Logistics Real Estate Report Switzerland 2020 Logisticslogistics Real Real Estate Estate Report Report Switzerlandswitzerland 2020

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High investment interest in a dynamic but less liquid market environment LOGISTICS LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020 LOGISTICSLOGISTICS REAL REAL ESTATE ESTATE REPORT REPORT SWITZERLANDSWITZERLAND 2020

OFFER ASKING HIGHLIGHTS SIZES RENTS

3,000 sq m CHF 160 / sq m p.a. 2020 90% QUANTILE 90% QUANTILE

1,350 sq m CHF 125 / sq m p.a. 70% QUANTILE 70% QUANTILE

STOCK (GLA*) 25 M sq m 800 sq m CHF 100 / sq m p.a. MEDIAN MEDIAN

500 sq m CHF 85 / sq m p.a. 30% QUANTILE 30% QUANTILE

350 sq m CHF 60 / sq m p.a. 10% QUANTILE 10% QUANTILE SUPPLY (GLA*) 465,000 sq m

SUPPLY RATE 1.9% PRIME YIELD (NET) 4.1%

CONSTRUCTION INVESTMENTS IN YEAR OF CONSTRUCTION WAREHOUSES AND DEPOTS 2017 CHF 801 M OF SUPPLY (MEDIAN) 1993

Source: FPRE, FSO, CBRE, 2019 / 2020 *GLA = Gross leasable area

High investment interest in a dynamic but less liquid market environment

MANAGEMENT High construction investments in French- The Swiss logistics real estate market, which is proving very resilient in the speaking Switzerland (p. 9 - 10) current coronavirus crisis, is characterized The continuing high volume of new by strong fundamentals and increasing construction is evidence of good demand diversification. The results of the present for space of appropriate quality and size. SUMMARY study, which is rounded off with an interview Investments in warehouses and depots have by Alexandre Monney, fund manager at risen over the last decade, particularly in Procimmo, can be summarized as follows: French-speaking Switzerland. The cantons of Vaud and Fribourg are increasingly acting as Decreasing prime yields (p. 3) a link between German and French-speaking Top yields have fallen to 4.1% (net) and Switzerland for dual logistics concepts. CHF 100 / sq m p.a. continue to be fueled by ongoing investment pressure in a late-cyclical market environment. Part of Switzerland’s demand falls to foreign MEDIAN countries close to the border (p. 11) Diverging asking rents (p. 3 / 8) The large suppliers of home electronics CHF 85 / sq m p.a. The most expensive and the cheapest dominate the national demand for distribution 30% QUANTILE asking rents have diverged further apart. centers. Nevertheless, the foreign online giants Large-scale offers from 1,000 sq m upwards Zalando, Amazon and Alibaba have seen the show the strongest growth in rents. highest sales growth in recent years. These CHF 60 / sq m p.a. often operate their large e-fulfillment centers in foreign countries close to the border. 10% QUANTILE High proportion of owner-occupiers (p. 4) A large part of the estimated net absorption of Logistics and traffic – Conversion of around 200,000 sq m per year is covered by suburban retail properties (p. 12) tailor-made new developments, especially as the Swiss market is still characterized by a high Warehouse and distribution uses in the owner-occupancy rate of around 60 - 70% outskirts of cities close to motorways (of stock). Currently, around 40,000 sq m per altogether cause fewer trips by cars and trucks year are likely to be new developments directly than office, production or light industrial linked to the growing online business. uses in the same location. Especially in existing shopping areas outside the cities, Rising rental supply (p. 5 - 7) the difficulties in stationary trade could create opportunities for logistics uses with Compared to last year, the supply increased significantly less traffic, which would benefit from 390,000 sq m (supply rate of 1.6%) to from good building and zoning law conditions. 465,000 sq m (supply rate of 1.9%). It still is dominated by small units and has also aged slightly.

