From a Swiss point of view, what is happening on the rental and property market in and around Visp is an extreme case, but it also has exemplary character.
The main driver for the explosively growing demand for living space is an unprecedented hiring offensive by the pharmaceutical company Lonza. In the picture: View of Visp from Eggerberg.
“Are you still in your right mind?” That’s what the locals in Visp asked the parents of the Upper Valais notary and lawyer David Gruber when they were building a house in the west of the municipality of Visp in the early 1980s. The building land was secluded in the countryside, surrounded by farms. Today, Visp West, as the district is called, is no longer recognizable. The area is largely overdeveloped and the demand for housing is higher than ever. Gruber’s parents’ house is probably worth a fortune compared to that time.
The main driver for the explosively growing demand for living space is an unprecedented hiring offensive by the pharmaceutical company Lonza. The Swiss contract manufacturer manufactures products for other pharmaceutical companies in Visp, including the active ingredient for Moderna’s corona vaccine. In order to manage the operation and expansion of its new production complex, Lonza has brought more than 2000 new, mostly highly qualified workers from all over the world to the mountain valley in the past two years. The group has 4,500 permanent employees at the Visp site. According to Lonza, it is difficult to estimate how many more will be added.
On the other hand, one thing is clear: the new employees of the pharmaceutical company can pay rent with their wages and afford purchase prices that were previously known from larger cities. 2,500 francs for a four and a half room apartment are not uncommon.
Lower supply rates than in Zurich
New figures from the real estate consulting firm Wüest Partner show that the proportion of advertised rental apartments in the total stock in the municipalities of Visp, Naters and Brig has fallen to less than 2 percent. That is less than half as much as in the rest of Switzerland (5.8 percent). Even in supposedly dry real estate markets such as Zurich (3 percent) or Lausanne (4.5 percent), the supply rate is higher.
“These are very low values. Everything advertised around Visp is gone within a very short time. The market has dried up,” says Robert Weinert, head of real estate monitoring at Wüest Partner. Apartment rents in Visp, Brig and Naters have also risen by 4 percentage points and more since the end of 2020. Institutional investors such as pension funds, who avoided the mountain valley just a few years ago, have become aware of the region. 400 apartments are currently under construction in the municipality with 8100 inhabitants.
From a Swiss point of view, what is happening in Visp is an extreme case, but according to Wüest Partner it also has exemplary character. “The development impressively illustrates how strongly expanding companies can noticeably change local real estate markets,” says Weinert. Understandably, the local population does not always respond positively to price increases and other side effects. The “Walliser Bote” recently raised the question in a comment: “How sustainable is the Lonza boom?”
For real estate investors in Upper Valais and the region as a whole, the economic boom holds great opportunities, but also risks: If Lonza – as happened ten years ago – one day considers downsizing again, there is a risk that demand and prices will collapse just as quickly if From today’s perspective, this also appears to be completely unrealistic.
“Lonzians” breathe new life into mountain villages
The Visper notary David Gruber also finds a certain concentration of risk “with all his love for Lonza”. “If the company moves production to Texas or China in ten years, then the highly mobile workforce will be gone again.” At the same time, Lonza is of course not the only driver of demand on the Upper Valais real estate market: the opening of the Lötschberg base tunnel 15 years ago made the region more attractive for commuting locals and buyers of second homes.
Gruber, who has no business connections to Lonza, is also convinced that the Lonza effect has not resulted in gentrification so far, as the “Wochenzeitung” wrote a few months ago. “It is rather the opposite: I know of numerous cases of Lonza employees from abroad who move to the surrounding mountain villages, whose existence is threatened due to migration tendencies. They breathe new life into these communities.”
Reinhard Meichtry, real estate agent and managing director of the Upper Valais homeowners’ association, has been active in the Upper Valais real estate market for 22 years. He is positive about the economic growth, but he probably speaks from the soul of many locals when he says that the pace of development is “a bit scary” for him.
Not so long ago, representatives of institutional real estate investors laughed when he suggested investing in the region. “They asked for a return of 6.5 percent plus a risk premium for the disadvantage of the peripheral region. Construction is now underway and there is no longer any doubt that the apartments can be rented out. It’s all going away.”
The booming economy also poses challenges for local authorities. As a result of the expansion at Lonza, Visp, in cooperation with other Upper Valais communities and Lonza, had to expand the drinking water supply, build new day-care centers, and due to the high number of commuters, the parking space capacities are increasingly reaching their limits.
Mayor Niklaus Furger hopes that the situation on the housing market will ease again when the ongoing construction projects are completed. However, Furger is well aware of the scope of the development: “Upper Valais is going through a transformation. You notice that, for example, when you eat a raclette or drink white wine at the traditional Friday Pürumärt. More and more people are speaking English.” However, the locals have always been used to dealing with newcomers from Switzerland and abroad.
According to Lonza, it is also trying to cushion the inevitable side effects of rapid staff growth. The company is building new parking spaces, providing employees with e-bikes and subsidizing public transport subscriptions. “Lonza works closely with the canton, communities and other local organizations to support the development of sustainable infrastructure and to jointly ensure the prosperity and functioning of our location and the region,” it says on request.
The group leaves it open how many staff it intends to hire in the coming years. The investments made in recent years still required a certain construction period before the plants went into operation. It is therefore a challenge to accurately predict the number of employees.