Property Market Report 2021

Property Market Report 2021

PROPERTY MARKET REPORT 2021 www.csl-immobilienmarkt.ch PROPERTY MARKET REPORT 2021 | 1 Publisher CSL Immobilien AG, February 2021 Editorial team Yonas Mulugeta, CSL Immobilien AG, Zurich Patricia Reichelt, CSL Immobilien AG, Zurich Siham Balutsch, CSL Immobilien AG, Zurich Michelle Müller, CSL Immobilien AG, Zurich Felix Müller, FMKomm GmbH, Zurich Concept and design Letitia Zenhäusern, CSL Immobilien AG, Zurich Data collection CSL Immobilien AG, Zurich Meta-Sys AG, Bubikon The report is based upon published data collected from advertising platforms, statistical offices and public institutions as well as analysis of internal data produced by CSL Immobilien AG. The data has been carefully researched and subjected to extensive quality control. How- ever, we provide no warranty for its correctness or completeness, particularly with regard to conclusions and projections. All liability is excluded. Quotes from the publication may be used with acknowledgement of the source. Copyright 2021, CSL Immobilien AG CONTENTS 5 EDITORIAL 6 CURRENT MARKET 6 LEGAL CONDITIONS 6 ECONOMIC ENVIRONMENT 7 INVESTMENT MARKET 7 INVESTMENT MARKET SWITZERLAND 8 INVESTMENT MARKET COMMERCIAL PROPERTY 9 INVESTMENT MARKET RESIDENTIAL PROPERTY 10 SWISS REAL ESTATE MARKET 10 SWISS OFFICE MARKET 11 SWISS RESIDENTIAL MARKET 12 OFFICE MARKET 12 GREATER ZURICH OFFICE MARKET 14 CITY OF ZURICH OFFICE MARKET 16 BASEL OFFICE MARKET 17 BERN OFFICE MARKET 18 GENEVA OFFICE MARKET 19 LAUSANNE OFFICE MARKET 20 RESIDENTIAL MARKET 20 GREATER ZURICH RESIDENTIAL MARKET 23 CITY OF ZURICH RESIDENTIAL MARKET 24 BASEL RESIDENTIAL MARKET 25 BERN RESIDENTIAL MARKET 26 GENEVA RESIDENTIAL MARKET 27 LAUSANNE RESIDENTIAL MARKET 28 CSL IMMOBILIEN 28 YOUR CONTACTS AT A GLANCE 29 OUR SERVICES AT A GLANCE 30 GLOSSARY 4 | PROPERTY MARKET REPORT 2021 EDITORIAL Real estate market participants faced an entirely new crisis The residential market has benefited from the pandemic. situation in 2020. It was unclear during the initial lockdown in People working from home could not help but think more spring 2020 what the impact of the pandemic would be on about their personal living situation. Together with low inter- the markets and on property values. On the investment mar- est rates, this fuelled demand, particularly in the owner- ket, it quickly became clear that the lack of investment alter- occupied segment, with the result that properties that had natives would make real estate a safe-haven asset class for previously been difficult to market in less attractive locations many investors. This drove purchase prices up again, against were now able to find buyers. expectations. However, the CSL survey of about three dozen of the largest Swiss real estate market participants reveals a In the rental segment, the difference widened between the nuanced picture. In 2020, interest in office properties fell, es- shortage of housing in central locations and outer regions pecially outside city centres, while competition for residential where supply and demand have fallen out of balance. For this property investments increased, driving prices. reason, a precise analysis of the location and the local market continues to be a key success factor in the development, mar- On the office market, many tenants put their decisions on keting and management of properties. hold in 2020, or they began to reduce the amount of space they rented as more of their employees worked from home. Many thanks to all the real estate investors and location pro- Interest in central locations rose again, while demand fell no- moters who helped us with the real estate market report by ticeably in the outer agglomerations. As a result, the available sharing their experience and expertise. office space climbed sharply across the country in 2020, in- creasing by 23 %. I hope you find the report insightful. The discussion about the future of the office is currently fluc- tuating between two poles. Conservative companies and em- ployees who value personal contact are on one side, and on the other cost-cutting companies are in the same boat as employees who value the ability to work undisturbed and would like to reduce their time spent commuting. The num- ber of people who continue to work from home over the long term and the effect this has on the office space market Best regards, depends on what becomes the new normal. From an eco- Yonas Mulugeta nomic standpoint, Switzerland withstood the crisis well com- pared with other countries. This gives hope that the office market will emerge relatively unscathed. The pandemic is now a standard part of daily life, but it will long be remembered as an accelerator of trends on the real estate market. So we shouldn’t lose sight of other issues, such as digital transformation, sustainability and demographic change. Yonas Mulugeta CEO, Partner, Director PROPERTY MARKET REPORT 2021 | 5 CURRENT MARKET LEGAL ECONOMIC CONDITIONS ENVIRONMENT Due to the repeated imposition of pandemic-related re- Economic