Real estate monitoring: bleak prospects for retail space
Published: Thursday, Apr 25th 2024, 17:20
Back to Live Feed
When you hear about real estate, you usually think of scarcity and rising prices. But this only applies to the residential sector. In the office and retail real estate sector, the outlook is less rosy. Instead, there is a threat of falling rents and rising vacancy rates.
According to the spring edition of "Immo-Monitoring" published on Thursday, real estate consultancy firm Wüest Partner (WP) expects asking rents for commercial space to fall. For office space, asking rents are likely to fall by 0.4 percent across Switzerland and for retail space by as much as 1.2 percent. This is despite a positive mood among many companies and a large number of vacancies in the office sector as well as low construction activity.
However, there are major differences. According to the study, buildings with a considerable need for refurbishment are particularly affected by rising vacancy rates and therefore no longer meet the requirements of tenants in terms of sustainability.
In addition, according to WP, there are still regions, including the Glattal-Furttal, Mendrisio, Morges and Nyon, with a structural oversupply. This is putting pressure on rental prices for office space. However, the major economic centers such as Zurich and Geneva, where the labor market is also developing very positively, are hardly affected by this. Very well-located and well-maintained modern space in particular remains in demand.
E-commerce causes problems for retail spaces
According to WP, the market for retail space is facing major challenges - despite the upturn of the past two years. WP is forecasting a decline in asking rents of 1.2 percent overall. One important reason for this is the upturn in e-commerce.
This requires costly change and flexibility. By redesigning the sales areas, the shopping experience could be improved.
Top locations preferred
Interest in retail space in prime locations is high. This is leading to rising rents. However, across Switzerland as a whole, rents for retail space tend to be under pressure. Some shopping centers are particularly affected. The average vacancy rate here was a relatively high 5.0 percent in 2023. By comparison, it was well below 4 percent in major cities.
In addition, sales per square meter in shopping centers are falling more sharply than in other retail spaces, which is putting pressure on market rents. According to WP, this is also having an impact on their real estate values. These would perform worse in comparison to other retail spaces. Inner-city retail space clearly increased in value between 2018 and 2023, while the value of shopping centers remained practically constant.
However, a distinction must also be made here between top shopping centers and medium-sized shopping centers. While the former increased in value between 2018 and 2023, the valuations of the latter fell significantly.
Retail space in top shopping centers with good transport links, plenty of parking spaces and a good mix of sectors can be let at a much higher rate. There are even waiting lists for interested parties. In contrast, prime rents in medium-sized shopping centers have not been maintained in recent years. However, rents in shopping centers are generally slow to react to market changes due to the generally long leases, WP continues.
©Keystone/SDA
English 
German 
French 
Spanish 
Arabic