Special real estate.A niche area with potential.

Special-purpose properties are built for a specific use and are therefore only suitable for other purposes to a limited extent. This entails risks, but at the same time makes them attractive investment properties – assuming the necessary expert knowledge is available. Global Real Estate from Credit Suisse Asset Management holds a total of 93 special-purpose properties in its portfolios.

July 21, 2020

Developments such as an aging society, digitalization, or the increasing number of students are creating new needs. The real estate industry is reacting to these trends with special buildings, also known as operator properties. Throughout Switzerland as a whole, special-purpose properties account for a substantial share of the total real estate market with an investment volume of over CHF 26 billion.

The spectrum of special real estate is broad. It ranges from leisure properties to health, retirement and education properties to railway stations, multi-story parking garages, logistics warehouses, data centers, hotels, and shopping centers. And they all have one thing in common: they are tailored to the individual needs of the tenants or leaseholders.

The structural design of these properties is intimately linked to their use. This requires specialized expertise for how these properties are run and increased risk management with regard to asset management.

Comprehensive review of special properties

Due to the specific purpose of use, the asset management team must be able to reliably analyze and assess not only the building itself but also the business plan of the tenants or leaseholders. As a result of this comprehensive risk management, the tenants or leaseholders must meet increased information requirements and provide, for example, utilization figures, revised financial statements, and insurance certificates. Profound knowledge of the industry is essential for assessing the creditworthiness and earning power of a special-purpose property.

A possible change of use and the associated increase in marketability is in some cases only possible at considerable expense.

Development supports demand

Special properties are designed for a specific use. However, these existing use concepts are being challenged by current social and technological developments. For example, the demand for flexible uses such as co-working spaces is on the rise, the general growth in city tourism is driving the need for more short-stay overnight accommodations, and e-commerce is presenting the logistics sector with new challenges. Parking garages are also continuing to develop and are becoming multifunctional service points that combine parking and shopping. These trends offer interesting prospects in the field of special real estate and continue to stimulate demand.


Diversification of the portfolio

Special properties diversify the real estate portfolio. Global Real Estate is diversified across the traditional areas of residential, office, and retail. The portfolio also includes 93 specialty properties (excluding retail) with a market value of around CHF 2.7 billion. Hotel properties account for the largest share of this. The 17 properties have a market value of around CHF 0.76 billion, closely followed by the 24 retirement and nursing homes and residences with a market value of CHF 0.67 billion. The portfolio also contains logistics and education properties.

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