Retail Resilience – Gregor Strocka, Managing Director, Head of Capital Markets Switzerland.

Can you share a unique characteristic of the Swiss retail market?

Solid economic fundamentals, combined with the strong domestic economy and high per-capita purchasing power, ensure attractive retail sales with exceptional resilience to global crises. Zurich and Geneva rank first and second respectively in European purchasing power, ahead of London and Oslo, making the market particularly appealing for high-margin luxury suppliers.

International high street retailers concentrate in Switzerland's two largest cities. Bahnhofstrasse in Zurich and Rue du Rhône in Geneva rank among Europe's  most expensive retail streets. High sales per square metre creates strong demand for available spaces, resulting in 0% vacancy rates most years.

Switzerland's low-interest rate environment, with the central bank's key rate at 0%, means property yields are also low by international standards. Prime high street yields currently sit around 1.9% net in Zurich and 2.6% net in Geneva.

Why should investors consider Switzerland as a prime investment destination?

The Swiss property market offers investors a combination of stability, performance and liquidity that is almost unique worldwide.

The market's high resilience has been demonstrated repeatedly during recent major global crises. Neither the 2008 financial crisis, the 2020 Covid crisis, nor high global inflation from 2021 onwards has destabilised the Swiss property market. Value corrections have been minimal globally, and market liquidity has remained intact.

Although absolute property yields are low in Switzerland, risk premiums over the local risk-free rate are among Europe's highest. Furthermore, sustained Swiss Franc appreciation against the Euro and US Dollar over recent decades has generated attractive additional returns for foreign investors.

Given low market volatility and positive currency development, Swiss property investments offer attractive risk-adjusted total returns.

Which city would you recommend for investment?

The five major centres of Switzerland - Zurich, Geneva, Basel, Lausanne and Bern - have high investment grade and good liquidity.

When investing in high street retail properties, focus on Zurich and Geneva, as only these cities have prime shopping streets of international significance. Attractive food retail properties, retail parks and shopping centres can also be found in smaller Swiss cities.

Despite the relatively small Swiss market, there is significant divergence in investment product attractiveness. In-depth understanding of local markets and detailed analysis of key success factors are therefore crucial for making the right investment decision.

What type of investors are most active in Switzerland?

The Swiss market is well-capitalised and dominated by domestic private capital and institutional pension capital. Around 45% of bidding activity comes from family offices and high-net-worth individuals. Property funds, investment foundations and pension funds comprise a further 35% of measurable activity. The remaining 20% is distributed among insurance companies, owner-occupiers and other bidder groups.

Notably, 90% of investor capital comes from domestic sources, whilst only 10% is foreign.

What is the hottest sub-sector in your market right now?

Food retail and convenience stores are a high-demand sub-sector. Due to strong population growth, several convenience retailers are expanding rapidly. New players such as Aldi, Lidl, Müller, Rossmann and Action have increased market competition and successfully challenged the Migros-Coop duopoly. For property investors, this creates opportunities to capitalise on high demand for new lettings.