Demand for office space in Milan intensifies

Global real estate consultant Knight Frank is reporting this week that office take-up in Milan is set to reach 330,000 square meter in 2017, making it the second strongest year on record. The first nine months of 2017 saw the strongest period on record for the city; with office take-up reaching 273,000 square meter. Indicators show this surge of take-up will continue well into the New Year. With take-up at peak volume, prime rents have risen by 6% in 2017, reaching €530 ($626 USD) per sq. meter per annum, exceeding the previous high of €525 ($621 USD) in 2011-2012. Continuing this trend, 2017 is also set to be one of the strongest years on record for Italy's economy since the financial crisis. In recent years, Milan in particular has experienced significant capital targeting assets with development opportunities, expanding the city's premium quality stock and in turn, its skyline. Office occupiers in Milan are seeking properties that add value to their business and as a result, prime office space in the city is fast becoming scarce. Developers are striving to keep up with the demand and although 220,000 square meters of office space is currently under construction, increases in availability are likely to be short-term due to ongoing occupier activity and high levels of pre-leasing. Milan's office market has also maintained its appeal to investors, with a total of €1.4bn ($1.66b USD) invested in Milan's office sector in the first nine months of the year and both domestic and foreign investors still very active in the city. Milan's office landscape continues to be reshaped, leading to an uplift in capital values and a subsequent increase in appetite to global investors. This in turn continues to draw in occupiers, with a healthy appetite from Italy's service sector, prime office space continues to be snapped up and the appeal of Milan's office market is set to continue into 2018. Alessandro Riboni, Chief Executive of Knight Frank's Milan office commented, "Milan has been under investors' radar for years, becoming one of the key international markets. Advising our national and international clients, we have been witnessing the ever-growing interest for the city. The strong competition for prime assets has continued to support the compression of yields."