Lacklustre office market
Demand for offices in the canton of Geneva was weak again in 2016. As such, over 180,000 m² of offices in the Canton are empty with the vacancy rate rising to 4%.
Cost control and staff cuts are prompting companies to streamline the floor area they rent and therefore to relocate rather than expand. However, many tenants are tied into long-term leases and cannot actively look. These occupiers are seeking to negotiate early break options.
Availability in the city centre is expensive and does not match up to occupiers’ expectations. It has borne the brunt of competition from new out-of-town schemes that offer practical space at more appealing rents.
Rents continue to fall but a floor level should soon be reached. The prime rent stands at €708/m²/year (CHF 765/m²/year), a fall of 5% over the year. However, incentives are intensifying. Landlords are granting increasingly long rent-free periods to their tenants and are more frequently helping with tenants’ layout works.
Investment is still high
After a record level for investment in 2015, transactions declined in 2016 although it is still at a very high level (second highest in the last 10 years after 2015). Indeed, €746 m was invested in offices in the Canton of Geneva in 2016, representing 91% of its commercial real estate investment.
The biggest sale was that on Boulevard Saint-Georges, an office building completed in 2012, sold to Bâloise Assurance for €131 m. (CHF141 m.). The building is fully let to the state of Geneva on a long lease.
Nevertheless, office investment in Geneva is still characterised by an imbalance between buoyant demand and insufficient supply.