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#MeetTheExpert - Matteo Basile, Head of Valuation National Clients, Colliers RES, Italy

Matteo Basile, Head Head of Valuation National Clients in Colliers RES, talks about the future of Valuation in Italy and about the most recent trend of ESG topics in real estate.

 

How long have you been working in the real estate industry and how did you end up with Colliers?

I have been working in real estate for about 7 years, since I joined Colliers. After graduating with a degree in Economics, I attended a second level master's degree programme at the Luiss Business School in Rome: Maurizio De Angeli, COO of Colliers RES, was one of my professors and so I became familiar with Colliers, where I got an internship after my master's degree; then, I moved to the roles of Valuer, Senior Valuer and Valuation Manager for the Milan office. I currently hold the position of Head of National Customer Assessment; I have been RICS certified since 2019 and I have been teaching in 2 master's degree programmes at the Polytechnic University of Milan for the last 4 years.

How are post-pandemic trends already visible in Italian portfolios? What is the balance between supply and demand?

The pandemic that has hit us in recent years has affected real estate asset classes in different ways.

As far as residential is concerned, the trend has changed: it is more rental-oriented, with a redevelopment of the suburbs, and it is beginning to respond to social and environmental issues. The needs of future and potential buyers or tenants have changed: larger spaces, more rooms to allow for smart working, shared condominium areas, box lockers to receive goods purchased online, etc. At this historical time, new residential building projects of excellent construction quality are being carried out, especially in major cities. This will fill a demand that is currently present but not totally satisfied, and which today finds an excellent response, already on paper, in the developments launched on the market.

Logistics is a very attractive asset class for international investors and is performing very well, particularly in the last mile, where the issue of regeneration is becoming central: here too there is surplus product that can be transformed, thus avoiding occupying further land with other buildings. Better use should be made of regeneration rather than building from scratch, precisely because of the many investment opportunities.

Offices represent the leading market in terms of volume, especially in large cities (Milan and Rome), and they always meet the interest from international investors, whose attention is however more focused on buildings with certain environmental certifications.

In the next few years, the hotel industry could probably be revitalized thoroughly, thanks mainly to some government plans to support the redevelopment of all tourist properties. Tourism is expected to become a pillar of the Italian economy and, to make this happen, we clearly need to welcome national and international visitors. They could offer a great opportunity here, in both the hostel and luxury segments.

While healthcare has performed well and is continuing to do so, retail, especially in the case of shopping centres, has suffered the worst consequences: even before the pandemic, there was a sort of regeneration towards entertainment, such as cinemas, gyms, community centres, etc.

The large-scale retail sector is still a driving force in this market segment: we are independent experts for funds that own medium-large supermarkets, with many properties, which have been achieving considerable sales performances in recent years.

"The intrinsic market value of real estate increases"

How many pipeline funds do you think can be defined as innovative (e.g. hybrid asset class or ESG)?

Certainly, ESG issues have become central to property management in response to global environmental goals. Investors and tenants often look for a product with a high international environmental and social rating. ESG criteria have exploded even more since the pandemic. There are many asset management companies focused on sustainability and this attention is often reflected in various asset classes in the social area: schools, training centres, nursing homes, hospitals, etc.

ESG also means the redevelopment of class A offices, for which tenants are willing to pay higher rents for a better product, owners to spend more during renovation to then have lower operating costs and investors to abandon the logic of immediate profit maximization, precisely because, in the long term, they can take advantage of a favourable environmental, social and governance rating. This can be summed up by saying that the intrinsic market value of real estate increases.

The redevelopment of urban centres and suburbs is another ESG issue to focus on: there are now many funds that invest in mixed areas, with residential redevelopment projects in the form of social housing, for example, especially in semi-central and peripheral areas of large cities such as Milan and Rome.

"In Italy, for example, it is not easy to identify the different euro/sqm values of certain areas, and this is why we use internal sources and databases to always have a direct view of the market"

Can you describe the medium-term future scenarios on valuation?

What we have been witnessing recently is that valuation is increasingly becoming a full-fledged advisory business. It often happens that the client is no longer provided with a valuation service only; rather, an attempt is made – for example in real estate developments or transformations – to provide a detailed market analysis of the possible trends of the different uses in terms of values, size cuts, absorption, competitiveness, etc. In order to meet the requests of some clients, we carry out valuations in accordance with ABI regulations (known as ABI compliant), i.e. containing information also of a technical and legal nature which, in order to be developed, requires an expertise that is not only economic. As RICS-certified assessors, we are able to keep the bar high at all times. For income properties, from a valuation point of view, cash flow discounting methodology cannot be ignored when seeking to meet the needs of real estate funds, for example, which represent about half of our clients and whose goal is to generate annual flows. One hope is that we can obtain sources that are as transparent as possible: in Italy, for example, it is not easy to identify the different euro/sqm values of certain areas, and this is why we use internal sources and databases to always have a direct view of the market. It is often not easy to get international investors to understand this issue. I see a slight improvement, but there is still a great deal of margin, so there is much to be done.

"The Plan can truly be a driving force for issues that today in Italy are not developed as in other Countries"

How will the NRP affect real estate?

This plan is based on 6 fundamental pillars: redevelopment, digitalization, culture, tourism, green revolution and sustainability, all of which related to real estate. Tourism, for example, can receive a very significant boost from this plan and become the driving force for developing other asset classes even more. The same can be said for urban redevelopment, where the issue of rented social housing or senior housing will be central. A major urban regeneration will be possible above all by simplifying the administrative bureaucratic process.

The Plan can improve social structures and thus encourage investments. The hope is that this will be an amplifier of future redevelopment and reconstruction processes according to ESG criteria, thanks to which the whole real estate supply chain could improve. The Plan can truly be a driving force for issues that today in Italy are not developed as in other Countries, and on which there is a great deal of room for improvement.


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Matteo Basile

Head of Valuation

Milan

Independent expert in various assignments, valuation and advisory of single assets and portfolios, market analysis, technical due diligence on single assets and portfolios, feasibility studies, regeneration projects.

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