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SWITZERLAND
Country Snapshots
Second quarter | 2016
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About & Contacts
SWITZERLAND
Economic Snapshot
Second Quarter | 2016
Overview
The Swiss economy has performed steadily in H1 2016,
despite the challenges posed by the strength of the Swiss
franc (CHF). The KOF Economic Barometer showed an
improved outlook for several sectors of the economy in May,
but it also signaled some weakness in private consumption.
The Swiss National Bank (SNB) continues its efforts to keep
the franc from appreciating further by keeping interest rates
negative at its June meeting, while also reiterating its
commitment to intervene in the foreign exchange market in
order to ease the pressure on the currency.
MARKET INDICATORS
Market Outlook
GDP:
Growth is forecast to remain relatively subdued in
2016, but medium term prospects are more positive.
Inflation:
Deflationary pressures to persist in 2016, due to low
oil prices. Prices expected to modestly rise in 2017.
Interest rate:
The SNB bank will maintain its very loose monetary
policy, with interest rates staying negative.
Employment:
Weakening in sectors hit hardest by the stronger
CHF, such as tourism and consumer services.
Economic Summary
ECONOMIC INDICATORS
Weaker indicators for private consumption
Retail sales contracted for the eighth consecutive month in
March, while recent confidence indicators suggest that
consumers have become more pessimistic in recent months.
Much of this decline in consumer sentiment is linked to
deteriorating labour market conditions, with the strong
currency weighing heavily on industries such as consumer
services, tourism and manufacturing. On the flip side, the
strong currency has made imports cheaper, which is
boosting consumers’ purchasing power and keeping inflation
in negative territory. Private consumption growth is expected
to modestly slow to 0.9% in 2016, but is forecast to steadily
recover over the medium term.
Exports struggling but better prospects forecast
Leading indicators for the export sector remain weak and the
outlook for 2016 is still very challenging for many exporters.
Medium term prospects appear more positive however. Many
of Switzerland’s exports are high quality consumer and
investment goods, which are in high demand from both
developed and emerging markets. Exports are expected to
grow by 1.7% in 2016 but growth is forecast to accelerate to
3.8% per annum in 2017-2019.
Outlook
The short term outlook for the economy is relatively weak,
with GDP growth forecast to reach 0.8% in 2016. Beyond
that the outlook is more positive, with domestic and external
demand expected to pick up. While there is still a lot of
uncertainty around the future path of the CHF, the impact of
the exchange rate shock from 2015 should start to fade over
the medium term.
2013
2014
2015E
2016F
2017F
GDP Growth
1.8
1.9
0.9
1.0
1.5
Consumer Spending
2.2
1.3
1.1
1.2
1.3
Industrial Production
0.5
2.1
-2.4
1.6
1.6
Investment
1.2
2.1
1.5
1.6
0.9
Unemployment rate (ILO%)
3.2
3.2
3.3
3.7
3.8
Inflation
-0.2
0.0
-1.1
-0.4
0.4
CHF/EUR (average)
1.23
1.21
1.07
1.09
1.11
CHF/USD (average)
0.93
0.91
0.96
0.99
1.05
Interest Rates: 3-month (%)
0.0
-0.1
-0.8
-0.8
-0.8
Interest Rates: 10-year (%)
1.3
0.4
0.0
-0.2
0.6
NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc
Economic & Political Breakdown
Population
8.3 million (2015)
GDP
US$ 664.5 billion (2015)
Public Sector Balance
0.0% of GDP (2015)
Public Sector Debt
34.8% of GDP (2015)
Current Account Balance
9.8% of GDP (2015)
Parliament
National Council (200 members) and Council of
the States (46 members)
Government
Federal Council (seven members)
President (2016)
Johann Schneider-Ammann
Election Dates
October 2019 (Parliamentary)
Economic Activity
GDP GROWTH (annual %) - left
INFLATION (annual %) - right
5.0
5.0
2.5
2.5
0.0
0.0
-2.5
-2.5
-5.0
2006
2008
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial
property solely for information purposes. It is not intended to be a complete description of the markets or
developments to which it refers. The report uses information obtained from public sources which Cushman &
Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is
accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or
completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any
reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our
prior written consent is required before this report can be reproduced in whole or in part. ©2016 Cushman &
Wakefield LLP. All rights reserved.
2010
2012
2014
Béatrice Gollong
2016 F
-5.0
Head Investment and Consulting
Zollikerstrasse 141, CH-8008 Zurich,
Switzerland
Tel: +41 44 388 58 52
[email protected]
cushmanwakefield.com / spgintercity.ch
SWITZERLAND
Office Market
Snapshot
Second Quarter | 2016
Business investment is subdued, with the strength of the Swiss
franc eroding competitiveness and weighing on profit margins.