Yield compression continues Rising asking rents for large logistics units

In 2019, CBRE’s “EMEA Investor Intention from investing directly in production In recent years, investors have benefited zones in which logistics offers close Survey” again asked the most prominent facilities, warehouses or distribution not only from good capital growth, but to the towns are being created. In European investors for the most popular centers by regulatory or statutory also from rent increases. Here, however, the Canton of Geneva in particular, a investment properties. While the investment guidelines. However, a general significant differences in the size of the large-size supply has been developed in industrial and logistics sector still held softening of investment strategies can space can be seen. While rents for storage recent years that, by Swiss standards, the top spot in 2018, it now ranks second be observed among individual investors. space in the 150 to 999 sq m range grew is characterized by very high rents, after office properties. One of the reasons Furthermore, large Swiss real estate by around 20% between 2004 and 2018, often up to CHF 200 / sq m p.a. for this is the strong compression of funds, stock corporations and investment slightly more than office space, the large yields, which has now reached logistics foundations already invested in logistics 1,000 sq m offers paint a much more The general demand for space through properties and thus led to a slight shift have announced that they will continue dynamic picture. On the one hand, they online trading has probably also in investor demand. In some European to increase their allocation to logistics are more volatile, especially since large contributed to a positive development markets, top yields (net) of well below 4% real estate in the coming years. This spaces only make up a small market in rents. And last but not least, it is are already being seen. Logistics yields also applies to opportunistic foreign segment. On the other hand, it appears becoming increasingly difficult to in this late phase of the investment cycle investors who are once again increasingly that they are to some extent dependent develop large areas due to building and are thus increasingly catching up with looking for Swiss logistics real estate. on the general economic situation. zoning restrictions and traffic limitations. the low yields of other asset classes. The excessive increase in aksing rents At a low 4.1%, the difference between for units of 1,000 sq m and more over first-class logistics properties and the last five years can be explained office properties in Switzerland is by a combination of various factors. still around 150 to 200 basis points. Development projects near urban centers Nevertheless, there is currently no have made a significant contribution to sign of a rush into logistics real estate. this decoupling of rents. Various urban Many market players are still prohibited cantons have established industrial

Development of prime yields 2014 - 2019 (net) Development of warehouse rents 2004 - 2019

7,5% 0 Germany GDP S 0 000 7,0% 00 O Netherlands 0 6,5% France 6,0% Switzerland 0 5,5%

5,0% 20 2 4,5%

4,0% 00 0 N GDP * Forecast

3,5% I 0 2 201 4 201 4 201 4 201 4 201 5 201 5 201 5 201 5 201 6 201 6 201 6 201 6 201 7 201 7 201 7 201 8 201 8 201 8 201 8 201 9 201 7

3 4 1 2 3 4 1 2 3 4 1 3 4 1 2 3 4 1 2 20 200 Q Q Q Q Q Q Q2 2019 Q3 2019 Q4 2019 20 20 20 200 200 200 200 200 200 20 20 20 202 20 Q Q Q1 Q2 Q Q Q Q Q Q Q Q Q Q Q

Source: CBRE, 2020 Source: Immodatacockpit, FSO, CBRE, 2019 / 2020 © CBRE Switzerland 2020 3 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

Heterogeneous occupier structure

WarehouseLagerimmobilieLagerimmobilieMixedGemischt used commercialGemischt genutzte property genutzte Umschlags-TransferUmschlags- center Distributions-,Distributions-, SpeziallogisDistribution Speziallogis- / - LogistikparkLogistikpark undLogistics und park / LagerimmobilieLagerimmobilieLagerimmobilie GemischtGemischtGemischt genutzte genutzte genutzte Umschlags-Umschlags-Umschlags- Distributions-,Distributions-,Distributions-, Speziallogis Speziallogis Speziallogis-- - LogistikparkLogistikpark und und und GewerbeobjekteGewerbeobjekte immobilieimmobilie tik-Special tik-logistics propertyGüterverkehrszentrumGüterverkehrszentrumFreight traffic center Source: CBRE based on LOG-HSG, 2020 GewerbeobjekteGewerbeobjekteGewerbeobjekte immobilieimmobilieimmobilie tik-tik-tik- GüterverkehrszentrumGüterverkehrszentrum

Logistics properties are much more The boundaries between logistics and The Swiss market continues to be However, there are more and more heterogeneous and specific than storage space and other types of space, characterized by a high (space-related) exceptions here as well. For example, the the often interchangeable office and such as production facilities, are often owner-occupancy rate of around distribution center of Digitec Galaxus residential properties, this is one of the blurred. With a stock of 25 million sq m 60 - 70%. In particular, for industrial in Wohlen (AG), which belongs to the reasons why they are traded with a risk of logistics space in Switzerland, a large and retail companies with large floor Migros Group, is a rented property. premium. Similarly, the smaller user proportion consists of simple warehouse space requirements and in the case of Similarly, the international parcel and base, consisting of industrial companies buildings or mixed-use commercial transfer halls and high-bay warehouses, letter express services DHL, DPD, UPS (around 40%), retailers (30%) and properties. Modern and large transfer higher owner-occupancy rates are and FedEx have also had their cross- logistics service providers (30%), leads and distribution centers account for seen than for smaller companies docking platforms near the airport to a more limited third-party usability. only about 15 - 20% of the total stock, and simple storage areas. Logistics tailor-made and at the same time albeit with a growing tendency. areas of secondary strategic interest concluded long-term rental agreements. are more likely to be rented.

