taly is a modern and cosmopolitan country, a land of creativity, centrally located in the heart of the Mediterranean. It is at the crossroads linking the North and South of Europe. Italian style, innovation, creativity and love for tradition are all key success factors of the “Made-in-Italy” brand in the competitive world market.
Shopping in Italy is also a serious business. Italians take price, style and quality into careful consideration before buying. More recently shopping habits have become more polarised as Italian shoppers are increasingly looking for value through discount and private label goods, though luxury and premium brand retailers’ sales have proved resilient. The shopping streets in all towns and cities are also places to be seen on the early evening “passeggiata.”
Compared to many Western European markets the Italian retail sector remains highly fragmented and is dominated by small independent businesses, the majority of which operate as single outlets.
|Unemployment rate (%)||11.9||11.4||11.2||11.0||10.6|
|Interest rates 3-month (%)||0.1||-0.3||-0.3||0.0||0.4|
|Interest rates 10-year (%)||1.6||1.7||2.7||3.5||3.9|
Note: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc
|Population||59.9 million (2014)|
|GDP||US$ 2,148.7 billion (2014)|
|Public sector balance||-3.0% of GDP (2014)|
|Public sector balance||-3.0% of GDP (2014)|
|Public sector debt||132.1% of GDP (2014)|
|Parliament||Coalition of the Democratic Party, NCD and Scelta Civica Party|
|Prime Minister||Sergio Mattarella|
|Prime Minister||Matteo Renzi|
|Election date||2018 (Parliamentary)|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
Source: Oxford Economics Ltd.
|LARGEST CITIES (2011)|
MAJOR DOMESTIC FOOD RETAILERS
Coops (Ipercoop and Coop), Bennet, Conad, Iper, Esselunga
MAJOR DOMESTIC non-FOOD RETAILERS
Coin, OVS, Piazza Italia, Benetton, Terranova, Pittarosso, Salmoiraghi & Viganò, Trony, Expert, Cisalfa Sport, Scarpe & Scarpe, Brico Center, Mondo Convenienza
MAJOR INTERNATIONAL FOOD RETAILERS
INTERNATIONAL RETAILERS IN ITALY(a selection)
Inditex group, H&M group, Sephora, Muji, Mango, Abercrombie & Fitch, Hollister, Gap/Banana Republic, GAP, Apple, Promod, Desigual, Mediaworld, Saturn, Decathlon, Champion, Pimkie, Celio, Deichmann, Takko, Tiger, The Disney Store, Tommy Hilfiger, Foot Locker, Timberland, Nike, Adidas, Puma, Kiabi, Maison du Monde, Ikea, Leroy Merlin.
FOOD & BEVERAGE OPERATORS
Autogrill group, McDonald’s, Burger King, Rosso Pomodoro, Fratelli La Bufala, Old Wild West, Ladurée, Eataly, Grom, Wok, Sushiko.
|MONDAY - SATURDAY||SUNDAY|
|Shop keepers may decide opening hours||Shops may be open|
Although Italian consumers are getting increasingly familiar with shopping in out-of-town modern retail formats, the high levels of pedestrian flows demonstrate that high street shops still represent a key destination and that the in-town retail market is likely to maintain its importance in the future.
The market is generally more active, even if its wider economy is yet to emerge from recession. The mass market is slowly regaining interest from operators, also in southern cities like Naples, Bari and Palermo.
The luxury high street market is as strong as ever and continues to outperform mass-market destinations, with top cities being Milan, Rome, Venice and Florence. Operators are willing to secure spaces in the most sought-after locations.
There are some international brands entering or looking to enter the Italian market, such as Victoria’s Secret, JD Sport, Uniqlo and Primark. Other active cross border retailers are the Sandro Group brands, AW Lab, Asics, Michael Kors.
The out of town retail market is well established with Italy ranking 5th in Europe in terms of Shopping Centre floor space. Considering all retail formats over 5,000 sqm, in Italy there are over 860 schemes for a total GLA of about 15.9 million sqm, with shopping centres accounting for almost 90%. The Italian retail market is still dominated by small and medium sized schemes; only 6% of the existing schemes are in fact larger than 40,000 sqm.
Although the market in Italy is mature and close to saturation, there are signs that indicate there is still room for large, quality developments, such as the Brescia Roncadelle Shopping Centre: this Inter Ikea project is expected to open in the second half of 2016, with a total GLA of just under 90,000sqm. Other important projects in the pipeline include Westfield in Milan, with over 150,000 sqm of GLA, due to open over the next 2-3 years.
