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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 - PowerPoint PPT Presentation
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The Italian Property Market A Question of Transparency
IRFItalian Research Forum
Agenda
Introduction to IRFClaudia Buccini, Associate & Head of Research – Cushman & Wakefield Italy
A European Lesson: Forum and Network across EuropeSusan Trevor-Briscoe FRICS, Associate & Head of Research - Savills Italy
IRF: Why, How, WhereValentina Puleio, Research Analyst – BNP Paribas REA Italy
IRF Proposed Definitions: Stock, Vacancy, Take-upRezarta Tasellari, Director & Head of Research – DTZ Italy
IRF Proposed Definitions: Prime rent, Prime yield, PipelineMirko Baldini, Director – CBRE Italy
Conclusion Raffaella Pinto, Senior Research Analyst – JLL Italy
Introduction to IRFItaly 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 LessonForum 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
Russia
ITALY
France
Ire- . land
Spain
Germany
CEE: Romania
Ukraine
UK
Port-ugal
CEE: Poland
Netherlands
CEE:Czech Republic
CEE: Hungary
1. No data-exchange structure required
2. Forums established
3. Informal networks
A European LessonHigh transparency – e.g. UK
FEATURESo Independent data providers
(e.g. EGi, Focus)o Pre-existing co-operational
environmento Data collection - Data analysis
WAY FORWARDo Weakness - Basic datao Birminghamo Manchester?
A European LessonGood/Average transparency – e.g. Germany (GIF)
FEATURESo Structured data exchange organisationo Market acceptance and trusto Shared definitionso Agreed data serieso Independent publicationso Training seminarso Data collection
WAY FORWARDo Expanding membershipo Data analysis
A European LessonLow transparency – e.g. Spain
FEATURESo No formal agreemento Quarterly meetingso Exchange letting info.o Discuss marketso Researchers / Agentso Partial data collection
WAY FORWARDo Formalisationo Extend market coverageo Complete data collection
A European Lesson
o Data exchange Data analysiso Agreed definitions … Data series … Publications …o Privacy Confidentialityo Reliability Market acceptance and trust
Market maturity and transparency
Type of exchange structures
IRFWhy? 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 DefinitionsStock, Vacancy, Take-up
Rezarta Tasellari, Director & Head of Research – DTZ Italy
IRF Proposed Definitions : StockEXISTING 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 : VacancyVACANCY : 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-UpTAKE-UP: Total floor space known to have been let or pre-let to tenants, or sold or pre-sold to owner-occupiers, 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 DefinitionsPipeline, 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 different expert
opinion
o Action• IRF goals: an agreed IRF Prime Rent on an annual basis, using
– a definition– a method
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 Different expert opinion
o ActionIRF goals:
• improve the transparency of investment volume • not harmonize the overview of Prime Yield
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 ActionIRF 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 Set ruleso Glossaryo Geographical definition of marketo Extend the working group to local playerso 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