CSL registers soft landing in real estate market
In the office market, vacancies are falling and prices are rising, while in the residential market, prices remain stable or are falling slightly: Looking at the Swiss real estate market over the past year, the real estate consulting firm CSL is registering a soft landing and a departure from the extremes that still dominated 2014.

However, the record low reference interest rate poses a risk to the stability of the housing market, according to a report published at the end of March. Real Estate Market Report Switzerland 2016. If the interest rate rises rapidly in the future, both tenants and investors will be forced into action, CSL Immobilien notes.
Office market: falling vacancy rate
In 2014, the Swiss office market had reached a long-term high of around 2.25 million sqm of available space. In 2015, however, a countermovement set in: With 1.74 million sqm of available space, supply moved significantly downwards. The supply ratio fell from 5.6 to 4.3 percent. In the Zurich economic area, which is characterized by strong oversupply, available space also fell from 827,000 sqm to 727,000 sqm.
Median rents in the office market in the Zurich economic area rose slightly in 2015 in the vast majority of areas due to falling supply. The top rents nationwide continue to be paid in Zurich's Central Business District at CHF 850/sqm/year and in the center of Geneva at CHF 900/sqm/year.
For 2016 and 2017, CSL Immobilien expects a further moderate decline in vacancy rates on the office market nationwide. One exception is the Zurich economic area, where new, larger office properties such as Ambassador House will soon come onto the market.
Housing: Rents stagnate at a high level
In the residential market of the Zurich economic area, median rents remained at the previous year's level in a majority of areas. By contrast, median purchase prices rose slightly across the board. One exception in the owner-occupied segment is apartments in the top price range, which remain under strong pressure.
For 2016 and 2017, CSL expects prices in the residential market nationwide to remain moderate. This will be helped by an increase in supply, which is already becoming apparent on the basis of an increasing number of building permits.
Investment market: yields plummeting
In the investment market, the pressure to invest due to a lack of alternatives continues to be noticeable at present. For office properties in prime locations (location class A), investors are satisfied with a net yield of 2.75 percent (previous year: 3.2%), according to CSL.
In location class B, the expected return fell even more sharply from 4.2 to 3.5 percent. Only Class C properties saw an increase in expected returns to 6.75 percent. An average net return of only 2.25 percent is now expected for an A-class residential development. (ah)
Read a detailed review of the 2016 CSL Real Estate Market Report in the upcoming issue of Real Estate Brief.