Where is the Swiss commercial real estate market headed?

21st March 2017

Vitangelo Pagliarulo, Junior Financial Analyst

Retail has had another tough year in Switzerland in 2016. Retailers’ sales contracted by -1.4% after having already suffered a very disappointing 2015 financial year (-1.5%). These poor figures are mainly explained by the continued strength of the franc. The clothing segment, which has been contracting for the fourth consecutive year now, was the most affected, with negative sales growth of -7%. Consequently, commercial real estate is also experiencing difficulties. According to one statistic, the median rent for new leases decreased from CHF340 to CHF320 per square meter per year in 2016, a reduction of 5.9%.

What is more, commercial real estate is also facing another challenge with the growth of online commerce, which can be considered a substantial structural change as it upsets traditional consumption patterns. This combination of drivers should put the segment under pressure for some time, except perhaps for those players who hold assets in prime locations much more resilient to any shifts in the market.