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 © CBRE Switzerland 2020 1 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020 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. © CBRE Switzerland 2020 2 LOGISTICS REAL ESTATE REPORT SWITZERLAND 2020 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 8% Germany GDP S 0 000 7,0% 00 O Netherlands 0 6% 6,5% France 6,0% Switzerland 0 4% 5,5% 5,0% 20 2 4,5% * 4,0% 00 0 N GDP -o * Forecast 3,5% I 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 8 8 8 8 9 7 0 2 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 3 4 1 2 3 4 1 2 3 4 1 3 4 1 2 3 4 1 2 20 200 Q1 Q2 Q Q Q Q Q Q Q Q Q Q Q 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 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.