it did in the previous GFC: more solid fundamentals, a record ever year in 2019, huge liquidity to be deployed in the real estate sector, at least €20 bn equity according to a recent investment survey by Cushman & Wakefield . attracted unprecedented capital flows from foreign investors, and it is in the middle of a new Renaissance. A number of regeneration projects are reshaping the city, which is moving outside the Municipality’s border and getting bigger: the Greater Milan. ITALIAN 2020 These are some of the factors that made the half yearly data better than expected REAL ESTATE and that will continue to underpin the real estate performance in the coming OVERVIEW months.Investment has been supported H1 by the strong pipeline seeded last year standing at approximately €4 bn, “only” 25% below last year volume. Investors are changing strategies, with a more cautious approach and long-term view, but they are still there looking for opportunities.

We captured both investors and consumers sentiment and the outcome surprised us in a positive way. There’s a INDEX

INTRODUCTION 3

ECONOMY 4

CAPITAL MARKETS 6

OFFICE 12

RETAIL 26

LOGISTICS 34

HOSPITALITY 42

LIVING 50

CONTACTS 54

CONTACT

2 Cushman & Wakefield | Italian Real Estate Overview H1 2020 COVID-19 has changed our lives. As a spread of the virus are still present, we global community, we are finding our are getting used to living with it. Since way forward, taking it one day at a time the end of the lockdown, retail footfall and accept we will continue to navigate recovered almost 80% of it was pre-covid through “unchartered waters” at least and people still appreciate the “physical” until the beginning of 2024, when 2019 shopping experience despite the growing GDP level should be recovered. In Italy the online retail during the lockdown. It will real economy will be hard hit and estimate be a different experience from the pre- for 2020 GDP reflects a contraction covid: less leisure and more “focused on of more than 9% with the anticipated essential shopping”. impact on the labor market still difficult to assess. There has been unprecedented Hospitality sector, which is suffering most levels of financial support from both the in terms of occupancy due to low tourist Government and the EU and we have flows, continue to be under the investors’ seen some positive effects on households spotlight. Tourism is one of the biggest and businesses during May and June. The industries in Italy, representing 13% of recently approved EU Recovery Fund GDP, but the market is characterized marked a further positive step on the by a fragmented ownership with lack way to economic recovery and boosted of international hotel chain penetration confidence in the financial markets. We and quality supply. This moment could believe it will continue to support the represent an opportunity to enter the economy in the second half of the year Italian hospitality market for international and create a positive position as we move investors with an aim to create new quality through 2021 and 2022. supply and to potentially implement a new platform in the Country. From a real estate perspective, Italy entered this crisis in a better shape than it The living sector is accelerating its steps did in the previous Global Financial Crisis: towards institutional real estate. In the more solid fundamentals, a record ever first half of 2020 6% of the investment year in 2019, huge liquidity to be deployed flows into living from a negligible level in in the real estate sector, at least €20 bn the previous years. Structural changes in equity according to a recent investment demand combined with its resiliency are survey by Cushman & Wakefield Italy. driving investors to this “new” sector. This Milan attracted unprecedented capital will be the big challenge and opportunity flows from foreign investors, and it is in the facing the Industry for the future. middle of a new Renaissance. A number of regeneration projects are reshaping Overall, we’re seeing our world under big the city, which is moving outside the pressure from the ongoing changes but Municipality’s border and getting bigger: also demonstrating an amazing ability to the Greater Milan. These are some of the adapt. From the workplace to warehouses factors that made the half yearly data and everything in between, there is no better than expected and that will continue question that real estate is in the process to underpin the real estate performance in of evolving.There are not winners or losers, the coming months.Investment has been there are sectors that will be able to adapt supported by the strong pipeline seeded to changes faster and other that will last year standing at approximately €4 take more time. And this is not because bn, “only” 25% below last year volume. of Covid-19, it’s the normal evolution. Investors are changing strategies, with a more cautious approach and long-term view. We captured both investors and consumers sentiment and the outcome surprised us in a positive way. There’s a strong desire from people to come back to “normality.” Although fears about the

Cushman & Wakefield | Italian Real Estate Overview H1 2020 3 ECONOMIC OVERVIEW

GDP. The COVID-19 outbreak is hitting GDP, CONSUMPTION % YEAR CHANGE AND FORECAST the real economy and half yearly data indicates a decline of 12.5% compared 8% to last year. The huge financial measures 6% introduced by the Government and EU 4% are partially supporting a recovery with 2% Q3 GDP expected to increase by 11%. It 0% will not prevent yearly data exceeding a -2% -4% 9% contraction in 2020. The impact of this -6% crisis will be felt for an extended period of -8% time, and it will take until 2024 to return to -10% 2019 level. The worsening of household’s -12% incomes affected private consumption: 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 the uncertainty about the future is driving GDP Consumption up personal saving thus pulling down Source: Oxford Economics, Cushman & Wakefiled resources for consumption.

The immediate impact UNEMPLOYMENT RATE % LABOUR MARKET. 12% of the pandemic has been that Companies used the Government benefit of the furlough, extended until the end of August: 11% as of May, almost a third of workers are supported by it. It partially explains why 10% unemployment forecast for 2020 stands at 10.4%, aligned with the previous years 9% and partially affected by the temporary fall of the participation rate. Despite that, since February, 500,000 employees 8% lost their job. Overall, Government and 2017 2018 2019 2020 2021 2022 2023 2024 2025 Corporates are trying to understand the Source: Oxford Economics, Cushman & Wakefiled long-term implication on the job market, which is still unclear. CONSUMER AND BUSINESS CONFIDENCE INDEX

CONSUMER, BUSINESS CONFIDENCE. 120 Positive signals from households and 110 firms, post lockdown, showing a cautious 100 optimism driven by improved health 90 conditions. The consumer confidence 80 index has recovered from the past months 70 and has now overcome the baseline 60 value. The economic and future climate 50 components show the highest values, providing positive expectations for the future. Business confidence performed Note: ConsumerConsumer and confidenceBusiness confidenceBusiness data confidence do not include April data, particularly well in June, showing favorable since it has not been published by the national statistical institute. signals for all the sectors that are part of the index. Source: ISTAT, Cushman & Wakefiled

4 Cushman & Wakefield | Italian Real Estate Overview H1 2020 COVID-19

Following the softening of containment 200

measures, combined with the Spring and 150 a desire for “normality”, people are slowly taking their lives back and taking part in 100 regular activities as pointed out by the 50

latest mobility data released by Apple and 0 Google.

driving transit walking Baseline Driving and walking mobility has overcome the baseline values since June 3rd in correspondence with the borders’ opening. Source: https://www.apple.com/covid19/mobility On the other side, public transport remains behind due to the decrease in commuting GOOGLE MOBILITY DATA and the fear of contagion, making people 60% more likely to walk or use alternative 40% mobility (bike, scooter, etc) to their local 20% 0% high street. -20% -40% People are slowly coming back to their -60% -80% offices although the flows are still below -100% pre-crisis level. Smart working policies are -120% now well-established in several big firms and will probably last until the end of the Retail & Recreation Workplaces Residential year and will continue to be part of the Note: positive peaks recorded by the workplaces index (red line) correspond new normality in the labor market. Google to non-working days, in which values are aligned with the pre-crisis levels. records a recovery for retail locations, balanced by a smoothing of the residential Source: www.google.com/covid19/mobility index to normal levels.

C-19: THE EVOLUTION OF THE PANDEMIC IN ITALY

th th First Chinese citizens and 14 other provinces are Between May 4 and 18 , a gradual recovered in Rome. declared «red zones» Closure of cinemas re-opening of all activities. F&B Suspension of and theatres Nationwide limits to personal operators, Manufacturing, Construction, connections with mobility (except for need, work or health Wholesale, Brokerage activities can China. reasons). Non essential activities are restart. Softening of mobility limitations. ordered to stay closed. Stores are allowed to reopen, provided the respect of the safety measures.

