The differences between the Geneva and Zurich office markets have persisted into 2005. The outlook for Geneva is well-balanced. So far in 2005 occupier demand has been relatively strong, supported by international organisations and a high level of pre-lets. The Zurich office market, however, saw different trends, with many occupiers trying to take advantage of the downward rental pressure and renegotiating current contracts.
Zurich and Geneva, Switzerland's two largest economic centres, offer leading financial institutions and service-providers key advantages: a highly qualified workforce, proximity to universities and research and to international financial institutions. These cities also have excellent international travel connections and a high standard of living. For these reasons, Zurich and Geneva can compete with top business locations throughout the world.
Although Zurich and Geneva both reacted simultaneously to the downturn in the world economy and the massive job losses that followed the bursting of the new economy bubble, the commercial property markets in each of these two cities differ considerably.
Whereas Zurich is still struggling to recover its market balance, the situation in Geneva has been quickly restored, due to the presence of international organisations and multinationals combined with the slowdown in speculative construction.
In Zurich, landlords are hoping to see commercial property boosted by strong economic growth in the future. The reasons for the weak performance in Zurich are numerous: potential users are optimising their requirements and concentrating 2nd QUARTER AT A onfirst class locations; restructuring is commonplace; back-office activities are
being relocated from the city centre to the periphery and emerging sub-markets; and a large number of new buildings have been completed. With demand remaining subdued, rents are coming under considerable downward pressure as a result. Nevertheless, planning for major projects such as the Maag area are proceeding unabated.
Additional developments in Zurich-West, Zurich-South and Zurich-North are already in the pipeline. Due to improving worldwide economic growth and a dynamic export trade, the recovery of the Swiss economy has continued, with GDP growth expectancy of 1.3%-1.6% this year. Consumer spending is also showing signs of recovery but expectations remain cautious in view of Switzerland's erratic labour market. At 3.7%, unemployment is currently low by international comparison and could slightly improve during the next 12 months.
Inflation poses no threat to the Swiss economy with a rate of 1.2% in Q2-2005. In addition, interest rates continue to be historically low.
Source: CB Richard Ellis