Commercial real estate from foreclosure: What buyers need to know

Why Commercial Auctions Deserve Attention Now

Commercial real estate is a small but impactful segment in the Swiss foreclosure auction market. Although the number of properties per year is manageable, commercial auctions generate substantial volumes. The advantage for buyers: Information superiority and consistent due diligence can lead to attractive entry prices, robust cash flows, and improved equity returns – even in an environment with increased financing costs.

Market Overview 2021–2024: Few Lots, Steady Volumes

Over the last four years, a recurring pattern has emerged: The number of cases remains moderate, while the ticket sizes are high. In 2022, some large lot transactions stood out; by 2023, the level normalized, and in 2024, the total volume of the auction market increased again. The picture for the sub-segment "Commercial" is as follows:

Year	Number of Commercial Properties	Volume Commercial (CHF)	Ø Market Value (CHF)	Comment
2021	32	≈ 50.3 million	≈ 1.57 million	Re-opening effect, broad distribution by location and use.
2022	35	≈ 49.3 million	≈ 1.45 million	Fewer overall auctions but stable commercial tickets.
2023	29	≈ 30.7 million	≈ 1.10 million	Normalization after 2022, smaller to medium lots dominate.
2024	26	≈ 36.5 million	≈ 1.40 million*	*Approximation from volume/number; robust despite lower case numbers.

Seasonality and Timing

Auction windows repeat: Spring and autumn waves are strongest – particularly in June and October. July/August are traditionally quiet. Those who finalize financing and documents by spring can make quicker decisions during the busy months and outpace the competition.

Regional Patterns: Where Observation is Worthwhile

The highest auction activity (relative to the population) is regularly found in the south and in selected central cantons. For buyers, this means more deal flow and comparison opportunities:

High Activity & Selection: TI, VD, BE, VS.
Above-Average Rate per 100,000 Inhabitants: TI, JU, SO, GL – interesting for opportunistic strategies.
Premium & Core Locations (rare, competitive): ZH, GE, ZG, SZ, LU.

Pragmatic: Build a broad pipeline funnel in TI/VD/VS/BE; work selectively and early with bank term sheets in ZH/GE/ZG.

What Matters for Commercial Properties: Yield Drivers & Risks

Types of Use and Their Logics

Logistics/Light-Industrial: Tend to have longer contract durations, indexed rents, lower fit-out costs. Good demand in axes with fast highway/rail connections.
Retail (High-Street vs. Periphery): High-street locations in ZH/GE/BS are competitive; peripheral locations offer higher purchase yields but more re-use risk.
Office: Micro-location, layout flexibility, third-party usability; demand polarization (Core vs. B/C locations).
Gastronomy/Recreation & Special: Higher operational risks but strong value leverage with good operator creditworthiness or repurposing.

The Four Levers for the Investment Case

Entry Price: Auction discounts occur more frequently in complex cases (renovation backlog, legal peculiarities, vacancies).
Rent & Contract: Indexation (LIK), remaining term (WALT), staggered rents, options, cost logic (Net vs. Gross).
Third-Party Usability: Layout, floor heights, accessibility, parking/Public Transport proximity, zoning conformity.
Capex & ESG: Envelope/building technology, fire protection, EV charging, PV; reduces Opex, enlarges buyer circle at exit.

Due Diligence: Compact Review Framework for Commercial Auctions

Legal: Land registry (ranks/debt securities), servitudes/rights of way, building rights, possible rental/utilization rights; read auction conditions carefully (deposit, possession commencement, warranty exclusions).
Technical: Building envelope, building technology (heating/ventilation/cooling), fire protection (SIK/AEAI), statics/load reserves (e.g., for storage), e-mobility infrastructure.
Location: Demand anchors (jobs, traffic generators), logistics axes, public transport, parking; pollutants (noise/smell).
Environment: Contaminated site register, contaminated locations, wastewater/pre-treatment facilities, asbestos/PCB in existing buildings.
Yield: Rental list (creditworthiness, due dates, collateral), indexation, vacancy costs, market comparison.
Financing: Affordability/DSCR, interest lock, covenants; refinanceability after stabilization.

Quick Models for Discipline on Auction Day

// Maximum Bid (simplified)
MaxBid = NOI / Target-CapRate 
         - (immediate Capex + transaction costs) 
         - safety margin

// DSCR Stress Test (simplified view)
DSCR = NOI / Debt Service
Requirement: DSCR ≥ 1.25 even with interest +300 bp, NOI -10 %, Capex +20 %

Practical Examples

Light-Industrial in AG/TG: Long leases, low fit-out; focus on service accessibility/ceiling loads. Typical case for “Buy & Hold”.
High-Street Partial Area in VD/BE: Micro-location top, short remaining term; value-add through re-leasing/layout adjustments.
B/C Office in SO/GL: Discount possible to appraised value; consider Plan B via conversion (practice/co-working).

“Commercial auctions reward preparation, not spontaneity. Those who meticulously calculate rental lists, capex, and location logic buy less frequently – but better.”

Strategic Cantonal Playbooks

Deal Flow & Comparison Cases: TI, VD, BE, VS – ideal for pipeline-based bidding strategies.
Value Add Profiles: AG, SG, FR, NE, TG – solid demand, realistic rents, good exit liquidity.
Core/Core+ (scarce, competitive): ZH, GE, ZG, SZ, LU – small discount, but top long-term quality.

In 6 Steps to the Award

Build Pipeline: Closely monitor cantons with high rates (TI, JU, SO, GL); request files early.
30-Minute Screening: Rental list, vacancy, indexation, WALT; identify “red flags” (contaminated sites, fire protection, servitudes).
Capex Planning: Separate immediate measures (safety/fire protection) from value increase (ESG/spatial flexibility).
Bank Term Sheet: Ensure loan-to-value, interest rate range, covenants, deposit; prepare alternatives (bridge → long-term).
Bidding Discipline: Derive maximum bid from model – and adhere strictly to it.
After the Award: Handover/tenant contact, technical immediate checks, insurances, business plan & refinancing roadmap.

FAQ: Frequently Asked Questions about Commercial Auctions

How realistic is an award below appraised value? Often for properties with vacancies, renovation needs, or special legal situations; smaller in premium locations (ZH, GE, ZG).
What key figure is central? DSCR ≥ 1.25 in stress scenarios; alongside target cap rate per location/type of use.
What is often underestimated? Fire protection upgrades, building technology revitalization, tenant fit-outs (incentives), contamination risks.