SWITZERLAND Trends and Developments Contributed by: Martin Furrer, Alexander Wyss, Samuel Marbacher and Charles Gschwind, Baker McKenzie
portfolios (residential portfolios in particular) in some of the largest transactions in the market in 2023. Commercial properties In 2023, the office availability rate in Switzer - land’s five largest markets (Zurich, Geneva, Bern, Basel and Lausanne) rose slightly from 4.5% to 4.6%. In addition, inflation may gener - ally be reflected in office leases quicker than in residential leases. Despite a vibrant period of let - tings and relocations, with flex space providers and private banks expanding, demand began to ease towards the end of the year, although this did not have a significant impact on space avail - ability, according to JLL. In the Zurich region, for example, the total amount of available office space rose to 234,000 sq m, which can still be considered as a tight market. However, the availability rate in the Zurich sub - urbs reached 14.6%, a new record high in both absolute and relative terms, according to CBRE. On the other side of the country, Geneva expe - rienced a gradual increase in prime rental rates from the longstanding CHF850 per sq m per year to CHF900 per year and more. In addition to higher rents, companies seeking office space within Geneva’s CBD face two significant hur - dles: • firstly, finding sufficiently large contiguous office space on a single floor is proving to be very challenging; and • secondly, there is a trend of businesses demanding higher sustainability standards, a criterion that only very few buildings in the CBD can satisfy. As a result, the suburbs are becoming increas - ingly attractive as they tend to offer newer build -
ings. Construction activity is continuing in such locations, with Geneva’s first skyscrapers cur - rently being built in the Lancy Pont-Rouge area, as well as various residential projects that are set to further increase the attractiveness of the area outside of business days and hours. Residential properties Adjusted for inflation, residential investment has seen negative growth since 2021, and the vacancy rate amounted to approximately 1.15% by the summer of 2023. On the demand side, net immigration to Switzerland is expected to remain high in 2024. Meanwhile, construction activity is expected to remain relatively low on the supply side. In the final quarter of 2023, the UBS Swiss Real Estate Bubble Index fell slightly to 1,041 index points, the same level as at the end of 2021. This decline in the index can be attributed to a slowdown in the growth of household mortgages and a slight decline in applications for buy-to-let financing. Despite these developments, the index still points to significant overvaluation in the Swiss market for owner-occupied homes. Prices for such properties have remained stable even as financing costs have risen. Combined with a low rate of new construction and increased immigra - tion, a significant price correction seems unlikely in the foreseeable future. However, it is worth noting that the price gap between existing prop - erty and new builds widened in 2023. New-build condominiums usually have high prices, as they were built when their construction costs were high and the land was purchased at a high price. In contrast, the price of existing properties tends to adjust to stagnating demand.
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