WHY INVEST IN ITALY?

Growth is being driven by the expansion of logistics networks, improvements in infrastructure, and the rapidly growing e-commerce sector – developments that often reinforce one another.

Infrastructure Projects as a Growth Engine

Italy’s economy was hit hard by the COVID-19 pandemic: in 2020, GDP fell by -8.95%, representing one of the deepest recessions in the eurozone (-6.15%)². The downturn was driven by strict lockdowns that brought many sectors to a standstill, particularly hospitality, tourism, and manufacturing.

With the launch of the EU’s Recovery and Resilience Facility (RRF) in 2021, Italy gained access to €191.5 billion in funding, which can be drawn down by 2027 to modernise and future-proof its economy³. A major share of these funds is allocated to infrastructure development, including:

1. The expansion of broadband and 5G networks to accelerate digitalisation
2. The promotion of rail freight transport to improve efficiency and sustainability.⁴

Digitalisation as a Driver of E-Commerce

Expanding broadband and 5G networks is a core priority for the Italian government and business community. In 2023, 87.0% of the Italian population used the internet, compared to 92.5% in Germany⁵. Besides benefiting society and the economy at large, this infrastructure also lays the groundwork for further e-commerce growth. Revenues from online retail are expected to reach €39.3 billion in 2025 and to rise to €51.4 billion by 2029. In 2024, e-commerce accounted for 12.3% of total retail; by 2029, this share is forecast to increase to nearly 18% (see figure 2)⁶.

The roll-out of 5G and broadband has multiple effects: in addition to supporting e-commerce, it also optimises operations at modern logistics locations. Logistics activity in Italy (freight and logistics services) has grown strongly in recent years. For 2023, the market volume is estimated at USD 117.4 billion, projected to rise to USD 181.3 billion by 2033 at a CAGR of 4.4%⁷.

Efficiency Gains in Freight Transport in a European Context

Italy aims to shift around 30% of freight transport to rail by 2030, up from 12.6% in 2021 – an ambitious target.⁸ AAs part of the EU Recovery Fund, €29.8 billion is earmarked for rail projects to improve passenger and freight connectivity across the country.

Many of these measures are embedded in the EU’s Trans-European Transport Network (TEN-T). Italy plays a central role along several TEN-T corridors, including the Scandinavian-Mediterranean Corridor, which stretches from Helsinki via Germany and Italy to Palermo. Key projects on this corridor include the Brenner Base Tunnel (linking Italy and Austria) and the Mont d’Ambin Base Tunnel (part of the Turin-Lyon high-speed axis). (See figure 3a und 3b.)

Figure 3a: Italy’s integration into the EU’s Trans-European Transport Network (TEN-T)

Figure 3b: Connections to Italy’s most important logistics regions

These major Alpine tunnels are complex and costly undertakings. Other routes, such as those through the Ardennes, also pose significant engineering challenges. Italy’s seismic and landslide-prone terrain adds further technical and financial hurdles.

Nevertheless, the potential gains are substantial. Beyond reducing travel times, these projects bring Italy closer to its climate targets. The 57.5-kilometre Mont d’Ambin Tunnel alone is expected to save approximately 1 million tonnes of CO₂ annually.⁹

Italy’s road infrastructure is also closely integrated with the TEN-T system. With around 7,000 kilometres of motorways – including key axes such as the A1 (Milan–Naples) and A4 (Turin–Trieste) – Italy is a key player in European road freight. Planned upgrades and new construction along TEN-T corridors are designed to ease congestion, improve multimodal connections, and facilitate cross-border trade, including at intermodal hubs in Verona, Bologna, and Gioia Tauro.

Improved connectivity enhances Italy’s overall location quality. For economically weaker regions in the south, better links to Central European markets open up new prospects. At the same time, Italy benefits from its geostrategic position near Eastern Europe, the Middle East, and Africa. Major maritime gateways such as Gioia Tauro – one of the largest container ports in the Mediterranean – and the Port of Genoa ensure integration with global supply chains. Potential renewed cooperation with China’s “Belt and Road Initiative” could also create new momentum for logistics and trade.

Italy’s logistics real estate market has steadily evolved in recent years. Over the past decade, the total stock has increased by more than 70%, reaching around 25 million sqm. Relative to population size, further potential is evident: as figure 4 shows, Italy offers 0.4sqm of logistics space per capita, compared to 0.9sqm in Germany and 0.6sqm in France.

This potential is increasingly being realised. Despite high but stable financing and construction costs, the project development pipeline is well filled: as of the end of March 2025, around 1.3 million sqm of speculative space is under construction, mainly in Northern Italy and the Rome region.¹⁰. This pipeline is driven by demand for modern, ESG-compliant properties. Many projects are pre-let before completion.

As a result, a very high proportion of take-up is concentrated in new, ESG-compliant logistics facilities. According to Colliers, this share reached 98% in Q4 2024 and 92% in Q1 2025.¹¹

Although take-up in 2024 and Q1 2025 did not match the strong results of the two previous years, volumes remained robust. Key demand drivers include (online) retail, especially third-party logistics providers and major retail chains. Given the targeted tax incentives introduced as part of Italy’s location strategy, more companies are likely to consider establishing operations in the country as part of re- and nearshoring strategies.

Take-up in Q1 totalled approximately 505,000sqm, 17% below the five-year average. Broader economic and geopolitical uncertainties are leading to longer decision-making processes among occupiers, which is also impacting construction timelines. As a result, vacancy has edged up slightly and currently stands at around 4.9%, though it remains well below 2% in some regions.¹²

Availability is particularly tight in Milan: by the end of 2024, the vacancy rate in the metropolitan logistics area stood at just 1.7%¹³. This scarcity continues to drive rent growth. In both Milan and Rome – Italy’s second-largest logistics market – average annual rental growth between Q4 2019 and Q4 2024 was 3.6%. Even stronger increases were recorded in Piacenza, Genoa and Bologna, where rents rose by an average of 5.9%. Prime rents stood at €5.60/sqm/month in both Milan and Rome at the end of 2024. Over the next five years, average annual rental growth is forecast at 2.1% in Milan and 1.9% in Rome (see figure 5a and 5b)¹⁴. Overall, the potential for further rental increases remains high across much of Italy, although global uncertainties may dampen momentum.

The investment market is showing signs of resilience and, since summer 2024, even renewed dynamism. Total investment volume in the logistics sector reached €2.6 billion in 2024, up 51% year-on-year. In Q1 2025, volume rose to around €680 million – an increase of 61% compared to the same quarter of the previous year. Portfolio deals and value-add investments contributed significantly to this growth¹⁵.

Prime yields were largely stable at the end of 2024. In Piacenza and Verona, yields declined by 10 basis points, indicating a reversal of trend. While yields in Germany, France and the Netherlands stood at around 4.7% at year-end, they were higher in Italy: around 5.3% in Milan and 4.5% in Rome and Bologna. Combined with rental growth, Italy thus offers comparatively attractive entry yields compared to other core European markets. A further yield compression is expected over the next five years; in Milan, prime yields could fall to around 5.0% by the end of 2029¹⁶.

Figure 6: Development of prime rents and prime yields in the top markets of Milan and Rome