Jenuary February March April May June

First cases in Lodi area. Areas Few categories are authorized Regional borders are reopen. in Lombardy and Veneto are to reopen the stores Theatres, cinemas and classified as “red zones”. (bookstores, stationery shops, recreational structures for babies clothing stores). children will be allowed to reopen.

Cushman & Wakefield | Italian Real Estate Overview H1 2020 55 CAPITAL MARKET ITALY

6 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “INVESTORS LOOKING AT THE MARKET TRYING TO MOVE INTO A MORE ACTIVE INVESTMENT PHASE WITH THE VIEW OF PLACING A SIGNIFICANT INVESTMENT VOLUME”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 7 CAPITAL MARKETS ITALY

Half yearly data is down 25% on last are usually closed in Q4. According to year: solid pipeline from 2019 supported our deal tracker almost 35% of previous this result. There has been a change in pipeline activity is withdrawn or put on the source of capital targeting Italy, with hold. Investors are increasingly looking at domestic investors strengthening their long term and more defensive strategies position, investing 54% of the total in the to create and keep value along the cycle. first half 2020. Newcomers and cross- The lower level of Bond yields will continue border investors are adopting a “wait to make real estate investment attractive. and see” stance and/or a more cautious On the other side of the risk curve, a approach. A few factors contributed to smaller number of investors are still the half year result: looking for opportunities. CRE INVESTMENT VOLUME EVOLUTION • Strong activity in the first quarter, According to the Cushman & Wakefield mainly sourced in 2019, only slightly deal tracker: affected by the restrictions introduced • Core and Core + deals showed more regards travel and face to face resilience across all the asset classes. meetings. • Opportunistic deals have no assets • A couple of structured deals, such withdrawn but 17% of assets delayed as COIMA / UBI transaction while value add deals have 19% of (circa €800Mln) and Esselunga assets withdrawn and 15% of assets portfolio (circa €400Mln) which delayed. alone accounted for a quarter of the total half yearly volume. • The number of new assets on the market is growing slightly compared We believe that the effect of the COVID with the beginning of the “Phase II” of – 19 will be more evident in Q3 and Q4 the pandemic, but the general scarcity which will lack the “fuel” from deals is still confirmed. prepared between May and June which INVESTMENT VOLUME PRIME YIELD EVOLUTION ITALY MILAN* ROME €3.8Bn €1.6Bn €366Mln DOMESTIC CAPITAL 54% 68% 80% CROSS BORDER CAPITAL 46% 31% 20% 2020 *1% source unknown 8 Cushman & WakefieldH1 | Italian Real Estate Overview H1 2020 COVID-19 TRACKER Available 14%14%

We tracked all deals on the market from 2% Withdrawn 35%35% 15th February 2020 (beginning of Covid Delayed – 19 pandemic) to 30th June 2020. 10% Bids

15% Under Offer Exchanged 19% 5%5% 19% Completed

CRE INVESTMENT VOLUME EVOLUTION

14.000 1st Half 2nd Half 12.000

10.000

8.000 Millions 6.000

4.000

2.000

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

PRIME YIELD EVOLUTION

Shopping centers 5,75% Logistics 5,00% Prime office3,25% High street 3,00% Interest reate, 10 years government bond yield june 30: 1.64% 9,00%

8,00%

7,00%

6,00%

5,00%

4,00%

3,00%

Prime net yieldPrime 2,00%

1,00%

0,00% dic-11 giu-11 dic-17 dic-12 dic-15 dic-13 giu-17 dic-18 giu-12 dic-16 dic-19 giu-15 giu-13 dic-14 giu-18 giu-16 giu-19 giu-14 dic-10 giu-10 dic-07 dic-02 dic-05 dic-03 giu-07 dic-08 giu-20 dic-06 dic-09 giu-05 giu-03 dic-04 giu-08 giu-06 giu-09 giu-04

Cushman & Wakefield | Italian Real Estate Overview H1 2020 9 INVESTORS’ SURVEY

We conducted an Investors’ Survey improvement in health conditions and between May 11th and May 29th, 2020. huge financial stimulus. A total of 75 investors, currently active CURRENT ACTIVITY IN TERM OF ACQUISITIONS in the Italian market, participated. A general optimism emerged, driven by

CURRENT ACTIVITY ON THE MARKET respondents still active on the market and capable of submitting LOIs. 82%

DEMAND VS SUPPLY MISMATCH

WHAT AMOUNT OF EQUITY DO YOU HAV E AVAILABLE TO MILLION WHAT IS YOUR TOTAL OBJECTIVE IMPLEMENT YOUR ACQUISITIONS? EUROS FOR ASSET DISPOSALS IN 2020? 26% 500+ 1% 35% 200-500 8% 100-200 14% 24% 50-100 19% 10% <50 31% N/A

There are approx. 20 billion Euros of equity ready to be deployed in 2020 and 6 billion of assets to be sold.

DEBT FINANCING REQUIREMENTS

More selectivity based on asset classification Higher costs 41% 36%

Higher proportion of equity capital required 23%

Debt financing conditions for real estate more difficult for 90% of investors

10 Cushman & Wakefield | Italian Real Estate Overview H1 2020 CURRENT ACTIVITY IN TERM OF ACQUISITIONS

74%74% 75% 51% RESPONDENTSHaveHAVE changedCHANGED theirTHEIR have changed their have changed their INVESTMENT STRATEGY, MAINLY CONCERNING expected equity allocation ASSET CLASSESinvestment& INVESTMENT strategyPROFILE investment risk profile

CURRENT ACTIVITY IN TERM OF ACQUISITIONS How does allocation change in terms of asset classification

61% 55% 80-90% RESIDENTIAL OFFICE RETAIL

table = ecrease S D i on allocat i on allocat

73% 47% 43% LOGISTICS = HEALTHCARE HOTELS ncrease I i on allocat 38% Hotel Sector is under the investors’ spotlight HOTELS with 38% increases allocation and, on the other side, with 43% decreases the allocation

CURRENT ACTIVITY ON TERM OF ACQUISITIONS How does allocation change in terms of investment profile

Predominance / consolidation of 46% 50% defensive strategies CORE CORE+

EXPECTATIONS ON THE LEASING MARKET DEBT FINANCING REQUIREMENTS

Estimated time for the BEFORE END NOT BEFORE NOT BEFORE letting market to return 2020 2021 2022 to normality

Expectation on rental levels RAISE LOGISTICS OFFICE HOTEL

STABLE RESIDENTIAL RETAIL Debt financing conditions for real estate more difficult for 90% of investors DECLINE HEALTHCARE

Cushman & Wakefield | Italian Real Estate Overview H1 2020 1111 OFFICE MARKET ITALY

12 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “OFFICE IS CONFIRMED AS THE MOST SOUGHT-AFTER ASSET CLASS, SUPPORTED BY SOLID FUNDAMENTALS, CONSOLIDATED OVER THE PREVIOUS YEARS”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 13 OFFICE SECTOR