Share of stock by occupier group

Shippers

30% 30% 40% LOGISTICS SERVICE PROVIDERS RETAIL INDUSTRY

Source: CBRE, 2020 Owner-occupancy rate

Increasing supply 2019 2018

The offer of storage space advertised Supply Supply online (excluding small units of < 300 sq m) amounted to 465,000 sq m 465,000 sq m 390,000 sq m as of August 2019, concentrated along the motorway axes and Supply rate Supply rate particularly along the A3 between 1.9% 1.6% the Härkingen junction, Zurich and St. Margrethen in the Rhine Valley. However, the conurbations of Geneva, Lausanne, Basel and Lucerne also show a high density of supply. Geographical distribution of the supply

This represents an increase of almost 20% compared with the previous year and now corresponds to 1.9% of the total Swiss stock. These figures do not include tailor-made investment properties and space often developed for own use. This is why the growth in supply should not be taken as an indication of a decline in demand. In a market environment with a high level of new construction and conversion activity, older existing buildings that are being vacated due to location optimization or consolidation, or individual residual areas in new developments, lead to fluctuations in publicly advertised offers.

Source: FSO, CBRE, 2019 / 2020 © CBRE Switzerland 2020 5 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

Growing supply in Geneva, Zurich and Basel-Landschaft Supply rate of warehouse space by canton (in %)

Compared to last year, the most on around 12,000 sq m of lettable space. Supply rate 2.3 significant increase in supply was For technical customs reasons, returns 0.0% 5.0% observed in the Canton of Geneva. must first be processed in Switzerland, 1.3 1.4 However, more than half of the almost i.e. checked for completeness and 45,000 sq m in August 2019 were in cleaned, before they are returned to 3.5 2.5 1.7 two buildings in the Meyrin / Satigny the e-fulfillment centers in Germany. 0.5 2.8 0.9 0.0 industrial zone (ZIMEYSA), which have already been partially let by Older logistics or industrial properties 2.9 2.0 the time this report is published. are often sufficient for the increasing returns management. Indeed, in 1.3 2.2 0.7 Logistics uses depend on large areas and contrast to the outbound business, 0.0 0.9 are being developed on a corresponding it is not necessary to have high room 0.8 scale. Therefore, individual large heights and fast work processes, but 1.2 0.4 5.0 properties can have a strong influence on many individual manual 1.5 the development of the supply rate. E.g. operations instead. 2.0 the decline in supply in the Canton of Solothurn is solely due to the almost full occupancy of two properties in Neuendorf and Olten. In Neuendorf, Ingram Micro 2.9 now operates a returns center for Zalando 0.7 3.2 Supply of warehouse space by canton (in sq m) Source: FPRE, CBRE, 2019 / 2020

00000 00 2018 2019 0000 Angebotszi er

200 0,0% 5,0%

0000 200 00 00 00 00 0000 00 00 00 00 000 200 200 2200 200

20000 000 00 00 000 000 000 200 00 00 200 00 00 00 00 00 00 000 00 00 00 200 0 0 0 00 0 0 0 0 200 200 200 00 00 00 0 000 Z SG AG GE L D TI E L SO S TG GR ZG SZ S S R NE R AR OW NW AI GL

Source: FSO, CBRE, 2019 / 2020 © CBRE Switzerland 2020 6 2018 2019 2018/2019

0,6% 1,5% 0,9% 4% 0,4% 5% 11% 19% 0 - 299 m2 300 - 499 m2 12% 500 - 999 m2 23% 1'000 - 1'999 m2 2'000 - 4'999 m2 5'000 - 9'999 m2 10'000+ m2 58% 55% 8%

LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

Small-size supply 2019/2020Number of offers by size

The supply mainly consists of small units Even though landlords tend to advertise 3% 0.3% 0.4% 0.8%1.3% 5% 10% with low room heights. Classic logistics only the newer buildings with details 20% room heights of 8 - 12 m are rarely seen of the year of construction, online 0 - 299 sq m in online advertisements, high-bay advertisements can still be used to derive warehouse heights of 12 m and above trends in the structural condition of the 19% 300 - 499 sq m 14% even less. offer. If one focuses on the amount of Total 500 - 999 sq m Total space offered and not on the number of Even after excluding all warehouse offers 525,000 sq m 1,000 - 1,999 sq m 465,000 sq m advertisements, the offer has become (incl. units < 300 sq m) (excl. units < 300 sq m) below 300 sq m (totaling 60,000 sq m), slightly older. Whereas in 2018 49% of 2,000 - 4,999 sq m which often include workshop, small the space offered online was still built 7% 5,000 - 9,999 sq m storage and archive space or even after the turn of the millennium, in 66% 54% hobby and self-storage rooms, only 2019 this figure was only 44%. At the 10,000+ sq m around a quarter of the advertisements same time, the share of space built offer 1,000 sq m or more. This means before 1980 has also increased. that the offer structure has hardly changed compared to last year. Source: FPRE, CBRE, 2019 / 2020

