Building land in Switzerland is notoriously scarce. This applies not only to residential land but also to commercial land. Given the significant price differences between building plots in residential areas and those in commercial or industrial areas, the question arises: who are the actual users, buyers or investors of such plots, and what is the most suitable market set-up?

The following analysis shows that the redevelopment of commercial land outside urban areas is generally only worthwhile in certain cases where conditions are optimal from an investor's perspective. This requires significant risk minimisation for investors (including good transport links, long-term leases, good tenant credit ratings, and modern buildings that are fit for purpose). This justifies relatively low return expectations. The pace of the market is therefore set above average by owner-occupiers who use the land and property for production and commercial purposes. The fact that potential usability plays a significant role is demonstrated by the increased prices of building land for data centre use.

Initial situation

Commercially used building land is usually located outside city or village centres, mainly due to noise pollution and transport links. While residential forms can still be considered homogeneous, the differences in commercial uses are more pronounced. The mix of industries, measured by the number of workplaces, is very heterogeneous.

Number of workplaces within Corporate Groups
 

This is of central importance for the property market, as buildings and land serve the core needs of production, commerce and trade. Since these needs are specific to particular industries and users, the commercial property market shows clear signs of fragmentation. Not every building is equally suitable for every user. 

Market overview

Wüest Partner reports rental prices for commercial and warehouse space across Switzerland ranging from CHF 70/m² p.a. (10% quantile) to CHF 204/m² p.a. (90% quantile). CBRE reports similar ranges of CHF 70-190/m² p.a.

For light industrial and logistics properties, CBRE reports a prime net yield of 4-4.1% as of Q1 2026. This can be roughly supported by transactions carried out by Julius Baer Real Estate and extensive valuation and purchase price data. In rural locations with poor building stock and high vacancy rates, willingness to buy is significantly more subdued.

Parties driving demand

Parties driving demand can be broadly classified into owner-occupiers and financial investors. Owner-occupiers hold commercial properties as business premises, while investors develop buildings, hold them in their portfolios and let them, or act as property developers. From an operational perspective, the focus is on liquidity and capital management, combined with ensuring that operational requirements are met. Investors, on the other hand, primarily pursue the goal of achieving an appropriate return.

In the listed fund market, purely commercial products are clearly in the minority in Switzerland. Of the 47 listed funds, only 12 products have a predominantly commercial investment focus. In terms of market capitalisation, this corresponds to only around CHF 12.1 billion out of a total of CHF 80.9 billion, or 15%. Furthermore, these vehicles have a below-average premium (15% compared to an average of 38% for all listed funds as at 1 February 2026). Real estate companies sometimes have a stronger commercial focus. 

Example scenario

In certain sectors, so-called ‘sale and leaseback’ transactions are a common occurrence in the market. The previous owner sells the property and then leases it back on a long-term basis. This frees up liquidity for investments. The amount of the lease-back rent plays an important role here. As this is capitalised over the term of the contract, it has a direct impact on the transaction price.

Advantages and disadvantages of various lease-back concepts – company perspective

Higher rent compared to market rates

+ Higher initial sale price
+ Higher liquidity in the short term
- Higher costs in the long term 

It is also common for an investor to sign an end user as a tenant directly during the development phase.
The following calculation is fictitious and is not based on real cases. It is assumed that an investor expects a gross initial yield of 4.5% for a commercial property (outside the city) with a single tenant with a strong credit rating and a hypothetical 10-year lease at a market rent of CHF 120/m² p.a.¹  The lettable area is set at an example value of 10 000 m². Therefore, the absolute market rent is CHF 1 200 000 per year. This is the reference scenario. In the other variants, the market rent is modelled after the expiry of the contract (here 10 years).

 Calculation sketch

*The present value from the exit is identical for all scenarios at CHF 16.13 million.

According to the reference scenario, around 40% of the transaction price will be generated within the term of the contract. If the individual tenant unexpectedly defaults due to bankruptcy, this will have a significant impact on the investment. In addition, rent losses are to be expected during the unforeseen re-letting period, which is likely to last more than a year. It is therefore recommended that buyers demand a sufficiently high bank guarantee during purchase price negotiations. In the above example, with a purchase price based on a contractual rent of CHF 180/m² p.a. (assumption: overrent) compared to CHF 120/m² p.a. (market rent) and bankruptcy after 3 years, a c.p. loss of at least CHF 6 million or almost 20% of the initial purchase price would be incurred. Consequently, it is worthwhile to examine the risks for the investor arising from a single-tenant relationship in detail during due diligence:

• Asymmetric information
• Creditworthiness and default risk
• Moral hazard, e.g. after receiving a (high) purchase price payment due to excessive and unsustainable lease-back arrangements when the company is already facing imminent bankruptcy

There is also a risk for a company if it enters into a long-term lease agreement with the investor to operate on the property. If the creditor has already registered a mortgage before the lease agreement is concluded and becomes insolvent itself, this could result in foreclosure. If the contractual rent is artificially low, this could have a negative impact on the property value (see also the numerical example above). As a result, the mortgagee could demand a double call² under Art. 142 SchkG. This means that the company runs the risk that the transfer of the contract to the new owner will not be binding. Either new terms will be negotiated or the company will have to leave the location. In practice, however, such cases are rarely known.

