Italian real estate investment activity strengthened sharply in Q4, with €4.6bn transacted, driven by Retail and Industrial & Logistics and supported by strong crossborder capital (58% of quarterly volumes). For FY2025, total investment reached €12.5bn (+23% YoY), confirming a rerating and sustained recovery in transaction momentum.
Office
Demand for high-quality space in prime locations remains strong, driving rental growth in key business districts. In 2025, 60% of leasing activity in Milan and 68% in Rome was concentrated in central areas, where vacancy rates for Grade A assets are at historic lows – around 2% in central Milan. Limited new supply is expected to persist into 2026, supporting further rental growth of 2–2.5% per annum in prime central locations. Leasing activity is constrained more by lack of suitable space than by demand. Investment sentiment is improving, with a focus on central, Value-Add and Core Plus assets, and prime yields expected to compress by around 25 bps by 2026.
Retail
2025 marks a turning point for the sector, with investment volumes among the highest on record following the return of institutional capital, attracted by resilient fundamentals and more balanced pricing. The market is characterised by activity in both dominant prime assets and opportunistic transactions, confirming a broader repricing phase. Prime rents in Italy have recorded some of the strongest growth in Europe, with further consolidation expected in 2026.
Logistics
The logistics market is entering a more balanced phase, with take-up stable year on year and demand largely focused on modern, high-quality and sustainable assets. Vacancy, which increased in 2025 due to new completions, is expected to decline as the development pipeline becomes more selective. Prime rents are forecast to continue rising at a more moderate pace, while investment volumes rebounded strongly in 2025. 2026 is expected to be a year of consolidation, supported by improving financing conditions and a gradual return of core capital.
Living
Residential demand remains very strong across Europe, particularly in Italy’s main metropolitan areas – most notably Milan – where limited supply continues to push rents and prices to record levels. While regulatory uncertainty may slow the development of Build to Rent and Affordable Living schemes, strong interest is expected in Build-to-Sell student housing and co-living and, to a lesser extent, senior housing, especially for development-led strategies.
Hotels
The hotel sector continues to benefit from robust international tourism and improving operating performance. In Italy, demand is driven primarily by international visitors, with strong results in major cities and prime resort destinations. Investor appetite remains high for luxury assets and next-generation hostels. Further market consolidation is expected in 2026, alongside limited new supply and resilient prime yields.
Data centres
Data centres remain one of the most dynamic real estate sectors in Europe, driven by hyperscalers, cloud services and the rapid expansion of AI. Milan is Italy’s primary hub and a key European market, with total capacity estimated at around 1.1 GW including pipeline. Italy is increasingly positioned as a strategic Mediterranean gateway, with investments expected to exceed €10 billion by 2026. Strong demand, sustainability requirements and increasing regulatory complexity will continue to attract international capital.
