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. land
UK
Nether
lands
Germany
CEE: Poland
Ukraine
CEE:Czech
Republic
France
CEE:
Hungary
ITALY
Portugal
Spain
CEE: Romania
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
o
o
o
o
o
o
Structured data exchange organisation
Market acceptance and trust
Shared definitions
Agreed data series
Independent publications
Training seminars
Data collection
WAY FORWARD
o Expanding membership
o Data analysis
A European Lesson
Low transparency – e.g. Spain
FEATURES
o
o
o
o
o
o
No formal agreement
Quarterly meetings
Exchange letting info.
Discuss markets
Researchers / Agents
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
o Reliability
Confidentiality
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 owneroccupiers, 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
opinion
o
Action
• IRF goals: an agreed IRF Prime Rent on an annual basis, using
– a definition
– a method
different expert
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
o
Action
IRF goals:
• improve the transparency of investment volume
• not harmonize the overview of Prime Yield
Different expert opinion
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
o
o
o
o
Set rules
Glossary
Geographical definition of market
Extend the working group to local players
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