This has prompted some companies to cut spending or
outsource investment to their overseas operations. There are
also concerns that the Brexit vote could fuel an EU-wide
slowdown. Occupier, investment and office construction activity
has been notably weaker in H1 2016.
Occupier focus
Office availability continued to increase across most markets in
Q2, with several large financial companies consolidating their
operations and focusing on cost control. Many companies have
put expansion plans on hold and this is expected to continue
until the outlook for the economy becomes clearer. Some
business sectors - especially the banking, insurance and travel
sectors – have seen an increase in merger activity in recent
quarters and this has resulted in excess space being put back on
the market. Developers have also become more cautious and
speculative construction has slowed since the start of the year.
Rising vacancy is giving tenants bargaining power, although
rents have remained relatively stable, with landlords reluctant to
reduce rents and are instead offering more generous incentive
packages, such as rent free periods or contributing to fit out
costs.
Investment focus
Market Outlook
Prime Rents:
Stable in core locations, with landlords willing to offer
attractive packages to avoid reducing rents.
Prime Yields:
Prime yields are likely to hold firm, although non-core
locations may see some upward pressure on yields.
Supply:
Increasing. Rationalisation of real estate portfolios to
continue, with excess stock returned to the market.
Demand:
Stable, with cost control and consolidation remaining
the key drivers of activity.
Prime Office rents – June 2016
LOCATION
SFR
SQ.M
YR
€
SQ.M
YR
US$
SQ.FT
YR
GROWTH %
1YR
5YR
CAGR
Zurich
750
693
71.5
0.0
-0.7
Geneva
800
739
76.3
0.0
0.6
Basle
350
323
33.4
0.0
0.0
CURRENT
Q
LAST
Q
LAST
Y
10 YEAR
HIGH
LOW
Zurich
3.70
3.70
3.70
4.50
3.70
Geneva
4.00
4.00
4.25
4.45
4.00
Basle
4.40
4.40
4.40
4.95
4.40
Prime Office yields – June 2016
LOCATION
(FIGURES ARE NET, %)
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in
any transaction, such as financing, these are very much a guide only to indicate the approximate trend and
direction of prime initial yield levels and should not be used as a comparable for any particular property or
transaction without regard to the specifics of the property.
Recent performance
Yield - Country Average
Rental Growth - Prime
Yield - Prime
Rental Growth - Country Average
5.50%
15.0%
5.00%
10.0%
4.50%
5.0%
4.00%
0.0%
3.50%
-5.0%
3.00%
Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16
-10.0%
Rental growth (y/y)
Office investment volumes were €409mn in Q2, which was
18% down on the volumes recorded in Q1. Demand is
relatively stable from institutions, funds and private property
companies, but activity is being hampered by the lack of core
stock in key locations. Prime office yields were unchanged at
3.70% in Zurich and 4.00% in Geneva in Q2 and are expected
to remain at these levels in the second half of 2016. Yields in
non-core locations may see some upward pressure in the
short term.
MARKET INDICATORS
Yields
Overview
Outlook
The short term economic outlook is unclear and cost control and
rationalisation of real estate portfolios will remain key drivers of
occupational demand, with core locations performing solidly,
although prospects for non-core locations are more uncertain.
Investment demand is expected to remain focused on prime
stock, although there should also be some attractively priced
opportunities for core plus and opportunistic investors.
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial
property solely for information purposes. It is not intended to be a complete description of the markets or
developments to which it refers. The report uses information obtained from public sources which Cushman &
Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is
accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or
completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any
reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our
prior written consent is required before this report can be reproduced in whole or in part. ©2016 Cushman &
Wakefield LLP. All rights reserved.
Béatrice Gollong
Head Investment and Consulting
Zollikerstrasse 141, CH-8008 Zurich,
Switzerland
Tel: +41 44 388 58 52
[email protected]
cushmanwakefield.com / spgintercity.ch
SWITZERLAND
Retail Market
Snapshot
Second Quarter | 2016
Overview
MARKET INDICATORS
The retail segment and turnovers within the industry remain
affected by the strong Swiss franc. Even though turnovers in
the whole industry are expected to grow to 0.3% in 2016,
predictions in the non-food segment remain negative. To the
contrary, online sales are expected to grow further by 7-10%.
Due to the results of recent Brexit referendum in the UK, the
Swiss franc is expected to appreciate further, although the
Swiss National Bank is likely to intervene as needed.