Number of offers by ceiling height Share of space offered (left) and number of offers (right) by construction year

50% 50%

2018 2019 2018 2019

40% 40% 8.0 m 90% quantile

30% 30%

20% 20% 4.0 m Median

2.5 m 10% 10% 10% quantile

0% 0% 1920 - 1979 1980 - 1999 2000 - 2019 1920 - 1979 1980 - 1999 2000 - 2019

Source: FPRE, CBRE, 2019 / 2020 Source: FPRE, CBRE, 2019 / 2020

Heterogeneous rent structure

The quoted rents gathered in August 2019 Such top properties with rents of CHF Fitted-out premises that are being However, these rental costs that need have changed compared with last year’s 200 / sq m p.a. and above therefore operated by logistics service providers to be borne by the “end user” must be figures to the extent that the rental margin usually are tailor-made functional achieve even higher rents per square relativized by the common costs (incl. has widened. Not only have the top 30% buildings with room heights from 9 m meter of ground space if the number of traffic area or special area shares) that of the rental offers become CHF 10 / sq m onwards (12 m and more for high-bay (stackable) pallet spaces is considered. are directly incurred at the expense p.a. more expensive, but the 10% quantile warehouses) rented out at cost. They are Such serviced buildings reach gross rental of the operator of the property. has also fallen from CHF 70 / sq m p.a. used for cross-docking functions or for incomes of CHF 5 - 12 per Euro-pallet to CHF 60 / sq m p.a. the central distribution of small goods and month (excluding costs for storage / (e.g. electronic, medical or car spare parts retrieval processes and machinery). It is mainly the differences in the quality in automated high-bay warehouses). of the building structure that are being priced differently on the market. Simple warehouses with an old building structure Asking rents according to quality characteristics Usage Building quality and low room heights are increasingly facing a poor willingness to pay of CHF 60 to 100 / sq m p.a. Conversely, good areas with room heights of around 6 - 8 m can be traded at significantly higher Applies prices from CHF 125 / sq m p.a. (75% May apply quantile). They are required above all for transfer or distribution centers. They Hardly applicable Storage Distribution Good room height Good location offer adequate building services (HVACS typeBuilding (CHF / sq m p.a.) Rent Transfer New building High number of gates Good technology building (HVACS) = heating, ventilation, air conditioning, Automated, extended high-bay warehouse for distribution refrigeration, sanitation), a large number ~200+ or transfer center (often tailor-made at cost rent) (Top rent) of gates and are located near motorway connections between major Swiss centers. Air conditioned / cooled distribution or For non-tailored new buildings with 160 (90% quantile) first-class quality standards (without transfer center in (sub)urban location tenant improvements), even quoted rents in the range of CHF 140 to 160 / sq m Midlands distribution property 125 p.a. (90% quantile) can be considered. with radiant heaters (70% quantile)

Yield investors or developers often 100 only become active in the case of pre- Warehouse related to production (Median) let properties, since the construction of a logistics property together with 85 the land price and an adequate Unheated warehouse in peripheral location (30% quantile) margin often requires higher rents than the ones achievable on the 60 market for existing properties. Simple warehouse with high repair requirement (10% quantile)

