK : Total amount (occupied and vacant) of completed office space in buildings mainly
used for office purposes within a market as at the survey date (at the end of each quarter period).
o Includes:
• Commercial and public sector offices
• Purpose-built offices
• Converted offices (from retail/residential/industrial to office space)
o Sources:
• No public source for office stock that fits the RE definitions
o Weaknesses:
• The cadastral definition for “office” is different from the RE definition
• It is an estimated value
• The information on withdrawal is usually only available in few cases
o State of the art:
• Each advisor has an ESTIMATED total stock figure
• Different methodology and geographical submarkets
o Actions:
• Share and agree on a unique geographical definition of the market
• Census of office building, dividing the Milan market by brokers
IRF Proposed Definitions : Vacancy
VACANCY : Completed floor space offered on the open market for leasing or sale, physically
vacant for immediate occupation on the survey date (at the end of each quarter period).
o Includes:
• All vacant accommodation inclusive of space for sub-letting
o Sources:
• Agents’ mapping
• Funds’ financial balance sheets
• Websites of RE companies
o Weaknesses:
• Different methodologies to calculate total vacancy
• Immediate availability concept
• Different geographical submarkets
o State of the art:
• Each advisor has its vacancy data (different methodology and geographical submarkets)
o Actions:
• Share and agree on a single geographical definition of the market
• Revise and share current property databases
IRF Proposed Definitions : Take-Up
TAKE-UP: Total floor space known to have been let or pre-let to tenants, or sold or pre-sold to owner-occupiers,
during the survey period. A property is deemed to be “taken-up” only when contracts are signed.

o Includes:
• Also pre-lets/ pre-sales (this refers to a space that was planned or in construction stage).
• Lease renewals are counted as take-up with the additional size only.
o Sources:
• Agents mapping
• Press releases and newspapers articles (to be checked/confirmed by the landlords)
o Weaknesses:
• This definition is still open to the influence of some variations within IRF
• Normally is considered as “gross” area and sometimes also includes archive space
• The exact taken-up space is often rounded up or slightly increased
o State of the art:
• Exchange of the list of transactions made by each member’s own team
• Maintaining the confidentiality of information
o Actions:
• To share the “proposed” definition
• To co-operate with local brokers in order to increase market knowledge/data
• To agree on a single annual take up figure
IRF Proposed Definitions
Pipeline, Prime rent, prime yield

Mirko Baldini, Director – CBRE Italy

IRF Proposed Definitions: Prime Rent
PRIME RENT: The top nominal (not effective) rent for standard size (>500sq.m) property of
highest quality & specification and best location in the market.

o Companies’ “market view” constructed by :

• Market evidence (transactions closed and asking rents)
• Expert opinions

o Weakness
• Open to the influence of a series of variables (objective and subjective)

o State of the Art

• Independently-determined Prime Rent figure by each IRF Participant different expert
opinion

o Action
• IRF goals: an agreed IRF Prime Rent on an annual basis, using
– a definition
– a method
IRF Proposed Definitions: Prime Yield
INITIAL YIELD: The achievable yield for fully let & immediately income producing property of
highest quality & specification and best location in the market.
o Source
• Rental Income ÷ Purchase Price

o Weakness
• Gross Yield as market practice in Italy
• No relevant transactions Quoted hypothetical yield - expert opinion

o State of the Art

• Not “fact” but market view by each IRF Participants Different expert opinion

o Action
IRF goals:
• improve the transparency of investment volume
• not harmonize the overview of Prime Yield
IRF Proposed Definitions: Pipeline
PIPELINE: Total amount of floor space for:
– All developments under construction and/or
– Potential schemes (incl. major refurbishments) in the future

o Weakness
• No official source of information
• Hard to obtain the details & to follow the changes of the project

o State of the Art

• Independently managed pipeline data/info. by each IRF Participants

o Action
IRF goals:
• Share Office Pipeline
• Expand collaboration to include developers and public authorities
 Conclusion

Raffaella Pinto, Senior Research Analyst – JLL Italy

Conclusion
• What the European experience teaches us
• Lack of official statistics across all the countries
• Confidentiality is a shared issue
• Geographical market definition a key issue to reach consistency

• What are the main weakness that IRF is facing in sharing definitions…
• Geography issue  supply
• Quality issue  supply
• Confidentiality (privacy statement)
• Subjective factor influencing definitions

• …and achievements reached

• Agreement on take up definition
• Agreement on the Goal of the Forum
• Share increasing number of information's reducing gap
Conclusion
What are the next steps for IRF?

o Set rules
o Glossary
o Geographical definition of market
o Extend the working group to local players
o Annual press release on key market data shared within the
group

A greater involvement from our clients will help the IRF to

grow further in order to reach the same goal: market
transparency.
Conclusion

WHAT ’S YOUR COMMITTEMENT TO ACHIEVE

A BETTER TRANSPARENCY IN THE ITALIAN
MARKET?
Conclusion

THANK YOU
THANK YOU

Claudia Buccini, Associate & Head of Research - C&W Italy

Susan Trevor-Briscoe FRICS, Associate & Head of Research - Savills Italy

Valentina Puleio, Research Analyst – BNP Paribas REA Italy

Rezarta Tasellari, Director & Head of Research – DTZ Italy

Mirko Baldini, Director – CBRE Italy

Raffaella Pinto, Senior Research Analyst – JLL Italy