Demand on Swiss office market cools down
Published: Tuesday, Jan 9th 2024, 17:10
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More and more office space is becoming vacant in Switzerland. Nevertheless, prices are likely to fall only slightly, as there are still many potential buyers with purchasing power.
In Switzerland's five largest office markets - Zurich, Geneva, Bern, Basel and Lausanne - slightly more office space was available at the end of 2023 than in the previous year. This is according to an office market study published on Tuesday by consultancy firm Jones Lang LaSalle (JLL).
Specifically, the supply ratio rose by 0.1 percentage points to 4.6% within twelve months. Supply increased in Zurich and Geneva, while it remained stable in Bern and fell slightly in Lausanne and Basel compared to the previous year.
Comparatively low vacancy rate
According to the study report, office vacancy rates in Switzerland were low by European standards at less than 5 percent: the average vacancy rate in European cities last year was 7.7 percent.
In Dublin, Budapest, Stockholm and Lisbon, vacancy rates of around 10 percent were even recorded. According to the JLL experts, comparable rates in Switzerland can only be found in Opfikon and Wallisellen in the Zurich conurbation and in the Geneva and Lausanne West airport region.
Fewer purchase deals concluded
As the report also shows, demand for office space cooled towards the end of the year after a surge in the first half of 2023. However, this development has "not yet had a significant impact on the development of supply".
According to the authors of the study, the office market in Switzerland is liquid. However, fewer purchase deals are currently being concluded than abroad, "as seller and buyer expectations are often still far apart". However, there are selective signs that sellers could also accept lower prices, but the pricing and revaluation phase is still underway.
According to the report, insurance companies and funds have been particularly active in the bidding process to date. In the current interest rate environment, however, they are increasingly taking a back seat or even selling their properties. New owners include family offices of owner families, extremely wealthy private individuals, so-called ultra-high-net-worth individuals (UHNWI), as well as housing cooperatives.
According to Jan Eckert, Head of Switzerland and Head of Capital Markets for the German-speaking countries at JLL, there is still sufficient capital available in this country, which is stabilizing the market. "The number of co-bidders in transactions is lower than in previous years. However, as long as the quality of the property is right, there are still solvent potential buyers."
Looking ahead, the decline in construction activity is also likely to make itself felt: in 2024 and 2025, only around half as many new offices will be built as the annual average of the previous five years. Supply should therefore tend to tighten.
©Keystone/SDA
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