After the robust take-up activity from first in the Centre (50,000sqm) and the corporate sector last year in both Milan second in the Greater Eur (15,000sqm) and Rome, leasing activity slowed down submarket accounted for roughly 25% in the first half of 2020 as a combined of Rome’s take up last year. Quality is result of the uncertainty generated by the confirmed as the main demand driver in Covid-19 pandemic and the structural slow both markets: efficiency, wellbeing and down following the strong performance health & safety are the new keywords from of last year. In Milan take-up stood at corporates looking for spaces. In Milan 163,000sqm, a decrease of approximately the strong demand for quality spaces 30% compared to the first half of last continue reducing Grade A vacancy rate year and in Rome the contraction has to an ever-lower level. been even deeper: nearly 75% reduction reflecting a take-up of 45,500sqm. Milan Despite the market contraction, top quality figures have been affected by two large assets are maintaining stable prime rental transactions, accounting almost 40% on levels and in line with the end of 2019. the total take-up and involving UBI Bank, Lack of quality supply is expected to a domestic bank which is consolidating continue supporting prime rents, at least its footprint in Milan and SAIPEM, from in the short term, although incentives are the oil and gas sector. Both transactions likely to increase as an instrument to run are the conclusion of a long negotiation negotiations. process seeded last year. A more evident effect from the economic In Rome the reduction is due, mainly, slowdown due to the Covid-19 pandemic, to the lack of large transactions which is the increasing request from corporate characterized 2019 – the best year on to renegotiate their rents: deferments, record – some of which were carried out rent reduction or additional incentives. by the Public sector, one of the city’s key tenants; in particular two relocations the TAKE UP MILAN ROME

163,100sqm 45,500sqm PRIME RENT

€6O0sqm/yr €470sqm/yr PRIME YIELD

3.25% 2020 3.75% 14 CushmanH1 & Wakefield | Italian Real Estate Overview H1 2020 Landlords, in order to retain tenants are in the first half, +2% on last year. Milan likely to form even tighter relationships with and Rome comprised almost 90% of the them through a greater understanding of whole volume, with Milan concentrating the nature of their businesses. over 75% of the total office volumes and more than 80% of the total investment Corporates which started at the beginning volumes of the city, accounting at circa of the year the “stay vs go” exercise, are €1,6Bn. Rome, with a half yearly volume becoming more cautious, putting their at circa €366Mln for all sectors, attracted decision making processes on hold. Their 66% of the whole investment volume in main concern is about slumping demand the office sector. Although lower than that will hit profitability thus cost saving the levels seen in Milan, Rome data is will become central in their real estate aligned with first half 2019: the city is still strategies. Smart working will become attracting investor interest but on a more part of their business models and, in selective basis. some cases, it could see them reducing space currently occupied by releasing or Prime yields are stable in both markets subleasing excess requirements. These although the spread between prime and trends will be clearer in the second half of secondary properties is widening. the year.

Analyzing the Investment side of the market Office is confirmed the most sought-after asset class, attracting almost 50% of the total investment: €1,820Mln

OFFICE INVESTMENT VOLUME

6.000 1st Half 2nd Half 5.000

4.000

3.000 Millions

2.000

1.000

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cushman & Wakefield | Italian Real Estate Overview H1 2020 1515 OFFICE SNAPSHOT MILAN

“ALTHOUGH THE COMPLETION OF SOME PROJECTS MAY PRIME RENTS EVOLUTION BE DELAYED DUE TO THE RECENT TWO MONTHS STOP IN CONSTRUCTION WORKS, THE PIPELINE IS IMPROVING AND APPROXIMATELY 1MLN SQM ARE CURRENTLY UNDER CONSTRUCTION, OF WHICH 45% PRE-LET”.

DEVELOPMENT PIPELINE

UC - Pre-let UC - Speculative Potential

CBD - Historic

CBD -

CENTRE

SEMI-CENTRE

PERIPHERY

HINTERLAND

- 100 200 300 400 500 600 700 Thousands sqm OFFICE TAKE-UP EVOLUTION AND AVERAGE DEAL SIZE 500 2.500

450

400 2.000 ) ) 350 sqm sqm ( 300 1.500 size 250 Thousand deal 200 1.000 up ( - 150 Average Take 100 500

50

0 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1st Half 2nd Half Average deal size

PRIME RENTS EVOLUTION 700

600

500

400

300

€ / sqm / yr / / sqm € 200

100

0

CBD Centre Semi-centre Periphery Hinterland

OFFICE INVESTMENT EVOLUTION

4.000 1st Half 2nd Half 3.500

3.000

2.500

2.000 Millions

1.500

1.000

500

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cushman & Wakefield | Italian Real Estate Overview H1 2020 17 MILAN CITY TRENDS

MIND CBD CENTRE Take-Up H1 ‘20: 50,160 sqm Take-Up H1 ‘20: 7,843 sqm Prime Rent: 600 €/sqm/year Prime Rent: 480 €/sqm/year Prime Yield: 3.25% Prime Yield: 3.75% Pipeline UC ‘20-24: 245,000sqm Pipeline UC ‘20-24: 77,850sqm • pre-let: 46% • pre-let: 64%

SEMICENTRE PERIPHERY Take Up H1 ‘20: 14,900 sqm Take-Up H1 ‘20: 77,410 sqm Prime Rent: 370 €/sqm/year Prime Rent: 280 €/sqm/year SESTO SAN GIOVANNI Prime Yield: 4.50% Prime Yield: 4.75 % Pipeline UC ‘20-24: 173,820sqm Pipeline UC ‘20-24: 377,700qm • pre-let: 27% • pre-let: 33%

HINTERLAND Take-Up H1 20: 12,770 sqm CITY LIFE Prime Rent: 240 €/sqm/year Prime Yield: 5.75% Pipeline: 107,500sqm • pre-let: 100%

NEW CLUSTERS

LORENTEGGIO

MIND SCALO FARINI Pipeline UC+Potential 2020-2024: Pipeline UC+Potential 2020-2024: 155,000sqm 110,300sqm

CITY LIFE DISTRICT PORTA NUOVA Pipeline UC+Potential 2020-2024: Pipeline UC+Potential 2020-2024: 175,000sqm 237,200sqm

SANTA GIULIA SCALO DI Pipeline UC+Potential 2020-2024: Pipeline UC+Potential 2020-2024: 46,000sqm 96,500sqm

HINTERLAND

ASSAGO 18 Cushman & Wakefield | Italian Real Estate Overview H1 2020 12.3Msqm 8.6% MILAN STOCK VACANCY RATE CITY 45% 982,000sqm SPACE UC PRE-LET TOTAL SPACE UC

SESTO SAN GIVANNI

BICOCCA

MACIACHINI

SCALO FARINI

VÄSTRA KUNGSHOLMEN

CITY LIFE PORTA NUOVA

DUOMO

CBD SEGRATE CENTRE

TORTONA

SCALO DI PORTA ROMANA

SANTAGIULIA PERIPHERY

HINTERLAND

SAN DONATO OFFICE TAKE-UP EVOLUTION AND AVERAGE DEAL SIZE OFFICE SNAPSHOT ROME

“IN ROME GRADE A SUPPLY IS NEGLIGIBLE AND PIPELINE COMPRISES LITTLE MORE THAN 20,000SQM OF NEW BUILDINGS UNDER CONSTRUCTION (2 SCHEMES) AND CIRCA 215,000SQM

UNDER REFURBISHMENT (12 PROJECTS), THE MAJORITY PRIME RENTS EVOLUTION OF WHICH SPECULATIVE. AS TENANTS ARE INCREASINGLY LOOKING TO MOVE INTO MORE MODERN AND EFFICIENT PREMISES, LANDLORDS OWNING PROPERTIES IN PRIME LOCATIONS SEEK TO IMPROVE THEIR ASSETS IN ORDER TO SECURE A TENANT AND LIMIT VACANT PERIODS”.

