Banks

A record investment volume for direct real estate in Geneva in 2021

The Geneva cantonal market rose by 18% last year to reach nearly 4.4 billion francs invested.

With nearly 4.4 billion francs invested (excluding the sale of a company – share deal), the direct real estate investment market in the canton of Geneva reached a new record in 2021, posting growth of 18% compared to 2020. The fourth quarter was particularly dynamic, investment volumes in this quarter alone reached the record amount of 1.86 billion, or 42% of the annual volume.

This very high transaction volume is the result of a very high number of large transactions. In fact, 19 transactions worth more than 50 million have been identified, representing a cumulative investment of nearly 2.8 billion francs, or 63% of the annual investment volume. Conversely, transactions with a volume of between 5 and 10 million francs represented 39% of transactions for 9% of capital invested, ie a cumulative amount of around 398 million.

Provident institutions were the most active investor category in the acquisition with nearly 1.3 billion francs of investment, i.e. 30% of capital invested, followed by real estate funds and private investors with volumes invested around 1 billion francs and 940 million francs, or respectively 23% and 22% of total investments. On the sale, private investors represented 58% of volumes. Banks constitute the second category of players with more than 885 million francs in assets sold, or 20% of annual volumes.

What prospects for 2022?

At the start of 2022, inflation and the prospect of a move to raise interest rates by central banks were the two main economic news items in a world that real estate investors were considering post-COVID. Russia’s invasion of Ukraine has upset the world order. After nearly eight decades of relative peace in Europe, the war plunges us into the unknown with consequences on the real estate investment market that are difficult to grasp today.

On the one hand, the rise in commodity prices increases inflationary pressures. On the other hand, the deterioration in economic expectations could, in the medium term, jeopardize the normalization strategies of central banks. In this context, it is likely that the risk of stagflation will lead to a revision of investors’ asset allocation strategies in the coming months.

With relatively volatile equity markets and bond markets deemed unattractive due to the prospect of rate hikes, Swiss real estate, and particularly Geneva real estate, has a risk/return trade-off that should remain very attractive in the eyes of investors. investors.

The capital to be invested in the market is always very important. Market risk aversion and the resulting extreme selectivity are forcing investors to reduce their return requirement for the best objects, the spread between bonds and real estate is therefore expected to fall further for 2022.

If the potential for lower property yields seems to be coming to an end, the very strong competition between institutional investors, observed on the market, could still lead, for the best properties, to a slight contraction in yields in the residential segment in Geneva.

The search for real estate assets that meet ESG criteria and strong sustainability objectives in a “Net Zero Carbon” logic has become a new real estate market driver for institutions. On the seller’s side, 2022 could be a tipping point. With the return of inflation and the resulting reversal in interest rates, the prices of prime assets could reach their ceiling at the end of the year.

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