Source: CBRE, 2020

Continuing high construction investments

The logistics-related spending for new The pipeline is still well filled, which Migros Verteilbetrieb Neuendorf is Among the logistics service providers, construction and conversion projects will lead to high new construction and constructing a high-bay warehouse a new building for the pharmaceutical decreased significantly in 2017 and conversion volumes over the next two extension with a building footprint of logistics company Voigt in Niederbipp (BE) amounted to CHF 801 million, after years or so. The online business in over 17,000 sq m and is also expanding and two new Swiss Post regional parcel Coop’s investments for distribution and particular remains an important driver. its logistics platform in Moosseedorf centers in Untervaz (GR) and Vétroz (VS), production facilities in Pratteln and In an international context, an increase / Schönbühl (BE). Coop is merging its each with around 25,000 sq m, are nearing Schafisheim had a decisive impact in in online retail sales of USD 1 billion (or existing distribution centers in western completion. UPS will increase its presence previous years. The 2017 construction Swiss francs) can be expected to generate Switzerland in Aclens (VD) and expanding in the greater Zurich area and move from investments also partly include the additional demand for almost 100,000 sq the existing logistics and administration its current location in Rümlang to a new 26,000 sq m Planzer railway center m of logistics space. Due to e-tailers based complex by almost 25,000 sq m. 6,300 sq m operating area in the logistics in Penthalaz (VD), the 24,000 sq m abroad, which account for around one Victorinox, with a two-storey European zone in Bülach-Nord. The parcel and freight intermodal cargo center of Camion third of the growth in Swiss online sales of headquarters with 18,500 sq m of center is being developed by the Credit Transport in Vufflens-la-Ville (VD), the approximately CHF 650 million p.a. (2014 warehouse space in Ibach (SZ), and Suisse Real Estate Fund Logistics- 22,000 sq m three-storey Interdiscount - 2019), this does not apply to Switzerland Estée Lauder, with two distribution Plus. Zumwald Transports is also and Microspot building in Jegenstorf to the same extent. Nevertheless, an centers totalling more than 30,000 expanding its existing logistics facility in (BE) and the 16,000 sq m pharmaceutical annual increase in demand of 40,000 sq m in Galgenen (SZ) and Wohlen Avenches (VD) from 23’000 sq m to hub of Kuehne + Nagel in Möhlin sq m can be expected in Switzerland (AG), are increasingly focusing on 32’000 sq m. Dreier, the Swiss market (AG). In total, an estimated 210,000 sq thanks to e-commerce. The high level of manufacturer-led business-to-consumer leader for hanging garment logistics, has m (GLA) of new logistics space were construction expenditure, as outlined relationships. In contrast, Brack.ch with announced that it will merge its existing built in 2017, which corresponds to in the following examples, is also being its 20,000 sq m extension in Willisau locations in the recently acquired pro- approximately 0.9% of the existing stock. driven by a rising degree of automation (LU) acts as an online intermediary. perties (50,000 sq m) on the GE site in in the national logistics sector, which, Oberentfelden (AG). although requiring high initial investment, is counteracting the high Swiss wage costs.

Construction investments into warehouses and depots in Switzerland (in CHF m, nominal prices)

20 2 2 New construction: approx. 210,000 sq m (GLA) or 0.9% of stock

20 2 New construction: approx. 230,000 sq m (GLA) or 1.0% of stock

20 20 New construction: approx. 290,000 sq m (GLA) or 1.2% of stock

N C Source: FSO, CBRE, 2019 / 2020

Meier Tobler is also planning to freight capacity following the purchase French-speaking Switzerland In contrast to the densely populated consolidate the existing logistics sites of various buildings from Priora. is catching up areas between Lausanne and Geneva, in Nebikon (LU) and Däniken (SO), the Gros-de-Vaud region often offers and Swisslos is moving its rental space New buildings by (investor) developers even larger areas of land as well as good Investments in warehouses, depots, from Reinach (BL) to its own building are still rarely seen in Switzerland economic and demographic prospects. silos and cisterns have increased over in Rheinfelden (AG) with 5,000 sq m and, according to the Swiss Federal the last decade, particularly in French- in order to supply its sales outlets Statistical Office, have accounted for only speaking Switzerland. The Cantons throughout Switzerland from there. around one-eighth of all construction expenditure on average over many of Vaud and Fribourg are increasingly The public sector is investing in its years. The speculative logistics building acting as transhipment locations and as logistics infrastructure as well. In Emmen CP KAMMACHER II in Meyrin (GE) of a link between German-speaking and (LU), a new Swiss Army container hall Compagnie des Parcs and a pre-let new French-speaking Switzerland for dual with a stand area of 5,000 sq m and space building of FlexiLog in Satigny (GE), logistics concepts that rely on night for 600 containers is being built. A new both with around 18,000 sq m each, trains for the main leg of the logistics logistics center with baggage sorting are therefore rather the exception. route and on trucks for distribution facilities is being built at Geneva Airport, (Source: Different media reports) in the delivery areas the following day. and Zurich Airport will also increase its

Construction investmentsI into warehouses C and Ldepots by canton D 1994 S- 2017 Z (in CHF m, real prices) 20 0000 000 200 2 000 00 2002 200 0

000 0 00

2 200 20 0

000 00 00

000 0 00 2 000 00 0 0 02 000 00 0 C C S C 0 0 0 0 2 22 22 2

000 2 00 22 2 2 20 2 22 222

0 200 2

2000 2 2 00 2

000 2 00 2 0 0 S Z D AG E L R SO TI SG GE TG S L GR S SZ ZG S

Source: FSO, CBRE, 2019 / 2020 © CBRE Switzerland 2020 10 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