DEVELOPMENT PIPELINE

CBD

Centre

Semi Centre

Greater Eur

Periphery

0 20.000 40.000 60.000 80.000 100.000

Speculative Prelet OFFICE TAKE-UP EVOLUTION AND AVERAGE DEAL SIZE

300 3.000

250 2.500

200 2.000

150 1.500

100 1.000 up (Thousands sqm) (Thousands up - Average Deal Size (sqm) Deal SizeAverage

Take 50 500

0 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1st Half 2nd Half Average deal size

PRIME RENTS EVOLUTION

CBD Centre Semi-centre Greater Eur Periphery

600

500

400

300

€/sqm/yr 200

100

DEVELOPMENT PIPELINE 0 2011 Q2 2017 2012 2015 2013 2018 2016 2019 2014 2010 2020

OFFICE INVESTMENT EVOLUTION

1.400 1st Half 2nd Half 1.200

1.000

800 Millions 600

400

200

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cushman & Wakefield | Italian Real Estate Overview H1 2020 21 ROME CITY TRENDS

CENTRE SEMICENTRE CBD Take Up H1 ‘20: 5,300sqm Take-Up H1 ‘20: 4,133sqm Take-Up H120: 8,800sqm Prime Rent: 300 €/sqm/year Prime Rent: 470 €/sqm/year Prime Rent: 350 €/sqm/year Prime Yield: 6.00% Prime Yield: 3.75% Prime Yield: 4.25% Pipeline: 80,000sqm Pipeline UC ‘20-24: 18,800sqm Pipeline UC ‘20-24: 90,000sqm • pre-let: 94% • pre-let: 36% • pre-let: 63%

GREATER EUR PERIPHERY Take-Up H1 ‘20: 15,000sqm Take-Up H1 ‘20: 12,300sqm Prime Rent: 340 €/sqm/year Prime Rent: 160 €/sqm/year Prime Yield: 4.25 % Prime Yield: 8.00% Pipeline UC ‘20-24: 36,500sqm Pipeline UC ‘20-24: 12,000sqm • pre-let: 52% • pre-let: 0%

OTHER CLUSTERS

FIUMICINO CORRIDOR TIBURTINA CINECITTA’ Prime Rent: 220 €/sqm/year Prime Rent: 120 €/sqm/year Prime Rent: 180 €/sqm/year Prime Yield: 7.00% Prime Yield: 7.50% Prime Yield: 7.00% Pipeline planned: 70.00sqm

FIERA DI ROMA

CBD

22 Cushman & Wakefield | Italian Real Estate Overview H1 2020 10.08M sqm 11.5% STOCK VACANCY RATE ROME 34% 237,300sqm CITY SPACE UC PRE-LET TOTAL SPACE UC

TIBURTINA

CBD

CENTRE

SEMICENTRE

CINECITTA’ CENTRE

PARCO DE MEDICI GREATER EUR PERIPHERY

FIERA DI ROMA FIUMICINO CORRIDOR

HINTERLAND

Cushman & Wakefield | Italian Real Estate Overview H1 2020 2323 TOTAL WORKPLACE ECOSYSTEM

One of the effects of the current crisis respondents agree or strongly agree that is the acceleration in the use of smart they are collaborating effectively with working. This will have an impact on colleagues in the current environment the office sector and on its purpose or – up 10% from the pre-covid-19 period – function in the future. Thanks to one of and 73% think companies should embrace the largest surveys on working from flexible working policies. home during the pandemic carried out by Cushman & Wakefield, we can Remote working may be here to stay, but advise clients on this epochal shift. results also show human connection and The Survey: 50,000 people, 2.5 millions social bonding are suffering, thus negatively data points, 99 countries, 38 companies. impacting corporate culture and learning. It provides insight into how employees Slightly more than half of respondents are coping with this pandemic and what feel connected to their colleagues in the new normal will look like as offices the work-from-home environment. Short commute reopen. The analysis has been done As we look to the future, the office Atmosphere & services trough Experience per Square Foot™ @ will have a new purpose: to provide home Survey, Cushman & Wakefield’s inspiring destinations that strengthen proprietary tool that tracks real estate cultural connection, enhance learning, and workplace metrics. encourage bonding among colleagues Which are the main results from the and customers, and foster creativity Survey? and innovation. We are human beings and we need sociality to survive. The survey results demonstrate that, during the pandemic, productivity remains Flexible touch strong and team collaboration has reached The Total Workplace Ecosystem: a down and meeting variety of locations and experieces to spaces Accessible & new heights through better leverage of support convenience, functionality and memorable locations remote technology. Three quarters of wellbeing.

Core Office Urban Hub To Be Designed Open to the Public Core Office Key meetings / Collaboration / Learning / Mentoring / Innovation / Connection to Hub Culture Campus

Local Community Hubs Short commute Atmosphere & services

Work from Third Places in City Home On Demand Lunch/Coffee Limited travel Event Space Informal meetings Flexible touch down and meeting spaces Accessible & memorable locations

24 Cushman & Wakefield | Italian Real Estate Overview H1 2020 The world talks about them because there are so many. For the entire decade between 2020 and 2030, Millennials will comprise the largest share of the workforce, representing 40% of the global working age population by the end of the period.

We Are Still Working

The world talks about them because there are so many. For the entire decade75% between 2020 and 2030, Millennials will comprise the largest share of the workforce,Feel representingthey effectively 40% of the focus and global working age population by the endcollaborate of the period. Productivity has remained consistent and strong

People Don’t Feel Millennials are getting older. In just 11 years, the“Well” oldest Millennials Millennials are getting older. In just 11 years, the oldest Millennials will turn 50. will turn 50. MillennialsMillennials carecare about about big issues. big issues. In a global study, nearly one-third of 54% In a globalMillennials study, placed the environmentnearly asone-third of their top concern, with a similar Have a sense of wellbeing. Employees Millennialsproportion placed believing that the businesses environment as should try to improve society. report low levels of energy, wellbeing their top concern, with a similar and are not taking enough time away proportion believing that businesses from work. shouldWho try benefits to improve from the society. demographic shift? Corporations that have clearly defined corporate social responsibility strategies; lower cost cities and suburbs with strong civic centers and transportation services; lifestyle service providers Millennials want amenities. Personalincluding Connections gyms, childcare & A wave of Millennials are moving out of Whocenters benefits and restaurants. from the inner-city locations in search of space, but they are not compromising on walkability Learningdemographic are Suffering shift? and local amenities in their location choices. Corporations that have clearly defined50% corporate social Struggleresponsibility to connect strategies; to company lower culture.cost Colleaguecities and bonding suburbs is with down andstrong only halfcivic of centers respondents and feel transportationpersonally connected services; to their lifestylecompany service culture. providers Millennials want amenities. including gyms, childcare YoungerA waveGenerations of Millennials are moving out of centers and restaurants. inner-city locations in search of space, but Strugglethey are More not compromising on walkability The world talks about themand local amenities in their location choices. because there are so many.70% For the entire decade betweenOf younger generations have 2020 and 2030, MillennialsWFH will Challenges. Millennials comprise the largest share of &the Gen Z struggle with workforce, representing 40%caregiver of the responsibilities and global working age populationinadequate workspace. by the end of the period.

A TOTAL WORKPLACE ECOSYSTEM 73% Want remote working policies Millennialsexpanded and are shift getting to balancing older. In office,just 11 years, home the and oldest third places. MillennialsThe willoffice turn will 50. remain a critical driver Millennials care about big issues. of culture, learning, & personal In a global study, nearly one-third of connections. Millennials placed the environment as their top concern, with a similar Cushman & Wakefield | Italian Real Estate Overview H1 2020 25 proportion believing that businesses should try to improve society.