Impact on land prices

Due to the ranges shown and individual purchase price negotiations, commercial and industrial zones can result in significantly different willingness to pay for the associated land. Furthermore, most building and zoning regulations in industrial zones allow a great deal of freedom in terms of utilisation. Increased utilisation for a high proportion of office space has a negative effect in most cases, as there is hardly any external demand and companies/producers only need a certain amount of administrative and back-office space. For this reason, most industrial properties are not used to their maximum capacity, but rather according to demand. 

Particularly noteworthy are properties that are suitable for data centres. Here, the willingness to pay deviates significantly positively from the average prices.
Based on the previous numerical example, the usual construction costs for a commercial development are assumed. These costs are deducted from the transaction price after completion by a potential land purchaser.³ 

In extra-urban locations, this results in residual values averaging CHF 200-400/m² of land area. The land value share of the value after completion is often between 10-20%, which corresponds to the usual location classes in non-urban areas according to SIV tables. The range of land prices is also outlined in a study by FPRE (2025)⁴. 

However, it is not enough for an investor or developer to simply include the construction costs according to the construction cost plan (BKP). The total investment costs, including risk positions/margin, initial marketing positions and financing costs, are also relevant. This significantly reduces the residual value, which in the worst case can result in a negative land value. With a gross initial yield of 5.5%, the residual value c.p. would already be significantly negative using the very simplified property developer method. Commercial land prices can therefore only be achieved in an optimal set-up. Conversely, with a set land price of CHF 400/m², around CHF 2 270/m² of lettable space can be invested as initial costs in the above example.⁵ This must cover all the cost items mentioned, which can be challenging depending on the construction situation and already requires an optimised return expectation.

It can therefore be concluded that it is mainly owner-occupiers who dominate the market. The investment is interesting for developers or investors insofar as the land is directly linked to a tenant as the end user (and a fixed contract term). This is usually done with a ‘built to suit’ (BTS) solution. Developing land on a greenfield site ‘in reserve’ without an end-user concept appears uneconomical, risky and unprofitable in most locations in Switzerland.

Summary

In summary, the need for advice on commercial developments is becoming significantly more relevant in a more complex financing environment. Investors and companies alike should be aware of counterparty risk (especially in the case of single tenants or a small number of tenants) and the possible consequences, and take appropriate precautions when buying or selling. Secure financing also provides a solid foundation for bringing development projects to fruition, even in the event of unforeseen circumstances such as macroeconomic stagnation or recession, with realistic and market-driven market value assessments and competent transaction advisors. 

Julius Baer Real Estate

Footnotes:

¹ For simplicity's sake, a standard number of parking spaces is included. The return is divided into two components. Years 1-10 are capitalised at 2.5% as a bond comparable. The capitalisation rate at exit is derived c.p. so that the discounted exit value added to the present value of the first 10 years corresponds to the present value from the reference scenario. The exit return is therefore around 4.7%. The IRR (based on the target rent) stabilises at 4.5% in all scenarios. The values are rounded.

² The double call is an instrument for protecting the mortgagee in accordance with the principle of seniority. It protects the creditor from subsequent economic reductions/encumbrances on the property (easements, encumbrances, contracts, etc.). The property is advertised once ‘as is’ with encumbrances and once without the relevant encumbrances. If a higher realisation proceeds without encumbrances results in covering the mortgage, the encumbrances are ‘deleted’.

³ The residual value or property development method is a common method for assessing the willingness to pay for undeveloped land. It compares the future benefit (= value or transaction price) with the costs of development. The residual value represents the maximum possible price for acquiring the land.

⁴ FPREview Insights into the commercial and industrial property market (2025).

⁵ Simplified calculation with a rent of CHF 120/m² p.a. and an expected return of 4.5%. With a floor area ratio (chargeable floor space divided by chargeable land area) of slightly above 1 and a space efficiency (rentable space divided by floor space) of slightly below 1 for commercial buildings, 1m² of rentable space = 1m² of land area.