Weak economic activity strains Swiss office property market

Companies are only willing to pay less for offices in the present economic climate. Keystone / Laurent Gillieron

The market for office real estate cooled down further in the third quarter of 2023. In addition to the weakening economy, weaker demand also has a negative impact.

Across Switzerland as a whole, the number of available office space rose to 3.8% of total office space or 1.8 million square meters in the third quarter of 2023. This is the third quarterly increase in a row, as the real estate service provider CBRE announced on Friday.

+ ‘Myth’ of spiking Swiss rental prices

The falling demand for offices is also reflected in prices. The price expectation index for office rents collected last Wednesday by Fahrländer Partner Raumentwicklung (FPRE) fell to -34.7 points, after almost -20 points six months ago. 

The assessment of transaction prices for office and commercial buildings also became more pessimistic: the corresponding index in the most recent survey was -54.2 points, compared to -38.6 points six months ago.

According to the survey, significantly more office space was available, especially in locations outside the five major centers of Zurich, Geneva, Basel, Bern and Lausanne. The number of available offices also increased in the suburbs of the centres. 

+ Middle class blocked from property ladder

This was particularly pronounced in the Zurich airport region and in the Limmat Valley. In absolute terms, there have never been so many offices available for rent in the third quarter, it goes on to say.

The analysts explain the decline in particular as a result of lower demand for offices as a result of the weakening economy. However, construction activity did not play a significant role.

In addition, many companies have adapted their working conditions after the Corona crisis and are increasingly relying on home offices. The lower demand for office space is now gradually being reflected in the office market, it goes on to say.

+ Swiss chalets still attract foreign buyers

However, the large metropolitan areas bucked the negative trend. For example, the supply of vacant office space in the city of Zurich continued to decline in the third quarter. In contrast, the market in Geneva, Bern and Lausanne was stable.

In Basel, the availability rate also fell significantly due to some major rental successes. Market observers predict that an increase can be expected again in the city in the medium term.

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