Economic growth increases the bottleneck in the commercial real estate market in Basel

Basel is one of the most dynamic economic locations in Switzerland. This also has a knock-on effect on the demand for commercial real estate and thus indirectly on the industrial and commercial properties that stand vacant.




Dynamic development of demand and falling vacancy rates

The dynamic development of demand has led to a decline in vacancy rates from around 170,000m2 to around 105,000m2 between 2011 and 2015. The following diagram shows just how vacancy rates have evolved with a breakdown of different types of use. As can be seen, vacancy rates are declining for all types of premises, with the exception of retail space where the vacancy rate has remained relatively stable.

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Figure 1: Vacant industrial and commercial premises shown as area in m² and type of use, from 2011 to 2015, (c) Statistical Office of the Canton of Basel-Stadt

The declining vacancy rates also affect the availability of commercial real estate. CSL Immobilien AG records the availability rate for office premises every year, which shows what percentage of office premises were offered on the market within six months. The availability rate is the important factor for the location when companies are looking for premises. The higher the availability rate, the greater the choice for the company. Due to the widely varying needs with regard to the size of the premises, level of development and micro situation, which are in demand on the real estate market, an availability rate of around five percent is needed for a market to function in a sustained manner.

In comparison with the cities, Geneva and Basel have the lowest availability rates at 2.3% (see Figure 2). Basel competes at an international level in many areas. One year ago CSL Immobilien AG has compared 40 agglomerations within Europe and Basel is still trailing with the lowest availability rate. At that time only three other agglomerations (Stockholm, Stuttgart and Geneva) had a value that fell below the necessary 5%.

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Figure 2: Office space available within 6 months in the four largest cities in Switzerland

Opportunities for owners of real estate, project developers and investors

This low supply of available rental space in the Canton of Basel-Stadt poses a challenge for growing companies or may possibly lead to economic problems for businesses. Dynamic growth offers opportunities for owners of real estate, project developers and investors. In contrast to many other locations, there is a proven demand for new commercial real estate in Basel-Stadt.

The promotion of economic development from the AWA, in collaboration with BaselArea, helps growing businesses in their search for new or bigger premises. We would like to share with you our experiences in the segments where the search for premises is especial challenging:

Size
Optimal operating procedures as well as cooperation between teams work best on one floor. Basel has a shortage of available properties with a spacious layout/floor plan.

Location
Specialisation of the economy results in a lack of skilled labour. When recruiting, companies are reliant on the largest possible labour market. That is why access to the location through public transport becomes increasingly important. The availability of properties in the highly sought-after area around the SBB railway station has fallen sharply.

Contract periods
Flexible contracts are an important consideration for companies that are relocating, as well as for start-up companies. This enables optimised growth and reduces the risks involved. The existing Business Centre and Technologiepark Basel can no longer cover the rising demand due to the attractiveness of flexible contracts.

Level of development
Demand for flexible lease terms and conditions means that well-developed/equipped premises in particular are in demand (in contrast to "core & shell"). This affects both laboratory and office space, even for larger business entities.

What measures is the Canton of Basel-Stadt taking?

Improved availability of real estate is an important factor for the further economic development of the location of Basel. There are therefore various projects aimed at improving the availability of land:

1. Werkarena Basel

In 2015, Steiner AG won the project developer competition for a plot of real estate with building rights in Basel-Stadt. The building permit for the "Werkarena" has been in place since the beginning of March 2016. This presents a great opportunity for the artisanal industry and craft businesses in the Canton of Basel-Stadt. You can find out more by visiting www.werkarena-basel.ch.

2. Development of Technologiepark Basel

Because of high demand for laboratories and offices with a flexible lease for emerging companies, the Canton has decided to further develop and extend Technologiepark Basel. You can find further information in this Newsletter.

3. Transfer of information and networking

The Economic Development Unit offers various products and services for presenting and conveying information in the field of real estate. You will find the current Economic Area Portfolio for the Canton of Basel-Stadt on our website and the Economic Area Report for the Canton of Basel-Stadt will be released at the end of April 2016.

Do you have any questions concerning development of supply and demand for commercial real estate in the Canton of Basel-Stadt? Are you looking for a suitable location for your company? Are you looking for investment opportunities in commercial real estate? Then we look forward to hearing from you.

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Contact

Economic Development
Fabian Bauer
Project Manager for Economic Areas
Hochstrasse 37
P.O.Box
4002 Basel

Phone: +41 61 267 65 17
Email: fabian.bauer(at)bs.ch

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