Navigating Real Estate in a Post-Covid Market: 5 Article Series | Part 1 – Italy

by , , , , and | Jan 21, 2022

The Covid-19 pandemic has raised a world-wide health emergency. The pandemic affected and continues to affect not only everyone’s day-to-day activities but also different sectors of economy, including commercial real estate market. Join us for this 5-part blog series as real estate experts from Finland, Italy, France, Cyprus and the United States tackle the subject of “Navigating Real Estate in a Post-Covid Market”.

In Part 1, Managing Partner of Aliant Italy, Caludia Bortolani discusses why clients are buying property in Italy and opportunities for foreign investors in 2022.


Outlook on the real estate market for 2022: Italy

1) What does the real estate market looks like for 2022, and are there any good opportunities for foreign investors?

In Italy, like in many other countries, the pandemic produced a shock that has led to changes in real estate, as in other sectors, but most importantly it has accelerated transformation processes that were already underway.

In Italy, we are seeing a growth trend in logistics and residential (mainly in the two main cities Milan and Rome), while the retail sector is still struggling (also due to the increase of the online shopping). Hotels, came to a sudden stop, but are set to recover quickly as the health crisis unfolds. As to offices, the crisis has raised questions about the configuration, size, and quality of office space, although offices at least for a while shall remain an asset class of the Italian real estate market. The so called “new normal”, with its new way of working, undoubtedly poses questions on the size and configuration of the office space and on the overall health and wellbeing of people in the workplace – wherever that workplace may be.

Besides logistic, the residential properties area is becoming very appealing again all over Europe and in Italy in particular. In the global market, investments in the residential asset class passed from 14% in 2010 to 25% in 2020. The factors that are supporting the growth are several, such as an increase of student housings, internal migrations, cultural changes

What we have been witnessing recently is the establishment of “leading markets” such the US, Russia, UK, Germany and the Netherlands. However, what is the main interest seems to be is the “fragmented growth markets”, meaning that the ownership of the assets is fragmented as it is held by smaller companies or even families, a market that for such reason appears easier to break in. Such markets are located especially in Europe.

2) Why our clients our buying real properties in Italy

80% of our clients buy as they want to make a change on their lives, move to Italy, may be remote working from here; however, buy to rent is becoming of interest, and it should be considered as investment option as Italy may offer a very interesting tax regime overall. The Italian real estate market is appealing to international investors now more than ever, especially for individual owners.

There are also some benefit for private individuals on taxes on capital gain which are not levied if the property is held for 5 years or more.

For residential property, the “transfer tax” which is a tax on the passing of real estate from one person (or a company) to another, is of interest and it offers an advantage.

What is the legal issue that most affected the real estate market during the pandemic and on the following months?

This is something that will interest people planning to invest in invest in Italy in commercial real estate or in a business venture as it is one of the most popular issues worldwide.

Let’s take an example  of the tenant’s default to pay rent.

Regarding commercial real estate leases, the emergency legislator in Italy has mainly introduced a tax relief without issuing provisions with an impact on the relations between the parties, whether economic or contractual, with the exception of the eviction stop  (provided for in Article 103(6) of the Decree “Cura Italia” – Legislative Decree 18/2020, converted into Law 27/2020), extended several times and now expired on 31 December 2021.

We are going through some Courts’ decisions shortly, but overall Covid19 measures have shifted the balance of power between landlords and tenants, where tenants are asking for specific relieves, and landlord are more inclined to grant them rather than dealing with defaults or empty spaces.

For example, we assist a US client that opened a medical clinic in Rome and right during the pandemic he was in about to obtain all the authorizations to operate his business. Of course all was delayed, and the free months rent that we had negotiated for him at the execution of the lease, a year before, had gotten lost due to the halt that the permit process had suffered. Well, we were able to negotiate with the landlord, a large real estate fund, a moratorium of several months in the payment of rent, as the fund preferred to concede something rather than having an empty space, or enforcing the guaranteed it had in its hands against the payment of rent.

The latest court decisions focus on the question of whether the landlord is obliged to renegotiate the contract and whether he can reduce the rent to be paid by the tenant for the months of “lockdown”.

Several courts confirmed that the tenant must have the possibility to renegotiate the content of the unbalanced contract (inter alia, Court of Treviso, 21 December 2020).

In the meantime, since it seems that the Pandemic seems not to be over yet, what we have been suggesting and assisting our clients with is to have a specific Covid-19 clause inserted in their lease agreements, of the type of a hardship clause. So in case of a new emergency, the parties agreed ahead of time how they would want to regulate their relationship.

For more information onreal estate law in Italy contact Claudia Bortolani at cbortolani@aliantlaw.com.

Or watch watch the full webinar Navigating Real Estate in a Post-Covid Market: 5 Countries Perspectives here.

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