The big e-tailers stay away from Switzerland

It is true that Switzerland offers high As a result, part of the demand for This means that foreign providers are many marketplace products from purchasing power and good potential distribution centers falls to countries now hardly at a disadvantage compared to third parties, compared to its home for growth in online trade. The large near the border, but Swiss Post’s Swiss merchants, and therefore it does not brands, can hardly be distributed suppliers of home electronics dominate logistics infrastructure (parcel hubs (yet) make any sense for the online giants economically due to the EU and the national demand for distribution and post offices) can still benefit. to build their own logistics infrastructure Swiss export / import regulations as centers. Nevertheless, in recent years the in Switzerland. All the more so, when well as VAT and customs duties. foreign online giants Zalando, Amazon Thanks to the logistical integration considering that e.g. on Amazon the and Alibaba have recorded the highest of Swiss Post’s parcel centers, which sales growth. According to Carpathia, can be reached across borders in just a foreign e-tailers already accounted few hours and handle digital customs for 20% of Swiss online sales in 2018. clearance, foreign online retailers can Logistics centers near the border These companies often operate their offer fast delivery times. Even same- large e-fulfillment centers in foreign day deliveries have been tested in countries close to the border or act as the Zurich area in recent months. Pforzheim a marketing platform for shippers who 110,000 sq m are already based in Switzerland. Lahr 130,000 sq m

E-commerce Graben E-COMMERCEE-COMMERCE 110,000 sq m

Frauenfeld Urdorf Härkingen

Direct Untervaz traffic network Post parcel centers Sevrey 40,000 sq m Daillens Zalando logistics E-fulfillment centers Package hub Package hub center Amazon logistics Cadenazzo centers Vétroz ~100-120 km belt around Switzerland

Satolas-et-Bonce Consumer Consumer 34,000 sq m Casirate 34,000 sq m Vercelli Locker / Pick-up station Torrazza Piemonte 100,000 sq m 60,000 sq m Castel San Giovanni 100,000 sq m Stradella Source: CBRE, 2020 40,000 sq m Source: CBRE based on Carpathia AG, 2020

Logistics by no means the sole cause of the traffic problem

Logistics uses are often associated Despite the high proportion of truck rail transport is of particular interest with traffic congestion on Swiss roads. journeys, particularly in the case of for longer national distances and for It cannot be denied that online trade transfer facilities, it should be possible transit, import and export business. leads to more traffic. Whereas in the to steer traffic in an orderly direction Particularly in the existing suburban past products were delivered from by means of well thought-out supply shopping areas in prime locations, the the producer via warehouses to the chains, efficient and environmentally current difficulties in stationary trade chain stores and sold there to the end friendly means of transport and spatial could create opportunities for logistics consumer, online trade today requires planning measures. Due to the ban on uses with significantly less traffic. considerably more delivery stages until night-time driving from 10 p.m. to 5 a.m., the last mile is completed. Additional picking steps, e.g. via e-fulfillment centers and various stations at Swiss Post, lead to significantly more journeys. Traffic and space requirements by type of use

If one takes into account commercial Data traffic (business, service and goods traffic) center 1,000 as well as the private traffic of employees, it is nevertheless important to note that simple warehouse and distribution uses on the outskirts of cities close to motorways altogether cause fewer trips by cars and trucks than, for example, office, production or light industrial uses in the same location. A distribution center with 200 a space requirement of 30,000 sq m (incl. office share of 5 - 10%) will therefore generate “only” around 700 outward and Warehouse return journeys per day, with around a third of these being truck journeys and Transfer the rest mainly private employee journeys (30% public transport share). This is about Distribution

GLA per employee in sq m 100 the same amount as is generated by an Extensive production office in the city suburbs with 10,000 sq m (assuming a public transport share Normal production Retail / Leisure of 60% of private employee travel). Craft / Construction industry

Office

0 5 10 15

Daily trips per 100 sq m GFA Source: CBRE, 2020

Interview: Alexandre Monney, fund manager of the real estate fund “Procimmo Swiss Commercial Fund”

