"Real estate investors like pure plays."

Real estate has shown itself to be a largely resistant asset class during the pandemic. However, the challenges standing in the way of sustainable returns are increasing all the time and require not only wide-ranging real estate expertise but also long-standing experience.

August 13, 2021

Interview with Raymond Rüttimann

Head of Global Real Estate

Interview with Raymond Rüttimann

Mr. Rüttimann, which compliment given by a client recently left the biggest smile on your face?

Raymond Rüttimann: I’ve got a nice example for this. Recently a client took the time to write a lovely letter thanking our team for the work we’d done for them. I was especially pleased because the transaction concerned was extremely complex involving a community of heirs. Thanks to our real estate know-know and our broad-based expertise, we were able to cater precisely to the needs of the sellers and ensure that everything went smoothly.

Real estate is considered an alternative asset class, like commodities or private equity. Isn’t there in reality no alternative to real estate for institutional investors and wealthy individuals?

There’s something to that. Bonds have for a long time not really offered an alternative. As long as the spread between real estate returns and the yield on German Bunds is 300 basis points, investors are almost forced to hold a high real estate component.

I’d like to qualify the lack of alternatives to real estate, however. Infrastructure investments such as wind parks or hydropower plants are likewise based on real values which, as a rule, generate constant, reliable cash flows and therefore fulfill an important criterion for institutional investors.

How high is the real estate allocation among institutional clients in Switzerland and in other major real estate markets?

The allocation in Switzerland is around 24%. The global average is about 10%.

In Europe, the component stands at over 11%, although in Germany, France, and the UK, it’s probably more like 14%. For North America, the allocation is given as 9.5%.

Real estate allocation of institutional investors in global comparison

Real estate allocation of institutional investors in global comparison
The real estate component of institutional investor portfolios in 2020 was around 10% on average worldwide, up 0.6% on the previous year
Source: 2020 Institutional Real Estate Allocations Monitor, Cornell University’s Baker Program in Real Estate – Hodes Weill & Associates 

What are the reasons for these quite considerable differences?

A major difference is the interest rate environment. Unlike in Switzerland or Germany, for example, investors in the US are spared negative interest. In addition, residential real estate plays no way near as important a role as it does in Switzerland. In markets such as the US and Scandinavia, this means there is considerable catch-up potential in the area of real estate.

Do you expect institutional investors in Switzerland to continue to increase their real estate component?

Another moderate increase in the real estate allocation is possible.

Are there upper regulatory limits?

The Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV 2) stipulates that pension funds may invest a maximum of 30% in real estate. However, a higher percentage is possible in exceptional cases subject to certain conditions.

So you’ve still got some wiggle room...

I wouldn’t put it like that. By no means do all pension funds want to max out this limit, but we do think there’s another business sector that offers interesting potential for growth: the integral management of real estate portfolios for third-party clients.

Why is there a need for integral management?

Pension funds or insurers do not always have the specialist and all-encompassing real estate expertise to optimize returns over the long term and achieve sustainable appreciation in value. Responsibilities frequently focus on management and periodic renovations. Professional and active real estate management, on the other hand, also deals with investment and divestment strategies, transaction management for building acquisitions, or the alignment of real estate to ESG criteria (environmental, social, and governance). The tax aspects of real estate portfolios likewise require a great deal of specialist knowledge and practical know-how.

Focus on real estate

Asset allocation of Swiss pension funds as of the end of 2020


Bonds CHF 24.73%
Real estate 24.16%
Switzerland direct/investment foundations 14.77%
Swiss investment funds 6.53%
Abroad, hedged 1.98%
Abroad, non-hedged 0.89%
Equities abroad 19.03%
Equities Switzerland 13.26%
Alternative investments 6.60%
Bonds 5.10%
Liquidity 4.71%
Mortgages 1.33%
Convertible bonds 0.38%
Rest 0.69%

Quelle Credit Suisse Schweizer Pensionskassen Index, 4. Quartal 2020

COVID-19 has frequently been described as a game changer. Does that also apply to the real estate market? 

COVID-19 has accelerated various developments that were already evident even before the pandemic. Properties with retail spaces were already under pressure. Conversely, demand for logistics real estate has increased dramatically.

How did you deal with rent waivers during the pandemic?

In 2020, after the lockdown was announced, we were one of the first landlords to waive one month’s rent for affected commercial tenants. This signaled to them early on that we were eager to continue our leasing relationships in a spirit of partnership.

How do you assess the outlook for the commercial property market? 

