Investors are lining up for key properties
CSL Immobilien notes some turbulence in the current report on the real estate market. Bidding processes have driven prices up. Yields have fallen. Properties in prime locations promise investment security, but are rare and expensive. Larger apartments are increasingly in demand for rent.
The real estate market in 2021 was turbulent for investors. This is how the real estate market report 2022 from CSL Immobilien summarizes the situation in the past year. Prices for central locations reached record highs. Yields fell accordingly.
In a press release , CSL Immobilien cites the “Zurich Gold Coast community” Zumikon as an example of bidding processes that drive prices for office and residential buildings well connected to city centers to new record highs. There, the community had an empty fire station building next to a public transport station estimated at 8.7 million francs. It was sold for around 21 million Swiss francs. But first-class real estate “still has no alternative”, CEO Yonas Mulugeta explains this development, which can be observed in the centres.
The periphery, on the other hand, is seeing rising vacancies: in the past six months, the office space on offer in the greater Zurich area has increased to 910,000 square meters (previous year: 812,000 square meters) or by 12 percent. The same can be seen in the economic areas of Berne (+14 percent) and Geneva (+12 percent).
This price development led to new lows in net initial yields in most segments of the investment market last year. A sideways movement was expected. Residential properties of first-class quality yielded a national average of 1.9 percent compared to 2.35 percent in the previous year. At 1.9 percent (previous year 2.35 percent), top office properties fell to the level of residential properties.
Private individuals had to dig deeper into their pockets to buy their own homes. Due to the pandemic, there was also an increase in demand for large rental apartments that also offer space for working from home. Accordingly, the proportion of vacant 1 to 2.5 room apartments in the canton of Zurich rose to 27 percent (previous year 22 percent). Viewed across the country as a whole, the vacancy rate fell to 1.54 percent (previous year: 1.72 percent).