output in Switzerland fell less sharply than it did in strictions in various sectors, the question of the rental obli- most other industrialised countries. On the one hand, this is gation for commercial space has been a intense topic of due to the country’s sector structure. The pharmaceutical in- discussion in recent months. After Parliament rejected the dustry accounts for a large share of gross domestic product proposal for a COVID-19 business rent law, tenants must (GDP), while the tourism sector is relatively small. In addition, either look for a mutually agreeable solution with their land- the federal government’s emergency measures helped sub- lord or seek a reduction of rent through legal action. Sev- stantially to stem the economic damage. Company bankrupt- eral cantons (GE, VD, FR, NE, BS, SO) have developed solu- cies stabilised at a low level and the increase in unemploy- tions in which the canton participates financially in some ment has so far been very modest. But bankruptcies are cases if there is a mutually agreed rent reduction. likely to increase in the first quarter, as the coronavirus muta- tion will require additional protective measures in Europe. In a landmark ruling in October 2020, the Federal Supreme Court modified its stance on the calculation of net returns. However, the vaccination campaign points to an end to the Capital invested by the landlord may now be adjusted at a worst period. The economic situation is expected to improve rate of 100 % of inflation rather than the previous rate of by the second quarter. Vaccinations of high-risk groups will 40 %. Furthermore, revenue may now exceed the reference provide relief for the healthcare sector, and an easing of the interest rate by 2 % if the reference interest rate is 2 % or restrictions on movement will help to boost the Swiss econ- less. Previously, revenue could only exceed the reference omy in the second half of the year. For 2021 as a whole, we interest rate by half a percent. The real estate sector wel- expect GDP growth of 3 % over the previous year. The pan- comed the ruling as a step in the right direction, but it also demic-related decline in household income should be re- raises a number of questions (for example, what happens if couped over the course of 2022. The situation in the restau- the reference interest rate exceeds 2 %). rant, hotel and transport industries is likely to see sustained improvement from autumn. In contrast, the industrial sector Art. 6c of the ordinance on the rental and leasing of resi- will see an uptick as early as spring. Bolstered by strong de- dential and business premises (VMWG) entered into force mand from China, global trading activity should normalise on 1 June 2020. Under this provision, landlords may, in some over the course of the year and begin to expand significantly cases, pass on any costs incurred as part of energy perfor- from 2022. mance contracting (EPC) as ancillary costs for a maximum of 10 years. The aim of EPC is to reduce energy consump- However, interest rates will change very little. Monetary pol- tion costs through suitable efficiency, renovation and mod- icy will remain very expansive around the world. Although in- ernisation measures and accompanying services. flation will climb, it will barely exceed the targets of central banks. Long-term capacity bottlenecks are not likely; global The consultation procedure for revising the building con- trade will continue to have a deflationary effect. The Swiss tract law has been concluded. The initial results of this pro- National Bank (SNB) is not likely to raise headline rates be- cedure are highly anticipated; the objective includes improv- fore 2024. We also expect long-term franc-denominated in- ing the rights of building owners and property purchasers in terest rates to trend sideways at a low level. As a result, real the event of construction defects. estate will continue to have a considerable yield advantage over franc-denominated bonds. Dr. Sibylle Schnyder Dr. Christoph Sax Partner CMS of Erlach Poncet Chief Economist Migros Bank 6 | PROPERTY MARKET REPORT 2021 INVESTMENT MARKET INVESTMENT MARKET SWITZERLAND Society and real estate market participants were confronted The portfolios of Swiss real estate investors grew in 2020 by with an unprecedented crisis in 2020. During the initial an average of 2 %, not only due to purchases, but also – with COVID-19 lockdowns, this caused uncertainty among inves- few exceptions – due to increases in value. Around a third of tors. It was not possible to foresee what impact the pan- investors increased their investments in existing property demic would have on real estate prices in the short term. As once again. Another third invested more in development pro- a result, smaller transactions in particular were cancelled or jects in order to participate in value creation in the current postponed, while larger transactions by and large continued low interest rate environment and achieve higher yields.

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