MARKETBEAT INDUSTRIAL SNAPSHOT SWITZERLAND Q3 2014 A Cushman & Wakefield Research Publication OVERVIEW The Swiss industrial market has remained stable this quarter, despite exports struggling under the sluggish economic growth of the eurozone. Rents have held steady, with some upward movement for sought after pure logistics surfaces. Investment has been supported by a number of sale and lease back transactions, although demand currently outweighs supply. MARKET OUTLOOK Prime Rents: Rents hold steady as supply remains tight. Prime Yields: Yields are currently stable but future movement will depend on the evolution of the interest rate. Supply: Stable but at a low level. New projects and vacant surfaces will come onto the market next year. Demand: Strong demand from several sectors, particularly local industrial/craftsman's companies. OCCUPIER FOCUS Watchmaking, R&D and logistics firms have been the major source of demand this quarter and several watchmakers are planning expansions, regardless of the potential negative impact of political tensions in Asia. Occupiers remain focussed on large, high spec logistics platforms, which should promote rental growth in the short to medium term. The robustness of the industrial sector is largely due to the new planning law brought in 2012, which has increased building rights and allowed for a mix of commercial activities within industrial zones. This is expected to promote further leasing activity in 2015. PRIME INDUSTRIAL RENTS – SEPTEMBER 2014 Supply varies widely between various industrial zones, the two most active in terms of development being the Zone Industrielle de Plan-les-Ouates (ZIPLO) which is orientated towards the watchmaking industry and the Zone Industrielle de MeyrinSatigny. Supply of modern industrial supply has not yet caught up to demand, although continued development within industrial zones should help alleviate this, particularly due to attractive proposed rental levels. Zurich LOGISTICS LOCATIONS Sfr SQ.M/YR 145 € SQ.M/YR 120 US$ SQ.FT/YR 14.1 Geneva 180 149 17.5 5.9 1.1 Basle 120 99 11.7 -4.0 1.8 Zurich NOTE: Prime rents above refer to logistics properties. Manufacturing rents are usually 20-25% higher. PRIME INDUSTRIAL YIELDS – SEPTEMBER 2014 LOGISTICS LOCATIONS (FIGURES ARE NET, %) CURRENT QUARTER 5.60 LAST QUARTER 5.60 LAST YEAR 5.50 HIGH 7.55 10 YEAR LOW 5.50 Geneva 6.00 6.00 6.00 8.90 6.00 Basle 5.90 5.90 5.80 8.05 5.80 With respect to the yield data provided, in light of the lack of recent comparable market evidence in many areas of Europe and the changing nature of the market and the costs implicit in any transaction, such as financing, these are very much a guide only to indicate the approximate trend and direction of prime initial yield levels and should not be used as a comparable for any particular property or transaction without regard to the specifics of the property. RECENT PERFORMANCE Yields 9.00% 15.0% 8.00% 10.0% 7.00% 5.0% 6.00% 0.0% 5.00% -5.0% 4.00% 3.00% -10.0% Sep-04 Sep-06 Yield - Prime Rental Growth - Prime Sep-08 Sep-10 Sep-12 Rental growth (y/y) INVESTMENT FOCUS Geneva’s investment market has maintained a relatively strong performance so far this year, aided by a high proportion of sale and lease back transactions. Domestic investors have also become more active in the market, though acquisitions of vacant buildings are increasingly rare as investors require a mid to longer term lease with a stable rental structure. There has also a notable rise in interest from small manufacturers seeking to acquire their existing properties (condominium surfaces), most likely due to the new industrial zoning laws. GROWTH % 1YR 5YR CAGR -3.3 -1.9 Sep-14 Yield - Country Average Rental Growth - Country Average Source: Cushman & Wakefield OUTLOOK Switzerland has performed well so far this year, with demand growing and an expanding development pipeline. Industrial zoning has had a highly positive impact on the market, allowing various industrial branches to develop and establishing a strong network of local industrial companies. 2015 should present further growth for the industrial sector, although this is largely dependent on the wider economic situation within the eurozone. Cushman & Wakefield LLP 43-45 Portman Square London W1A 3BG www.cushmanwakefield.com/research This report has been produced by Cushman & Wakefield LLP for use by those with an interest in commercial property solely for information purposes. It is not intended to be a complete description of the markets or developments to which it refers. The report uses information obtained from public sources which Cushman & Wakefield LLP believe to be reliable, but we have not verified such information and cannot guarantee that it is accurate and complete. 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