logistics buildings often include, at What benefits do you see in investing in be too expensive for an opportunist player, least in Switzerland, a mix of storage, logistics? but too risky for an institutional investor. production and office space. In addition to strong market Do you see opportunities that come along fundamentals, the logistics market How do you perceive the current market with logistics in terms of value creation? still offers attractive returns relative trends? to other asset classes, despite the A large part of the stock consists of old strong yield compression in the recent Sentiment remains positive; the market and energy-intensive properties. Based on years. Moreover, the sector offers great still benefits from the dynamism of the this, in addition to traditional valuation opportunities for risk diversification Swiss industrial and SME structure. methods, we have integrated ESG criteria (from core to opportunistic) compared Demand for logistics space has been into our approach to improve the quality to other sectors. Finally, a large single- keeping well, while supply remains of our stock: solar panels laying on the tenant building with a long-term lease Procimmo SA is a manager of real estate limited, particularly in the large-size roofs of buildings, installation of electric can generate stable income and generally collective investment schemes approved segment, which keeps pressure on charging points for cars, implementation requires less asset management work. by the Financial Market Supervisory rents. In contrast, supply for smaller of new services for employees on site Authority (FINMA). Founded in 2007, the surfaces is more abundant. (catering, leisure activities), etc. company currently manages around CHF And what do you think would be the main 3 billion of real estate assets allocated in challenges? investment funds throughout Switzerland. Would you have an example of a building It has been focusing on the industrial and In Switzerland, logistics real estate is to mention in particular? logistics real estate “niche” market. still considered as a “niche” market: the “Logistics still offers attractive lack of knowledge of the sector acts as Several examples come to mind. The returns, great opportunities for a brake for many stakeholders, with a transaction we made in Puidoux (VD) in risk diversification and stable perception of risk often overestimated. the industrial zone of Verney (see photo) represents our value creation know-how. incomes.” Regulatory constraints, high land prices in the vicinity of the motorway or railway This was a sale & leaseback with partial axes, and municipalities often reluctant to withdrawal of the lessee-vendor in the deliver building permits of this type, are medium term, whereby we managed all obstacles that should not be neglected. to upgrade and optimize the land and These entry barriers involve a low degree building conditions, by activating several As a major investor in commercial real We are seeing an increasing construction of liquidity in the logistics market. levers: estate in Switzerland, what is your view activity in Romandy, how would you on the logistics market? explain this? • renovation of the How do you manage this liquidity risk? administrative building; First of all, the meaning of the term Land availability and lower regulatory • renovation and reconfiguration “logistics” needs to be clarified. In my constraints in several French-speaking The exit risk depends on each investor’s of the industrial premise; opinion, it can refer to both a large cantons might play an important role, time horizon. By positioning ourselves distribution platform in its common as logistics is quite land-consuming. on the long term, we can adapt to the real • increased revenues by generating definition, and light industrial areas Furthermore, a “catch-up” effect estate market cycles. When reselling a additional parking spaces; allowing smaller-scale transport over the German-speaking industrial repositioned asset, the challenge is to find and warehousing operations in its regions may well be taking place. potential buyers with the appropriate risk • optimization of tenant utility costs by extended definition. In that sense, profile. In simple terms, such an asset can implementing a common consumption © CBRE Switzerland 2020 13 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

What are the main factors influencing “Providing tenants with a rent levels? certain degree of flexibility and The location and the intrinsic quality of integrating ESG criteria into the building are key factors for logistics. our approach generate value However, users of logistics and industrial premises, which are predominantly creation.” SMEs, remain very sensitive to rental prices, due to the pressure on their operating margins, and often opt for the most economical solution.

system, where green energy How do you see the Swiss logistics market produced by the building is directly in the future? consumed by tenants who can benefit from a cheaper price, compared The market should gradually become to a local electricity network; more institutionalized and mature, • and finally increasing the rental values while offering new investment by concluding long-term leases. opportunities in view of the growing construction activity. E-commerce For investors, all this translates into direct growth will continue to support Building owned by the real estate fund “Procimmo Swiss Commercial Fund”. It offers income growth and generates value additional demand for logistics space, approximately 12,000 sq m of rentable space located in the east of the municipality of creation. although large international e-tailers Puidoux (VD) in its industrial area, benefiting from good access to the motorway. It consists will likely continue to operate from their of two separate buildings, an administrative building and an industrial hall. The two platforms across the Swiss border. buildings are currently let to several tenants and recently underwent a major renovation. Are there other levers that the landlord can use to support his tenants? What can we learn from your experience We think it is essential to be able to in investing in logistics real estate? provide tenants with some degree of flexibility in their respective activities, A flexible and well-thought-out building whether in the case of rapid growth, that meets the user’s needs coupled decline or innovation. Without naming with an attractive and appropriate them, we often support tenants in rental price will prove resilient in the adjusting their space requirements, both long term. Moreover, provided it is up and down. For example, we have located in a dynamic urban or suburban assisted the expansion of several tenants area, a logistics or industrial building from the lease of a small “streetbox-like” will offer a superior conversion or modular hall of approx. 100 sq m to the repositioning potential, which allows occupation of larger sites. an asset revaluation over time.

