Italian commercial property capital growth finally fell into negative territory over the six months to the end of December 2008, at -2.5%, according to the IPD Italian Biannual Property Index published on Friday April 3, 2009. After posting flat growth for the first half of last year, the delayed effects of the credit crunch have, at last, started to show through.
The six-monthly IPD Index revealed total returns managed to stay in positive territory by the smallest of margins, returning 10 basis points. This, for the second-successive half-yearly period, is entirely owed to resilient income returns.
Over the six-month period under review, the most substantial falls in capital growth where in the Retail sector, at -4.3%. In the two years of the bi-annual indices, growth has fallen in the sector for each successive half-yearly period, posting negative capital returns in both halves of 2008. By comparison Offices and Industrials, which maintained positive growth in the first half of last year, both fell by -1.6% in H2 2008.
Consistent with the pattern throughout most European countries, income returns held up, at 2.6%, insulating the total returns for the six-month period. This was led by Industrials, at 3.2%, followed by Retails and Offices which returned 2.6% and 2.5%, respectively.
As a result of the competing influences of negative capital value movements and robust income returns, the strongest sector total returns were Industrials, at 1.5%, followed by Offices at 0.8%, while Retail slipped into negative territory for the first time, at -1.8%. All property annualized total returns over one and two years were, consequently, 1.3% and 5.7%.
The IPD Italian Annual Property Index, which will detail the commercial real markets segment performance, is published in two weeks and the results will be presented in Milan on April 22 by IPD's Italian Country Manager, Luigi Pischedda.
Luigi Pischedda, IPD's Country Manager for Italy, said: "Like several other Continental European countries, including the Nordic countries, Portugal and Germany, we are starting to see a correction in commercial property capital values after something of a delayed reaction to the credit crunch.
"The fall in capital values is visible across all sectors albeit milder in magnitude, and the insulation income returns have provided for investors, over 2008, as in those other countries, contributes to keep returns above water."