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Milan’s rising rent, office space shortage sparks investing spree

A slow recovery from the global financial crisis left Milan underdeveloped

(Credit: iStock)
(Credit: iStock)

Investor demand for prime office space in Milan has surged amid a shortage of Class A buildings in the financial capital of Italy.

Sources told Bloomberg negotiations that could change the ownership of several trophy office buildings in Milan are underway. Among other potential deals, the State Oil Fund of the Republic of Azerbaijan may sell Palazzo Turati for about 112 million euros to Invesco Real Estate.

The billionaire Rovati family is in talks to acquire Piazza Cavour for about 170 million euros to DeA Capital Real Estate SGR SpA.

Blackstone Group is offering up Goldman Sachs’ new Milan offices for more than 100 million euros.

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A lack of development in Milan has led to a shortage of office space. The global financial crisis a decade ago had a prolonged impact on the real estate market in Italy due to the slow pace of recovery among banks, which restrained lending.

Average monthly office rent in Milan rose to 585 euros per square meter in the first three months of the year, up 1.7 percent from the same period last year, while office vacancy fell by about a half percent, according to JLL.

Last year, the volume of new office leases in Milan hit a record 381,000 square meters, or 4.1 million square feet, CBRE reported.

Prime yield, or annual rent as a percentage of the price of an office building, is roughly 3.6 percent in Milan, compared to 3 percent in Paris and Amsterdam and less than 3 percent in Berlin and Frankfurt, according to first-quarter data compiled JLL. [Bloomberg] – Mike Seemuth