FPRE: Market values for offices up in Q2
Market values for offices increased in Q2, while those for multifamily declined. FPRE expects yields to move sideways.
According to Fahrländer Partner AG (FPRE), the market values of mixed-use income properties in Switzerland stagnated in Q2 (+0.2%). However, compared to the same quarter last year, the increase amounts to a significant 8.6%. The market values of office properties increased by 3.0% compared to the previous quarter, and by as much as 13.0% compared to the same quarter last year. The market values of multifamily properties decreased by 1.6% in Q2, and increased by 5.6% compared to the same quarter last year. The most significant increase over the last four quarters is in the regions of Zurich (+8.1%) and Lake Geneva (+5.2%), in the Alpine region (-0.4%). In southern Switzerland (-0.3%), on the other hand, market values were down slightly. For office properties, the increase over the last four quarters is also strongest in the regions of Zurich (+15.6%) and Lake Geneva (+15.2%)
The inflation trend and rising interest rates are changing the outlook for investment properties. According to the FPRE survey of eight real estate experts, the minimum discount rates used to value investment properties increased in July (from 1.71 to 1.77%), which has a slightly negative impact on valuations. However, the participants emphasized the current prevailing uncertainty.
Prices for old buildings - and regionally also new buildings - come under pressure
FPRE expects a sideways movement in the market values of income properties for the current year. "Rents for older buildings will remain under pressure, which is likely to be reflected in falling market values in this segment by 2023 at the latest. In the case of new buildings, declining market values are likely to occur in regions with low demand and rising vacancy rates," FPRE writes. "Across Switzerland, however, market values are still expected to move sideways." The current development in the office market should rather be seen as a recovery effect after difficult years, he added. "The current development of rents is likely to more than compensate for the rising discount rates at the moment," says Stefan Fahrländer, partner at FPRE. (aw)
