Review of the 95th Swiss Real Estate Talk

With the theme of the 95th Swiss Real Estate Symposium "RICS about Opportunities", the organizers once again hit the nerve of the industry. The event, which was booked out very quickly, was all about opportunities on the real estate markets and the real estate capital markets: Over 300 participants followed the exciting presentations and exclusive insights of the renowned speakers at the Marriott Hotel Zurich. As in the previous five years, the end-of-year event, jointly organized by IMMOBILIEN Business and RICS Switzerland, took a targeted and critical look at the four most important regions: Switzerland, Europe, the USA and Asia.

Opportunities in a difficult environment

"While in 2022 we focused in particular on the risks, which then materialized almost exactly the same way in 2023, we would now like to turn our attention to the opportunities," explained Prof. Dr. Michael Trübestein FRICS, President of RICS Switzerland, in his opening speech. He used an analogy from nature to describe the current situation: "The current situation on the real estate markets sometimes seems to resemble a hurricane: The windless eye, Switzerland as an "island of the blessed", is surrounded by massive, stormy challenges on many foreign markets. Choosing the right "course", i.e. the strategically sound orientation of real estate investments and the structured identification of opportunities, is therefore essential. At the same time, it is important to evaluate whether the current situations in the markets are really that critical and how the respective markets should be classified. The latest geopolitical developments, higher inflation rates in the EU and the USA, rapidly rising interest rates, valuation corrections, negative leverage, stranded assets and increasing political restrictions are leading to great uncertainty among market players and a decline in real estate investments worldwide. At the same time, many segments offer exciting investment opportunities. Furthermore, megatrends such as sustainability and digitalization pose both a challenge and a market opportunity. Investors should now strongly consider an anti-cyclical investment strategy and skillfully exploit entry opportunities. But which ones and how? A perfect template for the following speakers.

Standardized construction for affordable housing

Adrian Wyss, Head Division Real Estate at Implenia, began by reporting on the market situation in Germany and Switzerland, his company's core markets. While the development market in Germany went into a tailspin after the interest rate turnaround, the situation in Switzerland is much more stable due to the robust economy, lower inflation and lower interest rates, as well as immigration, which is supporting the residential real estate markets in particular. Nevertheless, there are major challenges due to the housing shortage and rising costs. As a real estate service provider, Implenia is meeting these challenges with effective strategies that focus on sustainability. Digitalization offers great opportunities here. As Wyss explained, Implenia is currently developing a solution for building hotels and affordable apartments: A configurator that enables standardized construction with prefabricated components and thus leaner processes and shorter construction times. "This also makes it possible to counter the shortage of skilled workers and remain attractively priced while maintaining good quality," says Wyss. The prerequisite for this is a "digital ecosystem", which Implenia is currently building. With regard to the housing market, Wyss also sees opportunities in Germany, where there is an annual shortage of 400,000 apartments.

Good locations in Winning Cities

Roger Hennig MRICS provided an insight into the European real estate investment markets. The Head of Real Estate Investment Switzerland and Germany at Schroders sees opportunities for profitable investments above all in the winning cities. In a nutshell, these are characterized by above-average growth expected in the long term and a simultaneous shortage in certain market segments, such as office space. Nevertheless, a close look at the winning cities is also required: For example, there are major shifts in London and Paris, the largest and most liquid office markets in Europe - away from Canary Wharf or La Défense, for example, and into the cities. "The office is not dead," says Hennig. "But demand is increasingly focused on good locations." Here and there, "less large but modern spaces" are in demand, in buildings with a good ESG rating, with transport connections and amenities in the building such as cafés and restaurants, service providers, healthcare facilities or stores.

Risk analysis is becoming more important

Andrew C. Angeli, Global Head of Real Estate Research & Strategy at Zurich Insurance Ltd. in Zurich, then reported on the real estate markets in the USA, which are currently characterized by very high vacancy rates on the office markets. "Transaction volumes are falling in terms of both the number of sales and the volume," says the Zurich expert. The economic outlook for the United States is rather gloomy, and there are also some uncertainties with regard to the upcoming elections there. For example, only 14 percent of Americans are currently satisfied with the current president. Angeli currently sees opportunities in real estate financing in particular, preferably in secondary funds and mezzanine loans - not least because many of the investors in these vehicles are currently looking for an exit and are selling their shares in financing, even for top assets, at a high discount. Angeli also pointed out that investors need to factor the increasing frequency of storm and flood damage and forest fires associated with climate change into their calculations in order to anticipate how a market will function in the future. Cities that are particularly exposed to these risks will therefore only be investable to a limited extent in the future. An initial indication of this is the very sharp rise in insurance premiums. Risk analysis - traditionally a strong feature of insurance groups - is therefore also gaining importance in the real estate industry.

Looking to Asia

Jürg Syz, Partner at Asia Green Real Estate, took a look at the Asian real estate markets, which differ greatly from one another in many respects. For example, in terms of population growth. In Japan, for example, a transparent and, like Australia or Singapore, "mature" Asian market, the population is continuously shrinking. "This means that the location of a property is also becoming more important in Tokyo," says Syz. The same applies to Hong Kong: "Multinational corporations are now more likely to be based in Singapore, clearly the preferred gateway city in Asia." However, space in the island and city state is known to be limited. Syz cited cities such as Chengdu in China and Hanoi in Vietnam as examples of rapidly growing cities with attractive "fundamentals" - as well as Jakarta in Indonesia, where there are still building plots in the city center. "In contrast to the USA and Europe, there is a stable to increasing demand for office space in Asia," says Syz: "In view of the often cramped living situation in the megacities, home offices are not an issue in most Asian markets." Furthermore, interest rate trends in the Asian markets differ greatly and in some cases diverge fundamentally from the very sharp rise in interest rates in Europe and the USA

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