Market Outlook
Occupier focus
Prime Retail Rents - June 2016
Shopping centre development has been quite limited during the
last two years and no significant improvement is expected in the
future with 56,000 sq.m of new shopping centre space being
delivered across four new schemes by the end of 2017. Prime
high street rents in in Zurich increased by a moderate 1.1% yearon-year but remained more or less stable in other main cities.
Rents in prime shopping centres dropped by 3.7% year-on-year.
Investment focus
Outlook
Prime Yields:
Stable yields in prime retail segments expected.
Supply:
Low new supply level with limited development
pipeline 2016-2017.
Demand:
Strong demand for prime retail locations and weak
demand in secondary locations expected to persist.
HIGH STREET SHOPS
SFR
SQ.M
YR
€
SQ.M
YR
US$
SQ.FT
YR
GROWTH %
1YR
5YR
CAGR
Zurich (Bahnhofstrasse)
9,100
8,408
868
1.1
2.6
Geneva (Rue du Rhône)
4,000
3,696
381
0.0
0.0
Basel (Freie Strasse)
2,300
2,125
219
-14.8
-4.5
LAST
Q
LAST
Y
Prime Retail Yields - June 2016
HIGH STREET SHOPS
(FIGURES ARE NET, %)
CURRENT
Q
10 YEAR
HIGH
LOW
Zurich (Bahnhofstrasse)
3.20
3.20
3.20
4.50
3.20
Geneva (Rue du Rhône)
4.25
4.25
4.25
4.25
4.25
Basle (Freie Strasse)
4.35
4.35
4.35
5.05
4.30
SHOPPING CENTRES
(FIGURES ARE NET, %)
CURRENT
Q
LAST
Q
LAST
Y
10 YEAR
HIGH
LOW
4.05
4.05
4.05
4.55
Country prime
4.05
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in
any transaction, such as financing, these are very much a guide only to indicate the approximate trend and
direction of prime initial yield levels and should not be used as a comparable for any particular property or
transaction without regard to the specifics of the property.
Recent performance
Yield - Country Average
Rental Growth - Prime
Yield - Prime
Rental Growth - Country Average
5.00%
4.50%
4.00%
3.50%
3.00%
Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
Rental growth (y/y)
Investment volumes for the retail market reached €200 million
for the quarter. Overall activity has been difficult to measure
due to the number of off market deals, however retail
transactions are believed to be low in numbers. High street
properties and retail parks are the asset type attracting the
most focus when the product comes to market.
Stable rents in prime high streets with decreased
rents in shopping centres and secondary locations.
Yields
In comparison to the previous year, the total number of vacant
business units has increased by 4.7%, reflecting the cautious
mood amongst retailers to take space or indeed expand their
store footprints. This will impact negatively on rental levels and
some landlords will need to react and lower rents in order to
keep tenants. This is the case across the Swiss market but is
more prevalent in border cities with any activity focused on
Zurich and Geneva.
Prime Rents:
According to SECO (State Secretariat for Economic Affairs)
within a positive, yet fragile, global economic environment, the
Swiss economy is set to grow by an average of 1.4% in 2016;
real growth of 1.8% is forecast for 2017. Furthermore
unemployment will rise marginally over the coming months
(average for 2016: 3.6%, 2017: 3.5%), while a small increase in
employment is expected (+0.4% on average) by the end of the
year.
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial
property solely for information purposes. It is not intended to be a complete description of the markets or
developments to which it refers. The report uses information obtained from public sources which Cushman &
Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is
accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or
completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any
reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our
prior written consent is required before this report can be reproduced in whole or in part. ©2016 Cushman &
Wakefield LLP. All rights reserved.
Béatrice Gollong
Head Investment and Consulting
Zollikerstrasse 141, CH-8008 Zurich,
Switzerland
Tel: +41 44 388 58 52
[email protected]
cushmanwakefield.com / spgintercity.ch
SWITZERLAND
Industrial Market
Snapshot
Second Quarter | 2016
Overview
MARKET INDICATORS
The Swiss export sector has modestly improved in recent
quarters, but the ongoing strength of the Swiss franc has meant
that trading conditions remain challenging for many exporters.
Some important service sectors – such as finance and tourism –
continued to weaken in Q2, while their future prospects remain
modest. Occupational and investment activity is relatively stable
in Geneva, but demand in Zurich and markets in the Germanspeaking parts of the country is still weak.
Market Outlook
Occupier focus
Prime Industrial Rents – June 2016
Investment focus
Industrial investment volumes were a weak €96mn in Q2, with
activity driven predominantly by domestic investors. Foreign
investors continue to shy away from the market due to the
uncertain economic outlook and lack of suitable stock, while
the strong currency also makes pricing unattractive relative to
other European markets.
