Property investment trends to look out for in Italy in 2021.
Trends in the real estate market in Italy for 2021
Photo by Matteo Raimondi on Unsplash

Some of the fundamental changes already underway in the real estate market in Italy and across the world, driven by technology and demographics, were accelerated by the coronavirus pandemic in 2020. Now, in 2021, the winners and losers will clearly emerge: with the help of Nuveen Real Estate, let's have a look at the 5 main trends that will guide real estate investments in the new year, both in Italy and on a global scale, in this real estate market overview for 2021.

Money available for real estate in 2021

Central bank policies and capital flows will support the housing market in Italy and beyond in 2021. The coordinated action of quantitative easing in 2020 has far exceeded the previous QE, creating a low rate environment aimed at increasing liquidity and capital flows in commercial real estate.

The yield potential should attract investors given the performance of asset classes during previous QE periods. Property yields have increased significantly in the US and UK following the liquidity injections of the global financial crisis and also in the Eurozone with the European Central Bank purchases in 2015, 2016 and 2017.

With such favourable market conditions, the industry is expected to rotate in the US, Europe and Asia, Italy included. Capital is likely to focus on logistics, alternative segments and residential sectors, while the retail trade will continue to experience difficulties and fall further behind.

Transformation of urban centres and suburbs

Because of the pandemic, people are rethinking their lives. Data in the US show that many are trying to escape from densely populated cities in search of larger spaces, a trend which has been growing across the world and is also the case in Italy. This trend will benefit the suburbs, Italian countryside areas and also smaller cities in Italy; while this shift to living outside the city centre will also fuel demand for alternative housing, such as single-family units and manufactured homes, rather than traditional multi-family condominiums.

E-commerce and smart work for the future

As people reconsider where and how they live, they also think about how they work and how they shop. All this is accelerating some of the fundamental changes that were already underway in the housing market before the pandemic. The rise of e-commerce has transformed purchasing habits and the pandemic has increased its use at all ages and in underdeveloped sectors such as food and healthcare. Logistics will continue to benefit, while further consolidation among retailers is expected.

Technology has also made it easier to work from home during closures, raising questions about the future of the office. Returning to the office in many cities and towns will depend on local demographics and infrastructure. In Europe, in cities with shorter travel times and a younger working class, people are likely to return to the office earlier: these are usually "lifestyle" cities with a second-tier profile.

Resilient real estate assets replace obsolete ones

As in any subsequent crisis and recovery situation, some assets will prosper while others will become obsolete. Investors will reassess the life cycle of assets in the light of new risks posed by the pandemic and long-term structural changes in terms of demographics, technology and sustainability.

When it comes to real estate in Italy and across the world, experts say that the recovery will be "K-shaped". The values and incomes of some asset classes, particularly in the hotel and retail sector, are likely to decline, but will increase for other assets, with some more in between . Alternative assets such as life sciences, medical practices, personal storage, single family homes, data centres and mobile phone towers are likely to be the sources of this positive performance. The fundamental drivers of these assets are less linked to currently uncertain economic factors. Disruptive technologies, such as driverless cars and innovations in food production and delivery, also present opportunities.

The wide range of opportunities and performance for real estate reinforces the need for diversification across property types, which should encourage greater allocation to alternative asset types.

Climate change

International mitigation and regulatory efforts are likely to gain new momentum in 2021, but the strength of the commitment varies by country and region. The property sector must respond to investor demands by ensuring that assets are managed responsibly and sustainably and in line with investor values. Italy, for example, is set to see increasing investment in the eco-friendly sector of wooden homes which are just one of many "green" solutions that are emerging in the Italian real estate market.