The “goldenbis triangle” 1.4% with highest logistics density 1.5% bis 3.4% The highest density of full-time equivalents (FTE)3.5% employed bis 5.4%in freight logistics can be seen in the so-called “golden triangle”.5.5% This isbis located 7.4% between Basel, Zurich and Oberaargau and shows significantly higher7.5% values und than mehr the Swiss average of 2.8%. The top clusters are to be found in the MS regions Unteres Baselbiet with a share of 7.6% of all FTE, Gros-de-Vaud with 9.1%, Willisau Employment density in freight with 11.2% and Olten with 14.8%. logistics 2017

Share of FTE in freight logistics of total FTE 2017 Up to 1.4% 1.5% to 3.4% 3.5% to 5.4% 5.5% to 7.4% 7.5% and more

VZA in der GüterlogistikMedium nach and small workplaces dominate the market Unternehmensgrösse (2017) Compared to the Swiss economy as a whole, a particularly large number of logistics employees are employed in small (31% of all FTE) or medium-sized workplaces (34% of all FTE). Large companies with 250 or more employees are most strongly represented in the Workplace sizes central Swiss cantons of Solothurn and Aargau, while they are hardly ever and employment density found outside the central plateau. in freight logistics 2017

Anzahl der VZA in der Güterlogistik Numberpro Kanton of FTE (2017) in freight logistics by canton 2017 15,000 10,000 5,000 2,000 500

Anteil der VZA in der Güterlogistik Number of FTE in freight logistics byam company Gesamttotal size 2017 der VZA (2017) Large0 -companies 0.9% (250+ employees) Mid-sized1.0% companies- 1.9% (50 - 249 employees) Small enterprises (10 - 49 employees) Micro2.0% enterprises - 3.4% (1 - 9 employees) 3.5% - 4.9%

Share of5.0% FTE in - freight 6.5% logistics of total 6.5%FTE 2017 und mehr 1.0% to 1.9% VZA2.0% in der to 3.4% Güterlogistik nach Unternehmensgrösse3.5% to 4.9% (2017) 5.0% to 6.5% 6.5%Grossunternehmen and more 250+ Beschäftigte Mittlere Unternehmen 50 - 249 Beschäftigte Source: FSO, CBRE, 2019 / 2020 © CBREKleinunternehmen Switzerland 2020 10-49 Beschäftigte 16 Mikrounternehmen 1-9 Beschäftigte LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020

Employment development in freight logistics 2012 - 2017 Decline in employment in major centers in German-speaking Switzerland

In the sectors relevant to freight logistics, FTE was recorded in the MS regions of jobs were cut in the major Swiss German- Aarau and St. Gallen. Overall, the logistics speaking centers of Zurich, Basel and sector only grew by 0.2% between 2012 Berne between 2012 and 2017. This has and 2017 due to the rather difficult resulted in a displacement to locations economic environment at the time. outside the suburbs, as it is particularly noticeable to the south-east of Basel. In contrast, an increase of more than 500

Development of FTE of freight logistics 2012 - 2017 Increase of 500 FTE and more Increase of up to 500 FTE Decrease of up to 500 FTE Decrease of 500 FTE and more

Source: FSO, CBRE, 2019 / 2020

Workplaces development in freight logistics 2012 - 2017 Site expansions and consolidations

The picture is different for workplaces experienced a decline of over 11%. In a than for employees. Between fiercely contested industry with declining 2012 and 2017, especially in the margins, mergers of locations are likely “economic banana” in the midlands, to be responsible for this development. there were some MS regions with a declining number of workplaces and simultaneous employment growth. All in all, the logistics-relevant workplaces

Development of workplaces in freight logistics 2012 - 2017 Increase of 31 workplaces and more Increase of 16 to 30 workplaces In- or decrease up to 15 workplaces Decrease of 31 workplaces and more

Source: FSO, CBRE, 2019 / 2020

Contact

Research & Consulting

David Schoch Julien Scarpa t: +41 44 226 30 59 t: +41 21 560 73 66 e: [email protected] e: [email protected]

Investor Leasing / Tenant Representation Industrial & Logistics

Ismail Özgür Caroline Melis t: +41 44 226 30 09 t: +41 22 560 72 97 e: [email protected] e: [email protected]

Date of publication: April 7th, 2020

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About CBRE Group, Inc. CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates), and ser- ves real estate investors and occupiers through approximately 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. In Switzerland, CBRE is located in Basel, Geneva, Lausanne and Zurich. Please visit our website at www.cbre.com or www.cbre.ch. © CBRE Switzerland 2020 18