Italy’s Secondary Cities: Creating a new ecosystem

Written by Helen Richards

Historically, Italy's real estate market has focused its attention on major cities such as Milan and Rome. More recently, however, there is a growing consensus among industry experts that to potentialise the Italian real estate market it is necessary to invest in secondary cities, rather than allowing just one or two cities to dominate.

While there is increasing attention from investors and developers in Italy’s secondary cities, there are key factors that must be held in consideration when investing in these cities, such as the importance of placemaking, innovative business models, emerging concepts, including senior living, and having strong partnerships with established operators.

Leading players in the real estate market joined the GRI Club Meeting ‘Investments in Italy's Secondary Cities’ in Rome to address these matters and share insights on the topic.

Definition of Secondary Cities

Discussions began around the definition of secondary cities in Italy. Generally speaking, all cities with the exception of Rome, Milan, and Florence can be classed as secondary, although it was widely agreed that the classification is also tied to the specific asset class in question. For example, when discussing student housing, university cities such as Padova are considered as top locations and not as secondary cities within this asset class.

Opportunities Abound

Participants at the Club Meeting highlighted the abundance of opportunities available in Italian secondary cities, particularly in pure residential, and also residential with a strong operational component.

Student Housing - In the case of student housing, the Italian market primarily relies on a rent-to-rent approach. Unlike abroad, where investors often share risks and revenues, Italy's student housing market is still evolving. With the potential for growth and development, it presents an enticing opportunity for both local and international investors.

Short-Term Rentals and Alternative Hospitality - Short-term rentals and alternative hospitality structures also show strong potential in secondary cities, but for successful ventures, economies of scale must be established. Technology and replicable solutions are also seen as key factors for success.

Senior Living - The concept of senior living is relatively new and premature in Italy. The market supply, demand, and regulatory framework are still evolving. Consequently, senior living represents a unique challenge for real estate developers and investors.

Investor Sentiment

Many participants emphasised their strong belief in the potential of secondary cities. Only by investing in secondary cities can Italy’s real estate market grow to the strength of its European counterparts, where more than two cities dominate the scene, and where the Italian population have access to affordable real estate solutions.

One participant explained that the main challenge lies in creating a new ecosystem. It is essential to consider existing models by operators with international experience, as well as emerging Italian entities, and consequently build a product that works in the specific region.

Join GRI Club Europe to take part in the discussion and gain invaluable insights from other members shaping the real estate scene. Read more here.