Weakening economy weighs on office real estate market
Published: Friday, Nov 10th 2023, 09:40
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The office real estate market cooled further in the third quarter of 2023. In addition to the weakening economy, weaker demand is also having a negative impact.
Across Switzerland as a whole, the amount of available office space rose to 3.8% of total office space, or 1.8 million square meters, in the third quarter of 2023. This is the third quarterly increase in a row, as real estate service provider CBRE reported on Friday.
The falling demand for offices is also reflected in prices. The price expectation index for office rents compiled last Wednesday by Fahrländer Partner Raumentwicklung (FPRE) fell to -34.7 points, compared to just under -20 points six months ago. The assessment of transaction prices for office and commercial properties also became more pessimistic: the corresponding index stood at -54.2 points in the latest survey, compared to -38.6 points six months ago.
Peripheral locations less in demand
According to the survey, significantly more office space was available, particularly in locations outside the five major centers of Zurich, Geneva, Basel, Bern and Lausanne. The number of available offices also increased in the suburbs of the centers. This was particularly pronounced in the Zurich airport region and in the Limmat Valley. According to the report, there have never been so many offices available for rent in absolute terms in the third quarter.
The analysts explain the decline in particular by lower demand for offices as a result of the weakening economy. Construction activity, on the other hand, did not play a significant role.
In addition, many companies have adapted their working conditions following the coronavirus crisis and are increasingly working from home. The lower demand for office space is now also gradually being reflected in the office market, the report continues.
Central locations still in demand
However, the major metropolitan areas bucked the negative trend. For example, the supply of vacant office space in the city of Zurich continued to fall in the third quarter. In contrast, the market in Geneva, Bern and Lausanne remained stable.
In Basel, the availability rate also fell significantly due to some major letting successes. However, market observers predict that an increase can be expected in the city in the medium term.
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