MAPIC: Retail demand remains strong for Italian centres

The report said as development slows there will be strong retailer demand for existing shopping centres and retail parks with a focus on the quality of product.

The report shows that retailer demand continues to be strong, particularly from international chains such as Fnac, Footlocker and Zara.

Lionello Rosina, head of Savills in Italy, said: ‘Although negative economic and financial conditions are causing uncertainty amongst retailers and investors, the Italian out-of-town retail market never reached excessive levels of oversupply, so we continue to expect successful trading for quality schemes.’

Prime shopping centre rents currently stand at €800/sq m (£62.4 / sq ft) a year for units of 1,615 sq ft and €300/sq m (£23.41/sq ft) a year for units totalling between 10,763 sq ft – 16,146 sq ft.

On the investment front Susan Trevor-Briscoe, of Savills research, said: ‘There continues to be a mismatch between vendors and purchasers’ expectations. Prime yields have undoubtedly moved out.

‘But the extent of the yield shift, estimated on average at up to 100 basis points over a year, will be defined as activity recommences in 2009. Movement will be greater for secondary schemes, where as prime centres will be seen to suffer less.’

The report shows that the overall Italian economy is weakening: consumer prices increased by 4.1% in August 2008 and general spending is down.

However it finds that retail trade increased by 2.1% in July 2008 compared to the previous year.

Taking into account inflationary pressures, the value of retail sales from January to July 2008 was actually 0.1% lower than the same period in 2007.

There are currently about 795 shopping centres in Italy, totalling 124.9 million sq ft.

Savills predicts that the stalling of further development, along with a long Italian planning process will mean that the sector will not suffer from oversupply. Prime rents are likely to remain stable for good quality schemes.