SPG Intercity: Office markets subdued, retail under pressure

The market for office space remained comparatively quiet in the first quarter of 2016, according to the "Country Snapshot Switzerland". The majority of lettings were in the order of less than 400 sqm. Expansion plans remained "on hold" in view of the lack of growth, and space optimization was a dominant theme, reports SPG Intercity, Cushman & Wakefield's Swiss alliance partner.

Contracts for prime office space were concluded at prices around CHF 750/sqm/year in Zurich, CHF 800/sqm/year in Geneva and CHF 350/sqm/year in Basel. Yields on the most preferred properties remained at the long-term lows of 3.7 percent for Zurich, 4.0 percent for Geneva and 4.4 percent in Basel.

Retail market suffers from shopping tourism and online retailing

In the market for retail space, rents in shopping centers, in locations outside the main centers and especially in the Basel area and other cities close to the border are under increased pressure. Online business is continuing to gain in importance and is putting pressure on sales in stationary retail, the report says. Many retailers have already lowered their sales prices, which further reduces margins.

In Basel, the currency advantage in nearby foreign countries is making itself increasingly felt. Rents in the most preferred locations fell by eleven percent to CHF 2,400/sqm/year within a year, with a further downward trend, amid rising general vacancy rates. Interest from international retailers and luxury goods manufacturers in particular continues to focus on the main shopping streets of Switzerland's largest cities.

Cushman & Wakefield compiles the "Country Snapshots" on a quarterly basis; for this purpose, the real estate services provider asks its own offices and its alliance partners in Europe about current market developments for commercial properties. (ah)