Who benefits from the demographic shift? Corporations that have clearly defined corporate social responsibility strategies; lower cost cities and suburbs with strong civic centers and transportation services; lifestyle service providers Millennials want amenities. including gyms, childcare A wave of Millennials are moving out of centers and restaurants. inner-city locations in search of space, but they are not compromising on walkability and local amenities in their location choices. RETAIL MARKET ITALY

26 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “PEOPLE ARE REACTING BETTER THAN EXPECTED AND A NEW RETAIL EXPERIENCE WILL REPLACE THE PRE-COVID ONE. INVESTORS STILL COLD BUT NEW OPPORTUNITIES TO BE STUDIED”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 27 • first halfof2020 from first half 2020: There are two main positives from the expected by theendofyear. notes that willsmooththecontraction that, Q2 data pointed out some positive high streets have been left empty. Despite months, andthemost importantretail ordered to stay closedfor more thantwo restrictions. Indeed,stores have been immediately affected by the mobility hit by theCovid-19 pandemic,being Retail performance hasbeenstrongly RETAIL SECTOR 28 in their response to the re-opening of been reflected by apositive rebound in improving theirconfidence. This has the lockdown supported households Government since thebeginningof financial stimulus introduced by the People’s decline inthefirst week to almost been surprisinglypositive: from a40% in visitors since there-opening has than theexpectations. The rebound data hasbeenencouraging, better stores andshoppingcenters. Footfall Cushman & Wakefield |Italian Real Estate Overview H1 2020 H1

response after lockdown: the MILANROME VENICEFLORENCE MILAN PRIME RENTS HIGH STREET PRIME YIELD 2020VENICE € € 3 13,700 7,2O0 % sqm/yr sqm/yr 3 ROME FLORENCE % • concessions. in oftemporary are maintained flat favor ofsometemporary concessions. agreements, where rents remain flat in stability isalsoconfirmed by ongoing stable rents across allmarkets inQ2.Rent very littleevidence, thesentimentisfor Despite thelackoftransactions andwith

needs duringtheliquiditycrisis. quarterly invoices to meettheretailers’ and issuing monthlyrather than payment ofrents andservice charges such as not to issue invoices for the actions implemented by landlords have witnessed someunprecedented least findawin-win compromise. We grant concessions to retailers orat rents yet, somelandlords agree to concessions. Despite not affecting of discounts and rental holidays the negotiations withalarge number retailers relationship, The consolidation ofthe -20% inthe4thand5thweeks. 4 € € % 6,300 12,500 3.75 sqm/yr sqm/yr

that helped % landlords/ Retail parks are experiencing better and June data for the shopping centers performances than expected, given the and retail parks under management, and bigger size of their stores and the open- results show that: air settings. This is keeping a positive or at least a stable outlook. • May recorded a -6,8% decrease, with marked differences among Both the Shopping Centres and High categories. Food & Beverage sales Street sectors are characterized by were particularly negative, followed by ongoing negotiations that include new fashion. On the other hand, electronics, agreements, among which free-rent home furnishing and sportwear stores for the mandatory closing period, or performance was remarkable. discounts if the tenant is benefiting of the tax credit. Other operations include • Turnover fell by 16% in June, still better discounts for a certain period following than the footfall trend (-24%). The the reopening. On top of the discount, an same differences among categories increases to the turnover rent is becoming were still visible, even though less more common, in order to share the risk pronounced. between landlord and tenant. Although turnover declined in June, it Turnover data is less consistent than was less pronounced than expected and footfall data, and it is more difficult to give better than footfall decline, pointing out a an exhaustive picture of the current trend. relatively positive performance. Despite that, we collected* available May

FOOTFALL 2020 VS 2019 - SHOPPERTRAK INDEX 0% Reopening

-25% -22,1% -22,3% -24,0% -22,8% -22,6% -26,2% -28,5% -31,0% -34,9%

-40,6% -50%

-75% -75,8% -76,5% -77,8%

-87,1% -88,5% -88,4% -88,4% -87,7% -89,2% -90,4% -100% we 11 we 12 we 13 we 14 we 15 we 16 we 17 we 18 we 19 we 20 we 21 we 22 we 23 we 24 we 25 we 26 we 27 we 28 we 29 we 30 9Mar 16Mar 23Mar 30Mar 6Apr 13Apr 20Apr 27Apr 4May 11May 18May 25May 1Jun 8Jun 15Jun 22Jun 29Jun 6Jul 13Jul 20Jul 15Mar 22Mar 29Mar 5Apr 12Apr 19Apr 26Apr 3May 10May 17May 24May 31May 7Jun 14Jun 21Jun 28Jun 5Jul 12Jul 19Jul 26Jul

* In terms of comparable sales, it has to be taken into account that stores were closed for 18 days in May 2020. Based on this assumption, we used the daily turnover to compare the two years. The sample comprises 1,432 stores for ca 430,000 sqm GLA comprised in shopping center and retail parks under management; it excludes hypermarkets and supermarkets and some category such as travel agencies, tobacconist, telecommunications, medical services etc).

Cushman & Wakefield | Italian Real Estate Overview H1 2020 2929 CONSUMERS’ SURVEY

Cushman & Wakefield Retail Asset Services despite the major changes the population Italy conducted a web-based consumers’ went through during lockdown, behavior survey, to investigate consumers’ is gradually normalizing and consumers sentiment after lockdown between May are going back to brick and mortar 22nd and June 22nd. Results show that shopping.

Health & Saftey are at the center IMPORTANCE OF SAFETY MEASURES of the new shopping experience: Constant bathrooms cleaning 4,77 sanitation and availability of personal Stores and common areas sanitation 4,52 protective equipment are the most Availability of sanitizing gel 4,47 important measures for shopping center Mandatory face masks use 4,32 customers. Social distancing 4,27 Avg. Limits to number of visitors allowed 4,10 4,11 Obliged walking paths 3,88 Body temperature measurement 3,71 Store visits booked in advance 2,94

(1 = not important at all, 5 = very important)

PERCEIVED SAFETY The overall rating is positive, confirming the effectiveness of measures adopted in shopping centres. 3.9/5

MAIN REASON FOR VISITING Compared to pre-covid time, 51,4% “buying things” is the main Stores driver for consumers in visiting a 30,2% 34,4% shopping center. Consumers are Hyper / Supermarket 21,2% more focused on their needs and 4,2% A walk spend less time for “leisure” and 24,2% “experience” as we were used to. 2,3% Restaurants & Bars Shopping Experience has changed. 7,8% 7,7% Other 16,6%

Post-Covid Pre-Covid

30 Cushman & Wakefield | Italian Real Estate Overview H1 2020 EXPECTED PURCHASING BEHAVIOR Even if consumers were forced to shop online due to the stores closure, only 18% of them will increase the More online shopping 18,2% online purchases post lockdown. There doesn’t seem to be a big Click & Collect 3,7% bias for the “traditional” shopping experience, since a considerable share Majority of shopping in store 50,1% of respondents will be focused on

Avg. physical stores. Stores only 25,2% 4,11

Other 2,8%

VISIT AFTER LOCKDOWN Overall results are encouraging: 65% of respondents are back to shopping after the reopening of May 18th.

No 35,30%

Yes64,70%

10,095 26 Shopping 790,915 Interviews Centres Gla (sqm)

300,800 2,090 Daily visitors Stores

Cushman & Wakefield | Italian Real Estate Overview H1 2020 31 RETAIL SNAPSHOT

“HALF YEARLY INVESTMENT VOLUME REACHED ALMOST €900MLN, CA 50% INCREASE ON 2019, MORE THAN 60% DRIVEN BY DOMESTIC CAPITAL AND ALMOST 70% COMPRISED IN THE MOST RESILIENT RETAIL FORMAT: HIGH STREET, HYPERMARKET AND SUPERMARKETS (C&C). TWO “UNUSUAL” TRANSACTIONS AFFECTED THE 2020 RESULT: THE MINORITY STAKE UNICREDIT BOUGHT IN THE ESSELUNGA PORTFOLIO FOR OVER €400MLN AND A BIG HIGH STREET DEAL IN MILAN. BOTH DEALS WERE SEEDED IN 2019. INVESTORS ARE MORE CAUTIOUS AND THE UNCERTAINTY ON THE FUTURE OF THE FORMAT COMBINED WITH THE GREATER COST OF CAPITAL IS LEADING THEM TO PUT THEIR RETAIL STRATEGIES ON HOLD. THIS HAS BEEN REFLECTED IN AN INCREASE IN YIELDS FOR BOTH HIGH STREET AND OUT-OF-TOWN RETAIL MARKETS”.

