Real estate, the fever for shopping centers is rising. The report
Investor interest in commercial properties is returning, especially large, mall-style ones. According to a survey conducted by EY’s Strategy and Transactions department, approximately 60% of the credit institutions interviewed financed the retail sector in 2023, of which 75% of the resources were allocated to shopping centersthe. This is what emerges from the update of the EY Retail Property Investments Barometer Italy, already conducted at the end of 2023 and aimed at evaluating the perception and trust in the Retail asset class within the real estate market Italian, with the aim of capturing the sentiment regarding investment and management strategies, as well as the future prospects of the sector.
The survey, which in October last year had already involved the main players in the sector, in particular real estate companies, fund and real estate asset management companies and financial investors at a national and international level, was extended at the beginning of year to the main Italian and foreign credit institutions active and operating in commercial real estate financing. With the collaboration of the National Council of Shopping Centers (Cncc), EY involved in the survey the main banking institutions historically active in providing finance to the Italian Real Estate sector, thus collecting perceptions and feedback on the potential of new financing for retail real estate initiatives.
Without prejudice to the evidence collected on the side investors at the end of 2023, it is explained from the survey conducted at financial institutions, some elements are common among the audience of owner-investors of the shopping centers and the banks interviewed while on others there is still a gap, and it is by working to reduce this gap that a restart of the property market can be allowed even in the short term transactions-investments.
In fact, the survey carried out shows how, despite a general “wait and see” approach on the part of both investors and financiers, the sector is showing signs of recovery, with returns that have presumably reached their peak: this will lead to a return of interest on the part of both parties involved in the investment processes (equity and debt side), explain the experts.
Comment Marco Daviddi, Managing Partner Strategy and Transactions of EY in Italy: “The Retail Real Estate sector shows elements of solidity despite the market challenges we are experiencing, with over 60% of managers planning to return to investing in the sector in the next two years. On the management side, the focus will move on two crucial fronts: energy efficiency and the optimization of commercial spaces to strengthen their appeal gear change towards more sustainable and attractive asset management in the medium term and goes along with the requests of the financing banks, attentive to the dynamics of the sector and with a positive attitude – albeit cautious – in the presence of strong covenants and solid real estate fundamentals. Market players are preparing to navigate a complex landscape, characterized by access to selective credit which must be guaranteed by a high space occupancy rate and particular attention to efficienza energeticto assets and the outgoing liquidity of investments. The meeting point between the characteristics of the investment opportunities sought by investors and those of the financiers will be the key to the creation of long-term value in the retail industry.”
In 2023 60% of the credit institutions interviewed provided financing for retail assets, of which three quarters in favor of shopping centres, 85% of which was directed towards the refinancing of existing credit positions. According to experts, this can also be explained by looking at the forecasts for 2024 which, although they confirm what was said in the introduction, highlight how over 70% of the banks interviewed are interested in financing the asset class but in the context of operations having a “core” type investment profile, in contrast with the wishes of investors who at the end of 2023 had shown a predisposition to make investments with a higher risk-return profile, of a “value add” or “opportunistic” type.
Comment Roberto Zoiapresident of Cncc: “The shopping center industry is investing many resources to support the evolution started in recent years which concerns, on the one hand, the offer, increasingly focused on the experience, with an increase in services in addition to the traditional shopping, and on the other the real estate assets, which aim for redevelopment also with a view to greater energy efficiency, to enhance the structures and contribute to their attractiveness. The attention of the banking world, as revealed by the survey carried out with EY,. continues to be fundamental to continue this virtuous process, combining investments and effective asset management strategies to position even more core products on the market, consequently also encouraging interest in possible operations in the sector”.
A reflection also emerges regarding the key conditions for accessing new financing, the experts further explain: credit institutions require a high employment rate (at least 90%) to finance new acquisitions or a pre-let rate above 50% and a certain exit for financing intended for value-add operations. The common ground between the prerogatives of the large property owners of shopping centers and the banks interviewed is, however, that ofand intervention policies for valorisation in an ESG key: as already demonstrated at the end of 2023 by investor-managers, also for credit institutions, an intervention policy regarding sustainability and improvement of the energy consumption performance of the centers, as well as their qualification with the highest levels of certification (Leed, Breem, Very good, etc.), is essential for the provision of new finance, which has become increasingly stringent in its requirements in line with current and prospective regulations on the subject.