Flexible offices will benefit from the recovery of demand
After growing slowly in 2017, demand for offices will increase again in 2018 in the Zuricharea. Indeed, thanks to the positive outlook for the Swiss economy, employment will accelerate. Improving confidence in Swiss businesses is likely to result in new demand for office space in the Zurich area. Demand will not be spread evenly among all office sectors though: the units that will benefit the most are flexible offices and premises well connected to public transport. Zurich City and Zug remain the most sought-after locations, closely followed by Zurich West. Available office space in the Zurich economic area amounted to approximately 750,000 m² in Q4 2017, a fall from the 850,000 m² at the end of 2016. Stock is set to increase with project developments that will add to availability, such as "The Circle" at Zurich Airport.
Office investment is back to its average level
The market showed an impressive growth in portfolio deals in 2017. The increased activity in the transaction market is indicative of higher liquidity in the Zurich market; a contrast to previous years. At the same time the purchase of development projects made a major contribution to growth. Net initial yields for Grade A and Grade B office properties in 2017 were 2.70% and 3.50% respectively. Grade A properties were in most demand in 2017. Owner-occupiers are taking advantage of the pick-up in activity in the transaction market by selling their corporate real estate at high prices. Sales and leaseback transactions, especially in the Grade C office property segment, are an increasing feature of the Zurich investment market.