The Real Estate Gap Europe Can’t Ignore: 3 Reasons Italy’s Demand-Supply Imbalance Means Investor Upside
Convert stranded stock into cash flow with three value-add plays you can launch this year.
Welcome to a new issue of the Unlocking Real Estate Value newsletter. Each week I will provide you with exclusive advice and professional insights to help you realise long-term value through real estate development.
A couple of weeks ago I attended the annual presentation of the Report on Italian and European Real Estate Funds by Scenari Immobiliari in Milan.
The results of the presentation showed a positive outlook, with a year-on-year growth in investment output across every major asset class. The key players in Italy presented their own assessments and they painted a picture of a market that is heating up where investors see more deals than developers can build.
Below, I share three hard-to-ignore reasons the gap between demand and supply is handing savvy players a clear edge.
Let’s dive in.
1. Capital is pouring into prime sectors, and it’s only picking up speed.
Is Italy still a side bet for global capital? Not anymore.
Institutional investment leapt 55 % in 2024 to €10 billion (Cushman & Wakefield, 2025). Money is zeroing in on the sectors where supply is thinnest and pricing power strongest:
Retail topped the table at €2.6 billion, a quarter of all deals.
Offices followed at €2.3 billion, anchored in Milan’s CBD and Rome’s historic core.
Logistics secured €1.75 billion, with prime rents up 2 % year-on-year (Savills, 2024).
Milan and Rome are absorbing most of that flow. Milan’s CBD office rents now sit 29 % above 2019 and 90 % of new luxury apartments sell before foundations are poured (CBRE, 2025).
Behind the scenes, the fund universe keeps expanding, 700 + vehicles projected by end-2025 and €121.5 billion NAV already logged (Preqin, 2024).
Why so much momentum?
A flat €200 k tax cap draws high-net-worth newcomers.
50–70 % income-tax breaks lure skilled expats.
ESG disclosure rules line up neatly with global LP mandates.
The smart money is early, but not for long. First movers still have room to negotiate, yet spreads are tightening by the quarter.
2. Demand is outrunning supply almost everywhere you look.
Across asset classes, stock simply can’t keep pace.
Logistics shows Europe’s tightest vacancy at 3 %. E-commerce penetration will jump eight percentage points by 2028, but developers can’t pour concrete fast enough.
Result: escalating rents, forward-funding deals and fierce competition for land.
Student housing is just as constrained. Less than 5 % of Italy’s students can access PBSA: the lowest provision rate in Europe. Universities in Milan, Bologna and Turin add students every semester, pushing yields to the high-single-digit range for well-located beds.
Offices look different but tell the same story. Europe’s average vacancy hovers near 9 %, yet Milan reports prime‐grade vacancy under 6 %. Tenants chase energy-efficient space; landlords who can green their stock command premium rents.
Pick a proven shortage: logistics boxes near ring roads, PBSA close to metro lines, or “green-ready” offices and build or reposition to fill it. In a market this tight, quality sells itself.
3. Fifteen years of under-building created a one-million-unit housing gap.
Italy’s residential puzzle isn’t about empty homes; it’s about under-delivery.
From 2009 to 2024, the nation added 2.1 million households but only 1.1 million homes (ISTAT, 2025). While about 27 % of units sit vacant, many are in shrinking villages, suffer seismic damage, or fail basic energy codes.
Opportunity hides in the mismatch:
Value-add plays in second-ring suburbs: smaller sites, quicker permits, strong commuter demand.
Bank-owned and public stock ripe for ESG-led refurbishment, often at deep discounts.
Conversions of obsolete offices into housing or PBSA: a trend already visible in Rome’s EUR district and Milan’s periphery.
The government’s 2025 Housing Plan adds tailwinds—tax credits for affordable rents, state-backed loans and a fast-track process for public-asset reuse.
Oversupply is a myth; the real play is unlocking stranded stock and matching it to growing urban demand.
Key Takeaways
I came away in a very positive mood with a very clear picture of a market with very strong economics to support inward investments across a long list of Real Estate Asset classes. You can really sense how investors are seeing Italy as one of their next investment frontiers in Europe.
In Summary:
Italy has moved from “watchlist” to “core”—capital flows, tax perks, and ESG alignment prove it.
Deep shortages in logistics, PBSA, and prime residential fuel above-trend rent growth.
A one-million-unit housing shortfall plus policy support creates fertile ground for value-add and conversion strategies.
Early entrants gain pricing power while supply stays structurally tight—move before the gap narrows.
That’s all for today.
See you next week.
— Carlo
Founder and Managing Director Benigni
More ways I can help you
And whenever you’re ready, there are 3 ways I can help you:
Do you need help focusing the development strategy for a project?
I can help you brainstorm a development strategy or provide real estate market advice:
Tools and Resources to help you make smarter real estate investment decisions:
Refer a Colleague
PS…If you’re enjoying this newsletter, please consider referring this edition to a friend or a colleague. Sharing valuable insights helps everyone make better investment decisions.
This post is sponsored by Benigni a specialist development manager working with international investors to realise long-term value through optimised development strategies. To learn more click this link to our website.
Subscribe to the Newsletter
A newsletter by Carlo Benigni providing, in less than 4 minutes, exclusive advice, strategies, and resources to help unlock hidden real estate value.
Subscribe for free to receive new posts and support my work.
Smart call on the value-add plays! I see that Italy's real estate crowdfunding just hit €167M in 2024, so there's actually capital sitting there waiting for exactly these smaller conversion projects!