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Milan: A Closer Look

By: Raffaella Cassese, SIOR

Milan is an important commercial and industrial centre, both within the European Union and internationally. It’s also a major Italian hub for services in the tertiary sector such as finance, fashion, publishing and industry. When considering doing business in Milan, you may be interested to learn some of the recent market reporting.

Milan is located in Lombardy, the most populated region of Italy with 10 million inhabitants, (that’s more than the whole of Switzerland or Austria or Benelux). Most well known for fashion and the opera, it is also the seat of the Italian Stock Exchange and is a great pole of attraction for the offices of multinationals (Google, Amazon, Apple, Sanofi, Novartis, British Telecom, Vodafone and Sky TV.) Milan is one of the major Italian cultural centres with seven universities, five English speaking schools and German, Swiss, French, Japanese, Jewish and Islamic schools, making up circa 200,000 students.

Although the Italian economy decelerated in 2022 amid higher geopolitical uncertainty, GDP growth was largely supported by consumption and investments.

According to many researchers such as Cushman & Wakefield and Monitor Immobiliare, the office sector was confirmed to be the best performing asset class. In the first three quarters of 2022, the volume reached €3.45 billion euro (US$ 3.71 billion) in Italy 78% of which was in Milan. Toward the end of 2022, prime net yields in the centre saw an increase for both Milan and Rome (from 3.50% to 3.80%) compared to the previous quarter, increasing in good secondary markets. Concerning office leasing, there was increased take-up in both Milan and Rome: corporate occupiers continued to seek to ensure flexibility within new leases, while employees also sought a measure of flexibility in their working lives by working from home. The attention of the occupiers remains constant to the services that the building offers to its tenants. As such, attention to ESG criteria – although difficultly accepted by owners – represents a real driving force destined to favour the sustainable improvement of real estate assets as well as representing a reputational objective for companies.

The biggest investment deal was the sale of “Cortile della Seta”, a very prestigious building located in the city centre, with 19.000 square metres (204,514 sq ft) of offices and 2.000 square metres of retail, allegedly sold for €350 million (US$ 377 million), completely refurbished and certificated LEED Gold, as it uses more than 50% of renewable energy sources.

According to several Italian real estate consultancy companies, take-up rates in Milan also reached record levels in 2022 with approximately 100,000 to 120,000 square metres taken up each quarter (+40% in comparison to the same period in 2021). Office demand was below 1,000 square metres (10,640 sq ft) and “grade A” buildings (76%). Approximately 35% of the demand involved accommodation located in central areas (CBD, historic centre), 28% in the suburbs, 21% in the hinterland and 16% in the semi-central area. Rents have increased reaching an average of €675 per square metre in the CBD and the city centre.

One of the biggest letting deals was the pre-let of approximately 20.000 square metres in the Sputh southern area of Milan, close to the Olympic village, which is under construction, that will welcome the OTB Group.

Another important transaction was the pre-let of a tower in the new business district of Garibaldi/Porta Nuova, rented to KPMG, 24 floors for 3.500 employees, with delivery date for beginning 2025.

However, it is important to note that, as a remaining consequence of the pandemic, offices are still occupied at maximum capacity for 70% of the working week. Peak usage sways significantly between Monday and Friday. Things are changing as remote work is mainly agreed as at maximum 30% of the total working time, but people, especially young people, prefer to work from the office. In recent years, as in many a metropole around the world, there has been a significant increase in temporary office accommodation such as WeWork and Spaces; they offer a very flexible length in the lease contract, and this is very welcome in this time of uncertainty.

“Milan is one of the most attractive cities in Europe, where we can see many investment opportunities for high quality and high standing assets.”

Milan is seeing some significant development projects entering the market. This is likely to have some negative effect on the city centre vacancy rate as office tenants see new, more flexible accommodation out of town. The city centre is perfect for smaller requirements and the older stock in the centre may be transformed into residential accommodation for which there is strong demand, given in part the influx of the population into the city centre, including 66,000 students arriving every year.

MIND is the Milano Innovation District (for biomedical companies and start-ups) from the developer Lendlease. Delivery is on-going and generally built only in the case of pre-lets. It consists of 100 hectares of mixed-use redevelopment, including 356,000 square metres of office accommodation, over 1,000 apartments, and 35,000 square metres of retail space.

The 2026 Winter Olympics are scheduled to arrive in Milan in February 2026 (as well as in the winter ski resort of Cortina d’Ampezzo) and the region is planning numerous redevelopments including the creation of the Olympic Village and office campus by the transformation of a railway station, providing 60,000 square metres.

“Milan is one of the most attractive cities in Europe, where we can see many investment opportunities for high quality and high standing assets.” Florian Winkle, co-responsible of core/core plus real estate strategy in Macquarie Asset Management (Sole 24 ore, November 18th, 2022).

Milan is constantly changing respecting the commitments that were made after the deindustrialization began. It is an international city with a European, nay Italian, flare, with more and more energy-saving, low-emission buildings, Leeds and EEG certified constructions. The urban regeneration is driving the whole region, in particular Milan, as well as other cities in the Lombardy region.

The city is going green—there is an emphasis on reducing emissions, closing the city to diesel and polluting private cars and building new underground trainlines. In turn this makes Milan more attractive to companies, employees and international students.

Don’t miss out on the SIOR European Chapter’s “Mind Your Own Business” (Generation) meeting being held in Milan this September. All SIOR members are welcome to attend and are invited to visit the Chapter website to find out more.


Media Contact
Alexis Fermanis SIOR Director of Communications
Raffaella Cassese, SIOR
Raffaella Cassese, SIOR
Target Real Estate

Raffaella Cassese, SIOR, is an office specialist from Milan, Italy and the head of corporate services for Target Real Estate.