Prime Yields:
Stable in Geneva, but yields in other markets will
continue to see some upward pressure in H2 2016.
Supply:
Rising - except in Geneva - with firms expected to
continue rationalising their property requirements.
Demand:
Low but stable. E-commerce expected to be a key
driver of future demand for logistics space.
LOGISTICS LOCATION
SFR
SQ.M
YR
€
SQ.M
YR
US$
SQ.FT
YR
GROWTH %
1YR
5YR
CAGR
Zurich
140
129
13.4
-3.4
-2.6
Geneva
180
166
17.2
0.0
1.1
Basle
115
106
11.0
-4.2
0.9
CURRENT
Q
LAST
Q
LAST
Y
10 YEAR
HIGH
LOW
Zurich
5.70
5.70
5.60
6.30
5.50
Geneva
6.00
6.00
6.00
6.50
6.00
Basle
6.00
6.00
5.90
6.80
5.80
Prime Industrial Yields – June 2016
LOGISTICS LOCATION
(FIGURES ARE NET, %)
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in
any transaction, such as financing, these are very much a guide only to indicate the approximate trend and
direction of prime initial yield levels and should not be used as a comparable for any particular property or
transaction without regard to the specifics of the property.
Recent performance
Yield - Country Average
Rental Growth - Prime
Yield - Prime
Rental Growth - Country Average
7.00%
15.0%
6.00%
10.0%
5.0%
5.00%
0.0%
4.00%
3.00%
-5.0%
Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16
-10.0%
Rental growth (y/y)
By contrast, the manufacturing sector in Zurich has been hit
harder and several export-oriented companies have been
shifting production offshore to retain the competitiveness of their
product. Some of the decline in demand from industrial operators
for logistics space is being offset by rising demand from retailers
and third party logistics providers, who are involved in the fast
growing e-commerce sector. Supply levels are still rising,
however, as firms consolidate operations and release excess
space back to the market. This is maintaining downward
pressure on rents in Zurich and in other key regional cities, such
as Berne and Basel.
Mainly stable, but rising supply in Zurich and in
German speaking cities is putting pressure on rents.
Yields
Geneva is one of the better performing occupational markets,
due to its position as a leading hub for high quality and high tech
consumer and investment goods. These goods are still in high
demand from both developed and emerging markets, despite the
reduced cost competitiveness due to the stronger currency.
Supply levels are stable and, consequently, rents have been
unchanged in the year to June 2016.
Prime Rents:
Outlook
The short term outlook for the economy and industrial sector is
weak, but medium term prospects are more positive with
domestic and external demand expected to pick up. Geneva
will remain the top performing market overall.
This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial
property solely for information purposes. It is not intended to be a complete description of the markets or
developments to which it refers. The report uses information obtained from public sources which Cushman &
Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is
accurate and complete. No warranty or representation, express or implied, is made as to the accuracy or
completeness of any of the information contained herein and Cushman & Wakefield LLP shall not be liable to any
reader of this report or any third party in any way whatsoever. All expressions of opinion are subject to change. Our
prior written consent is required before this report can be reproduced in whole or in part. ©2016 Cushman &
Wakefield LLP. All rights reserved.
Béatrice Gollong
Head Investment and Consulting
Zollikerstrasse 141, CH-8008 Zurich,
Switzerland
Tel: +41 44 388 58 52
[email protected]
cushmanwakefield.com / spgintercity.ch
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Béatrice Gollong
Head of Investment and Consulting
Switzerland, Zurich
+41 44 388 58 52
[email protected]
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This report has been produced by Cushman & Wakefield LLP, with data and market intelligence
contributed by SPG Intercity, the Alliance Partner of legacy Cushman & Wakefield in Switzerland, for
use by those with an interest in commercial property solely for information purposes and should not
be relied upon as a basis for entering into transactions without seeking specific, qualified professional
advice. It is not intended to be a complete description of the markets or developments to which it
refers. This report uses information obtained from public sources that Cushman & Wakefield has
rigorously checked and believes to be reliable, but Cushman & Wakefield has not verified such
information and cannot guarantee that it is accurate or complete. No warranty or representation,
express or implied, is made as to the accuracy or completeness of any of the information contained in
this report and Cushman & Wakefield shall not be liable to any reader of this report or any third party
in any way whatsoever. All expressions of opinion are subject to change. The prior written consent of
Cushman & Wakefield is required before this report or any information contained in it can be
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