It’s important to make a clear distinction here. In the future it will no longer be possible simply to lease office space anywhere and everywhere. The greatest potential is offered by locations in central business districts and/or in the vicinity of train stations. Office spaces in peripheral locations will have a much tougher time surviving on the market. If, on top of that, the buildings are 30 or 40 years old, their chances of being rented out are even slimmer.

"The greatest potential is offered by locations in central business districts and/or in the vicinity of train stations."

What do you do with buildings like that?

First of all, we examine whether they can be repurposed. In Zurich-Oerlikon − which is an attractive location − we converted the former head office of Sunrise into an apartment complex. All units were rented within a short space of time.

Will the market need quite so much office space in the future?

The demand for space in Switzerland should begin to stabilize. We do not anticipate a marked expansion in supply. In the future, whether or not a property is successfully rented will also depend on what the landlord has to offer aside from just the space itself. Additional services in and around the rental property are becoming more and more important. At Ambassador House in Glattbrugg, for example, we operate a staff restaurant, provide residents with daycare facilities and a conference infrastructure that is available for flexible use, and take care of various services ranging from dry cleaning to ordering flowers. Tenants value our role not just as a landlord, but also as a service provider. This is reflected in the occupancy rate of 90%.

The greatest challenge for real estate investors appears to be gaining access to suitable properties. How do you approach this problem?

We are in the fortunate position to have an established network behind us that we have cultivated over several decades. Real estate sellers and brokers are well networked with our specialists and know that they can rely on them. This applies in particular to development projects.

What role does the development business play?

For us, developments have long hovered between an annual volume of between CHF 800 mn and CHF 1 bn.

What are the three biggest projects that are currently being undertaken by Global Real Estate?

The two residential towers at Hardturm stadium in Zurich, with an investment volume of over CHF 500 mn; the Elementum office complex next to Munich central station, with around CHF 400 mn invested; and a residential development project in Chavannes-près-Renens near Lausanne, where we’ve likewise injected about CHF 400 mn.

Global Real Estate

Credit Suisse Asset Management is a leading provider of real estate investments. 
Our broad array of real estate solutions spans a range of geographies and
investment types.

How does Global Real Estate assess the potential offered by real estate in emerging markets?

Countries such as Brazil, India, Mexico, and especially China harbor tremendous potential. But the lack of legal security there prevents us from investing in these countries.

The investment decisions made by real estate investors often have major repercussions on the chosen locations and the populations that live there. How do you live up to this responsibility?

By reviewing every new build or renovation project with respect to its integration into the district and into the local neighborhood. This is done in coordination and dialogue with the responsible authorities. Our experience here has been fundamentally positive.

And what do users and the local population make of it?

Let me give you two examples: At the base of one of the two high-rises that we want to build at Hardturm, the City of Zurich has expressed an interest in signing a lease and installing a school with space for 18 classrooms and a cafeteria.

The courtyard of the Elementum building complex in Munich mentioned above will be home to a small city park with trees and lots of vegetation. These spaces will be accessible not only to the employees of the companies renting there, but also to the local population.

Several Credit Suisse Asset Management real estate investment products are focused on specific usage types, for example residential or commercial. Do differentiations like these still make sense, with effective usage becoming more and more mixed?

Yes, most investors appreciate it if the real estate is focused on clearly defined uses such as residential or logistics – they like pure plays. However, it’s impossible to avoid overlaps because a property is used for mixed purposes or a development is designed for mixed use. That can also be an advantage.

Sustainability criteria and certification have long been the standard for new builds. But which strategies and which objectives are you pursuing for the properties in your portfolio?

Our properties are also reviewed and optimized on an ongoing basis with regard to their sustainability. When undertaking renovation projects, we systematically convert to energy systems that do not use fossil fuels. Our goal is to become climate-neutral across our entire real estate portfolio by 2040. Of course, we make the greatest savings in terms of energy requirement when we replace an existing building with a new one that is rigorously constructed according to strict sustainability standards and is certified accordingly.

What happens with properties that are still not able to meet the applicable sustainability criteria even after a reasonable financial outlay?

We put these properties on the market and invest the resulting proceeds in real estate that is more efficient as regards sustainability. Restructuring of this kind rejuvenates the portfolio, something that is desirable from a strategic perspective.

"Our goal is to become climate-neutral across our entire real estate portfolio by 2040."

Mr. Rüttimann, what was your experience of the coronavirus crisis on a personal level?

Like most of the workforce, I spent a large part of my time working from home, although thankfully we have a vacation home in the Engadine, so I was able to switch things up between two home offices.

Raymond Rüttimann


The bigger picture

The most important attributes of successful investors include the ability to capture the determinants as a whole and link them together. This produces the big picture. It shows the entire investment spectrum and creates transparency to make investment decisions easier.

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