Investment in commercial real estate in Switzerland

Switzerland is the center of concentration of finance from all over the world, there are many central offices and branches of the largest corporations, not only salaries are high here, but also environmental performance - such a combination is rarely found today. And due to the fact that Switzerland historically retains its military neutrality, this has allowed the country to stay away from many conflicts, protecting itself, its territory and its inhabitants from shocks - there is no other such country in Europe. At the same time, Switzerland is part of the Schengen zone, it is here that the headquarters of the United Nations is located, the country also participated in the activities of specialized "branches" of the United Nations, such as UNESCO, WHO, UNICEF, etc. And the Swiss banking system, not to mention watches and chocolate are known all over the world.

And despite the fact that this is one of the most expensive countries, the standard of living of local residents allows them to feel very good, reaching old age - in terms of the number of pensioners relative to other age groups, Switzerland also holds the palm in the world. Therefore, even during world crisis periods, peace and well-being is always observed in this country in almost all spheres of life. And commercial real estate is one of such safe harbors.

Commercial real estate in Switzerland is on the rise

For more than 20 years, the Swiss real estate market has seen a stable growth in property prices, which averages 3% per year. But due to the restrictions for foreigners on the purchase of residential real estate in this country , many investors are looking towards the market for commercial square meters. True, you need to remember about the subsequent verification of the origin of funds for the purchase of objects and the reliability of the investor. If everything is in order, then many of the foreigners today most often choose real estate with an existing tenant and purchase a ready-made rental business. At the same time, the priority is always the presence of a large tenant, preferably a network, and with a long-term lease agreement. As for Russian investors, usually our compatriots are interested in buying real estate in large cities, but other areas can no longer be called a key parameter of the request.

Investments in commercial real estate in Switzerland are now especially relevant - in the context of the instability of investments in other countries and industries. Switzerland is the only European country that has seen an increase in real estate investment since the start of the pandemic. According to the report of the international consulting company CBRE, in the period from January to September 2020, the volume of investments increased by 24%, and in the third quarter - by 124%.

For today's investor, ROI is determined by the quality of the property and the quality of the lease agreements, as well as the reliability of the tenants. It is worth noting that today in this country the demand so much exceeds the supply of quality properties that the owner often chooses from 6-7 possible buyers. Therefore, when an object with the required characteristics appears on the commercial real estate market, a very quick reaction of the buyer is required, namely, an offer to purchase with confirmation of the possibility of a quick exit to a deal within 4-5 weeks (as well as the availability of funds in Switzerland and a company that will buy).

Investment size

The budget for the purchase of a commercial property depends on the geographic location, as well as on the property itself. For small commercial premises not located in the most central areas of major cities, a budget of CHF 600,000 (€ 555,000) and more is required. If we look at the larger commercial projects, then their cost can be tens of millions of Swiss francs, reaching 100-500 million Swiss francs (92.5-465.5 million euros). The volume of own funds when buying commercial real estate in Switzerland is usually about 35-45% of the value of the object, the rest is a bank loan secured by the object at a rate of 0.9% -1.5% per annum.

Profitability

The average profitability from the lease of high-quality commercial real estate is from 3 to 5% of the purchase price of an object, which, when connected with bank co-financing, gives up to 8% profitability on investment. It is also worth considering that the size of rental rates is indexed. Experts working in the commercial real estate market in Switzerland advise investors to acquire properties with the help of qualified lawyers, as well as carefully study the lease agreement in case of purchasing commercial real estate with a tenant. With a competent approach to such issues, the investor can make money on capital gains during the subsequent sale. When calculating the yield, it is necessary to take into account the taxation of this country: income from rent is taxed at the federal and municipal levels and the tax rate can be up to 50%.

Financial tools for buying

In Switzerland, investors can also purchase real estate through specialized funds for investment in commercial real estate to receive coupon income. It is also possible to jointly participate in development projects, including in Germany. But in practice, investors traditionally prefer to own the property itself. This form of ownership is also more comfortable for Russian investors. On the local commercial real estate market, there are options for collective joint investments in a separate property, the so-called club deals, but this is rather an exception.

Thank you for your help in preparing the material:

Oleg Sharonov, head of the SharonoFF company

Ksenia Sorokina, Development Director of Moscow Sotheby ' s International Realty