RETAIL INVESTMENT VOLUME

3.000 1st Half 2nd Half 2.500

2.000

1.500 Millions

1.000

500

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 HighPRIME Street RENTS Prime HIGH Rents STREET 16.000 14.000 12.000 10.000 8.000

/sqm/yr 6.000

€ 4.000 2.000 0

Milan Rome Florence Turin

PRIMEOut -RENTSof-Town OUT Prime OF TOWN Rents RETAIL 1.000 900 800 700 600 500 400

/sqm/yr

€ 300 200 100 0

Shopping Centres Retail Parks

RetailRETAIL Prime PRIME Yields YIELD 9,00% 8,00% 7,00% 6,00% 5,00% 4,00% 3,00% Prime Net Yield 2,00% 1,00% 0,00%

Shopping Centres Retail Parks High Street

Cushman & Wakefield | Italian Real Estate Overview H1 2020 33 LOGISTICS MARKET ITALY

34 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “THE GROWING NEED FOR GOODS AND SERVICES ONLINE PUT A STRAIN ON OUR SUPPLY- CHAIN AND CHALLENGED OUR DISTRIBUTION SYSTEM, WITH AN IMPACT ON THE LOGISTIC SECTOR WHICH IS STILL EVOLVING.”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 35 LOGISTICS SECTOR

In the first half of 2020 logistic take-up sales platforms yet, thus we believe that totaled more than 780,000 sqm, a 18% soon some of them will try to develop decrease compared to the same period of such selling platforms putting additional last year but a 15% increase on the same pressure on logistics demand. period in 2018. Prime rents in all the locations were stable The strong growth in online shopping and the trend is expected to continue drove e-commerce take-up in the first in the short term, supported by higher half above 300,000 sqm, circa 40% of incentives. the total. Overall, e-commerce, large- scale distribution retailers and 3PLs In general, although with different were the most active players, looking for performance according to the specific modern, efficient and strategically located sector, the Logistics market remains one warehouses. BTS projects continue to of the most resilient. Investors continue to drive demand, comprising approximately look positively on Italy, especially to grade 66% of the overall transactions. Northern A properties. Due to the scarcity of new regions and mainly Lombardy (60%), product developments (also speculative) Veneto (16%) and Emilia Romagna (15.7%) are still attracting institutional capital and attracted circa 90% of the total take-up. this trend has not been affected by the C-19 pandemic. The current crisis has highlighted that many retailers have not developed on-line

TAKE UP ITALYITALY LOMBARDY LAZIO

782,200sqm 355,076sqm 38,700sqm PRIME RENT

€56sqm/yr €56sqm/yr €55sqm/yr PRIME YIELD

% % 2020 5.00 5.00% 5.50

36 Cushman & WakefieldH1 | Italian Real Estate Overview H1 2020 Data Center. Online services demand As far as the investment market is strengthened during the lockdown (i.e. long concerned, the logistics sector remains term business digital planning, increasing the most targeted asset class by investors, of multimedia streaming services such as but performance is still not reflecting the Netflix as well as worldwide online games, huge appetite for it. Indeed, half yearly in addition to the millions of people who investment volume totaled €320 Mln, are smart working). The web is under showing a slight decrease in comparison pressure and digital traffic will continue with the same period of 2019 (-3%). Lack growing also after the crisis is over. For of products combined with a continued that reason, demand for Data Centers, mismatch between vendor and buyer which in Milan grew in 2019, will continue expectations affected the result. Despite and will expand according to its current that, we are witnessing a strong investor stable-up trend. commitment for the second part of the year. Potenital lack of financiing could While the main operators have not be the only threats which can affect given up on searching for data center the growth of the logistic market in the industrial areas, the demand experienced coming months. a considerable boost up to 400,000 sqm in the greater Milan area, which is Prime yields were stable in the first half, consolidating as an overall cluster larger but some compression is expected in the than the original first western hub. Big second half for core assets. hyperscale and co-locator firms such as Microsoft, Google, Vantage, Equinix, GTR and Data 4 are looking to possibly expand towards towards eastern and southern areas to strengthen their presence in Italy. Microsoft and Google Cloud, this latter partnering with TIM, both made strong commitments to strengthen their presence in Italy and they both announced the creation of new data centers. 38,700sqm This is just the beginning and if the Public authorities will be able to support and facilitate the challenge of the infrastructure strengthening and modernization, this will be a great opportunity for the overall €55sqm/yr Country.

5.50%

Cushman & Wakefield | Italian Real Estate Overview H1 2020 3737 LOGISTICS SNAPSHOT

“PRE-LEASE TRANSACTIONS ARE REPRESENTING 46% OF ABSORPTION SINCE THE BEGINNING OF THE YEAR 2020 AND THE VOLUME FOR BUILT-TO-SUIT/BUILT-TO-OWN PROJECTS IS 70% OF THE TOTAL. IN 2019 53% OF THE VOLUME WAS FOR BUILT-TO-SUIT/BUILT-TO-OWN PROJECTS.” “THE LIMITED AVAILABILITY OF GRADE A BUILDINGS, AS WELL AS THE FACT THAT SPECULATIVE DEVELOPMENTS ARE RARE, IS REFLECTED IN THE AMOUNT OF BUILT-TO-SUIT TRANSACTIONS REGISTERED OVER LAST YEARS, WHICH ARE EXPECTED TO DOMINATE THE MARKET IN THE FUTURE.”

TAKE UP - COMPARISON BETWEEN TYPE OF TRANSACTIONS

2020 H1 2019

24% 14%

46% 44% Pre-let 30% 44% Pre-let 42% 46%

Pre-lease Sale Owner Occupier New Lease TAKE-UP EVOLUTION

2.500

2.000 Thousands sqm Thousands 1.500

1.000

500

- 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1st Half 2nd Half

PRIME RENT EVOLUTION 70

60

50 €/sqm/yr

40

30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q2 Rome Milan Bologna Tur in Genoa Verona Piacenza Novara

LOGISTICS INVESTMENT VOLUME 1.600 1st Half 2nd Half 1.400

1.200

1.000

800 Millions

600

400

200

- 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Cushman & Wakefield | Italian Real Estate Overview H1 2020 39 ITALY LOGISTICS TRENDS “MAIN CONSOLIDATED LOGISTIC HUBS IN NORTHERN ITALY ARE AS FOLLOWS: GREATER MILAN (LOMBARDY); BOLOGNA AND PIACENZA (EMILIA ROMAGNA);PRINCIPALI VERONA (VENETO); TURIN AND NOVARA (PIEMONTE); GENOA (LIGURIA). OTHER CONSOLIDATED MARKETS ARE LOCATED IN CENTRAL ITALY AROUND ROME, SUCH AS SANTA PALOMBA,MERCATI POMEZIA AND ANAGNI TO THE SOUTH; FIANO ROMANO AND PASSO CORESE TO THE NORTH; TIBURTINA AND BAGNI DI TIVOLI TO THE EAST.” MERCATI EMERGENTI MAIN AND EMERGING MARKETS

PRIME 2015-2019 SUB-MARKET RENTPRIME € RENT (€/sqm/yr)VAR% MEDIA PRIME YIELD MQ ANNO ANNUA RomeRoma 55 55 +1,4 5.50%

MilanoMilan 56 56 +2,4 5.00%

Bologna 52 52 +4,5 5.25% TurinTorino 45 45 + 6,25 6.00% GenovaGenoa 60 60 +0,9 6.50% Verona 46 46 = 6.00% Piacenza 45 45 +3,1 5.75% Novara 42 42 = 5.75% Firenze/PratoFlorence 75 70 Na 6.00% Marche/CostaNaples 40 48 Na 7.25% Adriatica Bari 40 7.25%

