Volume en baisse de 15% et nombre de transactions en hausse de 12%

For the third consecutive year, the annual investment volume in the Canton of Geneva exceeded CHF 3 billion, confirming the attractiveness of the Geneva market.

In 2022, approximately CHF 3.4 billion was invested in Geneva, of which 41% in residential assets and 59% in commercial assets. The market was particularly dynamic in the first half of the year, with more than CHF 1.9 billion invested, and then slowed during the second half (CHF 1.4 billion). In particular, in the fourth quarter – usually the most active – the traditional year-end acceleration did not materialise, with CHF 800 million traded, i.e. less than in the first and second quarters.

Although the volume was lower than in the exceptional years 2020 (-8%) and 2021 (-15%), 2022 was more dynamic in terms of the number of transactions: 189 in 2022 versus 171 in 2021 and 166 in 2020.

In this context, we note that the average deal size fell to around CHF 18 million, whereas in 2021 it stood at CHF 24 million. This decline in average volume is mainly due to two factors. First, there were fewer large-scale transactions. The 5 largest transactions completed in 2022 represented a total of CHF 792 million, compared with CHF 1.5 billion in 2021. Second, the prices of investment properties declined in the second half of the year. From June 2022 onwards, the progressive increase in interest rates pushed up yield expectations among real estate investors, which logically led to a decrease in prices for investment properties.

Top 5 transactions

The 5 largest transactions account for around 24% of the total volume. The largest, amounting to CHF 203 million, was completed by the Fondation de Placements Immobiliers Turidomus and concerned an office building located on Rue du Rhône in Geneva. Following the acquisition in 2021 of a building on Rue du Marché for CHF 220 million, Turidomus is consolidating its investment strategy in Geneva’s prime segment. It is worth noting that Credit Suisse and SPS appear in this top 5 both as buyers and as sellers.

The dominance of institutional investors

For private investors, the dream of acquiring an investment building in Geneva is increasingly out of reach, given the dominant position institutional investors now hold in this market. As in previous years, investments made by legal entities represent almost the entire market, with around 94% of the number of transactions and more than 98% of the volume invested.

Nevertheless, the monetary policy implemented in 2022 by the Swiss National Bank (SNB) to curb soaring inflation was marked by three increases in the key interest rate, bringing an end to the long golden cycle for investment real estate.

In this context, certain institutional investors have revised their investment strategy and adopted a more defensive stance. This is particularly true for some real estate funds, which are more sensitive to financing conditions and for which capital raising has become more challenging.

Our analysis

During 2022, our team advised and supported various clients in the sale of their real estate assets under “sell-side” mandates, allowing us to take the market’s pulse in real time.

First, we observed that investors are becoming more selective regarding the quality of buildings, especially when renovation works are required.

Second, we note a more cautious approach from investors, characterised by a lower number of binding offers. A standard Geneva transaction[1] now reflects gross yields in the 3.4%–3.6% range, whereas last year yields around 2.5%, or even lower, were accepted by the best buyers in the market.

Even if real estate is no longer the only available investment alternative, Geneva property remains a safe long-term asset that every discerning investor should hold in their financial portfolio, and we are confident in the resilience of the Geneva market. Indeed, the episode of volatility has stabilised and the market already appears to be regaining its composure.

[1] Residential building with attractive rental upside, in good overall condition and in a good micro-location.