First PwC Real Estate Investor Survey for Switzerland

Where are the most lucrative real estate investments to be found in Switzerland? What kinds of property? How does the Swiss market differ from Germany?

PwC’s first Real Estate Investor Survey conducted by experts in Switzerland and Germany comes up with a number of key findings:

  • Overall, all-risk yields (ARYs) in Switzerland are lower on residential property than on office space.
  • Both residential and office properties tend to yield more in smaller Swiss cities than in Zurich and Geneva, and even more in outlying regions.
  • The differential between the Big Two (Zurich and Geneva) and the other cities is even greater for high street retail property.
  • Over the next twelve months most investors believe residential rent growth will stagnate, and anticipate negative growth in office rents in most cities and all outlying regions. They also predict negative growth for high street retail rents in all cities bar Lucerne.
  • Residential assets are very popular in Switzerland but only a niche in Germany, where investors favour the logistics market.
  • PropTech – technology start-ups for real estate – are an exciting prospect, but given the uncertainty it’s too early to invest

New, comprehensive study on Swiss real estate

What are all-risk yields (ARYs) for real estate investments in Swiss cities and regions? And how much higher are they in the German market? PwC’s Real Estate Investor Survey answers these questions for the first time with a comprehensive study based on interviews with leading Swiss institutional investors. In response to the growing interest in investments abroad, especially in Germany, we at PwC Switzerland teamed up with our colleagues in Germany, who had already published this semiannual study six times.

The study’s main focus is the development of interest rates and yields on real estate investments. In this light we asked our interviewees about the ARYs at which they are willing to invest in Switzerland’s Top 9 cities and eight regions. We also polled their views on the development of interest rates, letting parameters, growth perspectives and the methodology for calculating net operating income (NOI).

While the section of the report on the Swiss market comprises data on residential, office and retail real estate, the section on Germany focuses on office, retail and logistics. This mirrors the fact that while residential assets are highly popular among Swiss investors, they remain a niche in the German market. Instead, the logistics market is of great importance in Germany.

The findings for Switzerland in detail:

Residential property
For residential properties, the city of Zurich shows the lowest yields among Swiss cities. The median ARY for core properties in Switzerland’s largest city is 2.5%, and investors will also accept significantly lower yields in individual cases. The average ARY for all Swiss residential properties is 2.9%, only slightly less than residential property in Geneva (3.0%), Bern (3.2%) and Basel (3.2%). It’s not just the city of Zurich that exhibits the lowest ARYs: the region of Zurich (excluding the city) averages an ARY of 3.3%, followed by the Lake Geneva Region (3.4%) and Northwestern Switzerland (3.5%). There is a consensus among most investors that residential rent growth will be stagnant over the next twelve months.

Office property
Zurich and Geneva again top the bunch for office real estate, with the lowest ARYs for core (2.5% each) and average office properties (3.3% each). At the other end of the spectrum, Lugano (3.7%) and St. Gallen (4.0%) exhibit the highest average ARYs. As for the regions, Zurich (average 4.2%) and Central Switzerland (average 4.4%) have the lowest yields on office property. Strikingly, the spread between the regions and the Top 9 cities they surround is significantly larger than for residential property. Office rent growth is expected to be negative for all regions, as well as for the cities of Zurich, Geneva, St. Gallen and Lugano.

Retail property
Core high street retail properties in Zurich and Geneva yield 2.5% ARY, similar to the figure for office use. Switzerland’s two largest centres thus come in well below the remaining Top 9 cities. The regional ranking for retail property is slightly different than for residential and office use, with the Lake Geneva Region and Central Switzerland (average ARY of 4.3% each) moving past Zurich (average 4.4%). Rent growth is expected to be negative for all geographies, except the city of Lucerne.

Special focus: PropTech
This report features a special spotlight topic, PropTech. PropTech refers to start-ups in the real estate sector developing technology for application in areas from brokerage and management, financing and due diligence to development. Despite the rapidly growing number of new businesses, the study finds that there’s still too much uncertainty for investors to make a move. We assume that reservations will soon be eliminated once more use cases for PropTech become available, allowing market participants to achieve sizeable efficiency gains.

Check out the full PwC Real Estate Investor Survey here and feel free to call us if you’d like to discuss matters in more detail.

How did the Swiss real estate industry start into the year 2018?