40 Cushman & Wakefield | Italian Real Estate Overview H1 2020 20.1Msqm 7.3% ITALY STOCK VACANCY RATE MARKET 1,130,644sqm 74% DEVELOMPMENT PRE-LET PIPELINE PIPELINE

MAJOR LOGISTIC PRINCIPALI MARKETS EMERGING MERCATI MARKETS

MERCATI EMERGENTI HOSPITALITY MARKET ITALY

42 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “THE C-19 OUTBREAK WILL SLOW DOWN THE INDUSTRY IN THE MEDIUM TERM BUT THE LONG TERM OUTLOOK REMAINS POSITIVE”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 43 HOSPITALITY SECTOR 44 of themost targeted tourist destinations overall bed-nights,confirming Italyasone component accounted for the 50% of the for Italiantourism. The international consolidating alongperiodofgrowth registered ca. 279 millionbed-nights, from in2018 andthetourist €1.2Bn flows at arecord highof€3.2Bn,asharpincrease Overall investment volume in2019 stood the occupier side. an investment perspective aswell asfrom hospitality real estate sector, bothfrom outbreak cameafter astrong year for the nights andoverall hotel performance. The marked asignificantdecrease inbed- (hotels, restaurants, etc.) andwhich led to theclosure oftourism facilities impacted by COVID-19 pandemicwhich The Hospitalitysector hasbeenhighly opportunities. and build their platform thanks to good the timefor investors to enter themarket be hitfor acouple ofyears butthiswillbe the biggest industry inthe Country. Itwill 6% ofthetotal employment Tourism comprises 13% of Italy’s GDP and Cushman & Wakefield |Italian Real Estate Overview H1 2020 2019 HOTEL SUPPLY 32,800M

97 brands share international hotel 15% properties arrivals arrivals H2 Mln and isoneof

make anew cycle start withregards to the we believe that itwillbeanopportunity to the sector inthemediumandlongterm, the real impact that this crisis will have on Despite itbeingdifficult tounderstand recovery by year end. flow) anditisdifficult to expectafull foreign visitors (18%ofthetotal annual March andJulyItalylost circa 40million According to someestimates, between will most likely take more time to recover. one to recover, tourism willbemost probably thefirst This year, from cross border people. crisis shouldariseinthefuture. more resilient andless vulnerable ifother institutional one, enablingitto become supply towards amore professional and could possibly accelerate the shift of the size owners at local/regional level – 90% oftheproperties belongsto small- tourism and hospitality market – ca. the supply side. Italy, historically afragmented 1Mln bed-nights 280Mln rooms average RevPAR € 119 both domestic andleisure whileinternational tourism

In the first half 2020, investors and drop of 12% if compared to the half yearly operator maintained their interest for new average 2015-2018. The major investment opportunities. We highlight 2 of the main deal was the sale of the Hotel Bauer San operator selection deals closed in the Marco, Venice from the JV Elliot-Blue first half 2020 in Rome and Milan:Bulgari Skye to Signa. has signed an agreement for a new hotel in Piazza Augusto Imperatore in Rome, scheduled to open in 2022, while Rocco Forte Hotels has signed the agreement for The Carlton Milan in Via della Spiga. Investment volume stood at ca €400Mln, a sharp decrease compared to last year – the best year on record- but a smaller

HOSPITALITY TRADING PERFORMANCE ITALY (2015-2019) Hotel Trading Performance - Italy (2015-2019) 200 72% Occupancy % Occupancy 150 70%

€ 100 68%

50 66%

0 64% 2015 2016 2017 2018 2019

ADR (Euro) RevPAR (Euro) Occupancy %

HOSPITALITY INVESTMENT EVOLUTION 3.500 1st Half 2nd Half 3.000

2.500

2.000

Millions 1.500

1.000

500

0

H2 Cushman & Wakefield | Italian Real Estate Overview H1 2020 4545 HOSPITALITY ANNUAL BED-NIGHTS - CITY OF MILAN (2015-2019) SNAPSHOT

“ITALY IS ONE OF THE MOST HETEROGENEOUS TOURISM MARKET OFFERING DIFFERENT DESTINATIONS AND CITIES: ART CITIES (EG. ROME, VENICE, FLORENCE), BUSINESS CITIES (EG. MILAN, ANNUAL BED-NIGHTS - CITY OF VENICE (2015-2019) BOLOGNA, TURIN), LEISURE DESTINATIONS (SEASIDE, MOUNTAINS AND THERMAL LOCATIONS). INTERNATIONAL TOURISM ACCOUNTS FOR MORE THAN 60% IN THE TOP 4 CITIES, WHICH THEREFORE REGISTER A LOW SEASONALITY.”

ANNUAL BED-NIGHTS - CITY OF ROME (2015-2019) Annual Bed-nights - City of Rome (2015-2019) ANNUAL BED-NIGHTS - CITY OF FLORENCE (2015-2019) Average Length of Stay (days) Stay of Length Average 22.000 3 19.000 2,5 16.000 Rome, capital of Italy, boasts 13.000 a unique artistic and cultural 2 10.000 heritage. +4% annual average nights ('000)

- bed-nights growth rate* 7.000 1,5 Bed 4.000

1.000 1 2015 2016 2017 2018 2019

Domestic International Average Length of Stay (days) ANNUAL BED-NIGHTS - CITY OF MILAN (2015-2019) Annual Bed-nights - Milan (2015-2019) Average Length of Stay (days) Stay of Length Average 8.000 3 7.000 2,5 6.000 Milan is the most important 5.000 market for business tourism. 2 4.000 Slight decrease in terms of bed-

nights ('000) nights at an annual average rate - 3.000 1,5 of-1% Bed 2.000 1.000 1 2015 2016 2017 2018 2019

Domestic International Average Length of Stay (days)

ANNUAL BED-NIGHTS - CITY OF VENICE (2015-2019) Annual Bed-nights - Venice (2015-2019) Average Length of Stay (days) Stay of Length Average 3 7.100 Venice is one of the main Italian hotel markets thanks to its 6.100 2,5 unique urban conformation and 5.100 its extraordinary historical and 4.100 2 artistic heritage. +1% annual 3.100 average bed-nights growth rate*

nights ('000) 2.100 1,5 - 1.100 Bed 100 1 2015 2016 2017 2018 2019

Domestic International Average Length of Stay (days)

ANNUAL BED-NIGHTS - CITY OF FLORENCE (2015-2019) Annual Bed-nights - Florence (2015-2019) Average Length of Stay (days) Stay of Length Average 3 6.100 Florence, birthplace of the Italian 5.100 2,5 Renaissance, one of the leading 4.100 hotel markets in Italy. +3% annual 2 3.100 average bed-nights growth rate* nights ('000) - 2.100 1,5

Bed 1.100 100 1 2015 2016 2017 2018 2019

Domestic International Average Length of Stay (days)

Source: ISTAT, 2020

*The % points out the bed-nights annual average rate growth (Compound Annual Growth Rate) over 2015-2019.

