Prime office rents in Milan’s CBD grew to €520 per sqm in Q3 of 2011 following two previous consecutive quarters of stability at €510 per sqm, according to international real estate advisor Savills. The firm’s research shows that in the city’s other submarkets prime rents remained stable in the same period, despite an increase in supply due to new development completions over recent years, which has been countered by resilient tenant demand.

Although Q3 saw only one new office building completed, in the Milan periphery, Savills expects development completions to exceed 100,000 sqm in the final quarter, bringing the 2011 total up to over 200,000 sqm. In 2012 Savills forecasts further development completions of approximately 240,000 sqm.

Savills data shows overall take-up across Milan’s markets fell in Q3 compared with Q2, despite a similar number of transactions. This is characterised by a lower average lot size suggesting a trend towards smaller unit sizes. Take-up in Milan’s periphery totalled approximately 30,000 sqm (322,917 sq ft) in Q311, up from ca 13,000 sqm in the previous quarter. In contrast, Milan’s out of town market take-up fell to approximately 5,000 sqm in Q3, compared with over 45,000 sqm in Q2.

Eros Chiodoni, Director of Office Agency, says: “The Milan marketplace is characterised by distinct sub-markets, some with very different characteristics. We expect the increase in supply to have diverging effects on these submarkets. In particular we expect stability and maybe even growth in the better sub-markets where competition is tight for the best space. Some sub-markets are however at risk and in these locations over-supply could lead to downward pressure on rents in 2012.”