PwC – Immospektive Q1/18

The strength of the Swiss economy gives hope for positive impacts to the real estate market, or at a minimum to the current problem sectors of office and retail. The supply on the housing market has continued to grow which has led to an increase in the forecast vacancy rates and a decrease in market rents. Furthermore, it is assumed that interest rates will rise moderately in the long run.

Read more and get up to speed with us

Contact

Kurt Ritz
Partner, Real Estate Advisory
+41 58 792 14 49
kurt.ritz@ch.pwc.com

Marie Seiler
Director, Real Estate Advisory
+41 58 792 56 69
marie.seiler@ch.pwc.com

Samuel Berner
Real Estate Advisory
+41 58 792 17 39
samuel.berner@ch.pwc.com

 

Emerging Trends in Real Estate

Rethinking real estate

Overall, an optimistic outlook prevails throughout most of Europe’s property industry, with nearly half of this year’s respondents expecting European economic growth to improve over the next five years.

But the geopolitical backdrop is creating a shift in focus, with concerns moving from the regional to the global.

Emerging Trends in Real Estate® Europe 2018 reveals an industry that is becoming more complex, yet more transparent and accessible. Whatever the outcome, it is certain that the industry will need new skill sets, new ways of collaborating outside traditional industry boundaries and new business models to survive and compete in the new real estate ecosystem.

Dive deeper

Contact

Kurt Ritz
Partner, Real Estate Advisory
+41 58 792 14 49
kurt.ritz@ch.pwc.com

Marie Seiler
Director, Real Estate Advisory
+41 58 792 56 69
marie.seiler@ch.pwc.com

PwC-Immospective Q4/17

The positive expectations for 2018 are broad-based.

An economic upturn is projected for 2018. The upbeat economic prospects spread optimism for the office and retail segments. The prices of residential investment properties have risen further and driven peak returns to record lows.

More information

Contact

Kurt Ritz
Partner, Real Estate Advisory
+41 58 792 14 49
kurt.ritz@ch.pwc.com

Marie Seiler
Director, Real Estate Advisory
+41 58 792 56 69
marie.seiler@ch.pwc.com

Samuel Berner
Real Estate Advisory
+41 58 792 17 39
samuel.berner@ch.pwc.com

PwC-Immospektive Q3/17

Interpretation of the FPRE real estate meta analysis Q3/17

The Swiss economy is currently benefiting from an economically strong Europe. A normalisation of the interest rate landscape is still anticipated, but at a slower pace of adjustment. The reference rate fell to a new record low of 1.5%. Falling market rents in the residential and office market increase the pressure on investments, while the situation for the retail sector remains precarious.

More information

Contact

Kurt Ritz
Partner, Real Estate Advisory
+41 58 792 14 49
kurt.ritz@ch.pwc.com

Marie Seiler
Director, Real Estate Advisory
+41 58 792 56 69
marie.seiler@ch.pwc.com

Samuel Berner
Real Estate Advisory
+41 58 792 17 39
samuel.berner@ch.pwc.com

PwC-Immospektive Q2/17

Interpretation of the FPRE real estate meta analysis Q2/17

Swiss economy regains it’s confidence. While revenues in the construction industry remain above average the market for rental apartments is seeing bad omens for the first time. The forecasted economic growth is optimistic and likely to bring a pick-up in demand for office space.

More information

Contact

Kurt Ritz
Partner, Real Estate Advisory
+41 58 792 14 49
kurt.ritz@ch.pwc.com

Marie Seiler
Director, Real Estate Advisory
+41 58 792 56 69
marie.seiler@ch.pwc.com

Samuel Berner
Real Estate Advisory
+41 58 792 17 39
samuel.berner@ch.pwc.com

PwC-Immospective

Interpretation of the FPRE Meta-analysis Real Estate 1Q/16

The Swiss economy will struggle to gain momentum until 2017. However, farsighted investors may benefit from this situation. While prices for residential properties may have peaked, office properties in well-developed “B” locations might offer good investment opportunities. The slow economic recovery will increase demand for such properties. Owners of retail properties are also waiting for this kind of recovery. So far, consumers have spent their savings from low energy prices at online retailers or at foreign locations close to the Swiss border.

Find out more in the latest issue of PwC-Immospective for the 1. quarter 2016.