Cushman & Wakefield | Italian Real Estate Overview H1 2020 47 LIVING MARKET ITALY

48 Cushman & Wakefield | Italian Real Estate Overview H1 2020 “TURNING THE MULTI-FAMILY SECTOR INTO AN ASSET CLASS FOR INSTITUTIONAL INVESTORS IN ITALY IS THE BIG CHALLENGE FACING THE INDUSTRY FOR THE FUTURE”

Cushman & Wakefield | Italian Real Estate Overview H1 2020 49 LIVING SECTOR

The Italian residential investment market by structural changes in populations is in its early stage and the multi-family behavior - demographics, financial sector or private rental sector (PRS), uncertainty, inequalities, migration and is still negligible if we look at overall last- but not least- the sanitary emergency, investment volume. This is backed by are fast changing and there’s a new cultural and structural reasons. Italy is demand for living that is being expressed one of the biggest countries in Europe with no supply to satisfy it, mainly in with the lowest share of population living the biggest cities. This is only one of in a rented accomodation – 21% - and this the reasons why investors are exploring has delayed the creation of the PRS. A this asset class in Italy, starting from further factor keeping investors away is Milan, and this led residential investment the fragmentation of the ownership that surging in the first half of 2020 in Italy, makes it difficult to acquire entire buildings representing 6% on the total, a jump to be managed professionally. Despite from less than 1% in the previous years. that, the underlying fundamentals, driven

6.1% Residential share on the €97.5Bn Residential €5.4Bn Total rent total institutional investment volume transaction volume recorded in Italy volume of the new lease contracts recorded in H1 2020 - €234 Mn. (2019), +3.5% compared to 2018. registered in Italy (2019), +4.5% compared to 2018.

demand Increase 603,541 Total number of 948,289 New from institutional investors for the transactions recorded in Italy (2019), +4.2% contracts registered in 2019, +3.8 Italian residential sector, thanks to compared to 2018. compared to 2018. 53.6% out of the its high economic value. total refers to ordinary long-term contracts. Milan & 34% Number of transactions 20.8% of the Rome The most recorded in major cities population lives in a let dwelling, active residential markets, both while 79.2% lives in an owned for institutional investors and for residence. families.

Interest for new 106.2sqm Average 28.5% is the average assets classes (i.e. student housing, size of the residential transaction percentage of gross income paid senior living, co-housing), new recorded in Italy (2019), vs 90.6 sqm monthly on rent (2018), for a total residential trends in Italy. in the 8 major Italian cities of c. 560 €.

New residential €/sqm Average 29,600€GDP per 17,974 117.9 capita in 2019. building permits release in Italy in annual new ordinary long- term 2018 (+4.2% compared to 2017), for contracts rent in the 8 major Italian a total of 54,664 new dwellings. cities* (+11.9% 2018/19) vs 67.1 €/sqm/ yr on average on the Italian territory (+10.7% 2018/19). 4.1Bn/sqm 86.5sqm The Residential stock in Italy, for an average size of the new residenzial >20% Increase of the average surface of 117 sqm. dwellings under construction. ordinary long-term average rent in 76-110 sqm the most common size Florence, Bologna and Milan since range 2015.

50 Cushman & Wakefield | Italian Real Estate Overview H1 2020 Cushman & Wakefield | Italian Real Estate Overview H1 2020 51 PURPOSE-BUILT STUDENT ACCOMODATION

The purpose-built student accommodation • CCUM: residences at university colleges (PBSA) sector in Italy remains largely under- of merit (7%). developed and immature, characterized by the lack of fit for purpose and modern • ACRU: residences of the Italian purpose-built accommodation. Despite Association of Colleges and University that, on the demand side, the Italian Residences (10%). student market has a number of strong fundamentals, such as 1.83m students and Approximately 49% of all the public a diverse educational offer across some of operated beds are in the major reagions, the oldest universities in the world. with 24% of all beds located in Lombardy, 9% in Tuscany, 8%,in Emilia-Romagna and In Italy, there are currently approximately 7% in Lazio. 65,000 operational PBSA beds of varying size and quality, with the majority owned Overall, 8% of the demand for and operated by public bodies. We estimate accommodation of out-of-home students that publicly controlled beds amount to in Italy is covered by the current supply 84% of the operational market. of public and private PBSA, one of the smallest coverages in Europe. Public operators can be summarised in three groups:

• DSU: residences affiliated with the regional bodies for the Right to Study (66%).

International students mainly from 1.83M c.96,000 Albania, Romania full time students international students and China

8,400 524 English-taught 830,000 n° of number bed in pipeline programmes (ETPs) students that live away from the Province of the university

of all international students of the total students 31% 1,000-2,500€ 24% study in Milan and in Rome study in Milan and Rome Annual tuition fee of public universities

52 Cushman & Wakefield | Italian Real Estate Overview H1 2020 PURPOSE-BUILT STUDENT ACCOMODATION

The limited number of the existing stock of These new operations will provide modern PBSA and the quality of these that is often amenities and service levels in a market not fit for purpose, under-scaled or inferior which often provide basic accommodation to what is currently demanded by students in run by non-for-profit organisations. These terms of quality of accommodation and basic operators will also cater for international services/amenities have increased the interest students, particularly those from the US, as from investors. It is estimated that there well as Erasmus students, with some 27,945 are some 8,400 beds in the development students choosing Italy as their exchange pipeline across Italy, which will change destination according to latest figures. the landscape over the coming years and establish new concepts in key markets such as Milan, Turin, Bologna, Florence, and Rome.

ITALIAN STUDENTItalian NUMBERS Student AND Numbers YEARLY % CHANGE

1.900.000 6%

1.800.000 4% -2% 1% 1.700.000 -1% -1% ​ 1.600.000

1.500.000

1.400.000 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Domestic Students International Students

PBSA PIPELINE BEDS MAIN CITIES FOR OVERSEAS STUDENTS

CITY 2020 2021 2022 TBD TOTAL CITY TOTAL ST. %OVERSEAS ST.

Milan 600 1,050 700 0 2,350 Rome 222,500 7.41% Bologna 607 705 0 700 2,012 Milan 183,149 6.36% Turin 1,039 0 0 400 1,439 Turin 90,974 8.40% Florence 203 670 0 350 1,223 Bologna 86,502 8.48% Rome 178 0 490 0 668 Roncade 0 0 0 250 250 Florence 51,783 8.15% Rovigo 110 0 0 0 110 Pisa 47,700 4.22% Parma 0 0 0 87 87 Padova 44,476 4.81% Cesena 80 0 0 0 80 Pavia 26,758 7.13% Rimini 0 0 0 65 65 Venice / Mestre 21,000 6.28% Forlì 0 0 0 64 64 Siena 13,557 8.99% Imola 0 0 0 45 45 Total 2,817 2,425 1,190 1,961 8,393

Source: MIUR

Cushman & Wakefield | Italian Real Estate Overview H1 2020 5353 For further information, please reach out to:

JOACHIM SANDBERG LAMBERTO AGOSTINI THOMAS CASOLO Head of Italy Head of PDS Italy, Chair PDS EMEA Head of Retail +39 02 63799 219 +39 02 63799 264 +39 02 63799 218 [email protected] [email protected] [email protected]

CARLO VANINI CARMEN CHIEREGATO GIOVANNI GRIFA Head of Capital Markets Head of Retail Asset Services Head of Office & Logistics +39 02 63799 302 +39 02 63799 402 Asset Services [email protected] [email protected] +39 02 63799229 [email protected]

MARIACRISTINA LARIA DARIO LEONE ALESSANDRO SERENA Head of Valuation & Advisory Head of Hospitality Head of Office Agency Landlord Italy+39 02 63799283 +39 02 63799 310 Advisory Group [email protected] [email protected] +39 02 63799 265 [email protected]

CESARE LOMBARDI MARZIO GRANATA ALESSANDRO MANCINI Head of Office Agency Tenants Co-Head of Industrial & Logistics Co-Head of Industrial & Logistics Italy Advisory Group Italy, Logistic & Development Last Mile & Data Centre Advisory +39 02 63799 232 +39 02 63799 258 +39 02 63799 287 [email protected] [email protected] [email protected]

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