Also in Italy we are starting to reflect the European trend by which smaller shopping centres are being expanded, where possible, to meet consumer requirements, increasing cultural and social offerings in order to remain competitive.
Future trends indicate that well positioned, high quality schemes will become dominant and it is not excluded that the number of shopping centres will progressively diminish, due to many small and medium sized schemes coming to the “end of life cycle”, especially those falling within catchments dominated by regional centres.
NEW ENTRANTS TO THE MARKET
|KEY FEATURES OF LEASE|
|Lease Terms||The standard form of Property Lease (Contratto di Locazione) may be used for commercial premises of all types, and its format is to some extent covered by different sources of regulations, including the Civil Code and other relevant laws (ie. law 392/1978). The lease term is 6 years (often with automatic renewals of 6 years) for commercial properties with some exceptions (i.e. hotels for 9 years, or for other peculiar motivations). For leases exceeding €250,000/year all lease terms are subject to negotiation.|
The "Contratto di Affitto di Ramo D’Azienda" (business branch lease) is another form of contract frequently used for retail units, mainly in shopping centres or in town locations for spaces > than 250 sqm, where the landlord controls the retail trade license. Such “business leases” are usually for 5 to 7 years in retail schemes and 10-15 years in in town locations.
|Rental Payment||Euro per square metre per year, generally due quarterly in advance. A security deposit is usually required and it is generally a maximum of 3 months rent. Often landlords ask for wider guarantees (usually bank guarantees) to cover tenants obligations.|
|Rent Review||The rent is adjusted on a yearly basis (at each anniversary of the lease) according to the inflation index published by ISTAT (Italian Institute of Statistics). Often the adjustment for Property leases is 75% of the ISTAT index (except for leases exceeding €250,000/year), while for Business leases is 100% of the ISTAT index.|
|Service Charges, Repairs and Insurance||Service charges - Service charges vary depending on the scope of services provided by landlords. They normally include: building security, reception, common areas & plants both minor and major maintenance ("manutenzione ordinaria e straordinaria”), HVAC, utilities for common areas etc. The related costs are usually proportionally allocated to each tenant to reflect the amount of floor areas leased. In shopping centres, in addition to the service charge, tenants will typically contribute to marketing and promotion costs.
Repairs - Tenant: Ordinary repairs and maintenance of the space leased. Landlord: Extraordinary repairs and maintenance of the space leased and ordinary maintenance of the common areas.
Insurance - Subject to negotiations.
|Property Taxes and other costs||Tenant: Urban waste disposal tax
Landlord: Property Tax
Tenant & Landlord: Lease registration tax is generally at 1% of the headline rent (common practice for Property leases is to share this ½ between landlord and tenant)
VAT ON RENTS: 22% (although some tenants are VAT exempt).
|Disposal of a Lease||ASSIGNMENT AND SUB-LETTING Subject to negotiations. Subletting is often allowed to tenants group companies but assignment and/or subletting to third parties requires prior landlord’s consent.
EARLY TERMINATION The parties are allowed to negotiate an early break option (notice at least 6 months prior to the early break date). Early break options can be rolling (starting from a date) or one off (only upon a calendar or lease event). In the retail sector occupiers benefit from the “right first refusal” option for the purchase of the walls and of the automatic renewal of the contract.
TENANT LIABILITY Subject to negotiations.
|Valuation Methods||Measurement Practice: the measurement basis will depend on the type of letting (and can vary from one city to another). There is no universal adoption of a codified measuring standard. For an entire office building the area may be gross, save for the areas occupied by lifts and stairs. If a tenant has exclusive use of toilets these will be included in the area calculation, as will (frequently) balconies. The measurement is generally Retail High Street: Net Internal Area, Shopping Centres & Retail Parks: Gross Lettable Area|
|Legislation||LEGISLATION IN RELATION TO LEASE CONTRACTS: There are different sources of regulations which are applicable to lease practices: the main ones are the Civil Code and the Law no. 392/1978 and no. 164 of 11/11/2014 (for leases exceeding €250,000/year).
RESTRICTIONS ON FOREIGN OWNERSHIP: there are no restrictions on the foreign ownership of commercial property.
THOMAS CASOLOPartner, Head of Retail Italy, Cushman & Wakefield LLP
Via Filippo Turati 16/18
Milano, 20121, Italy
Tel: +39 02 63799 218
Mob: +39 335 6512556