A second life for luxury apartments: The number of empty, expensive apartments has risen sharply in recent years. A start-up is now beneficial with this: it rents the apartments to financially strong tourists and businesspeople.

Tagesanzeiger about Le Bijou

Once, luxury apartments were something of the best that could happen to an investor. They attracted a lot of tenants and were guaranteed and steady sources of income. But the business is no longer running as well as before. In recent years, investors have built many new, fancy apartments – but the demand could not keep up.

The consequence: the landlords are left with their expensive apartments. Or they have to go down with the rent – in Zurich, in some few cases rental discounts, up to 30 percent are mentioned. This reduces the return on investors, but it is good for Madeleine Trapper. The young entrepreneur has created a new business model with the vacant luxury apartments.

Together with her colleagues Alexander Hübner and Renato Steiner, she rents expensive living space, turns it into luxury and plushy apartments and relets these to tourists and business people. Costs: depending on location and equipment from 300 to 3500 francs – per night. The apartments are offered on online platforms such as Airbnb, Booking or Expedia. “We see ourselves in between Airbnb and deluxe hotels,” says Fallegger. She is prepared for the question whether this produces a loss of living space in the market: “The objects that we rent were previously staying empty for months.”

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According to Fallegger, the start-up Le Bijou meantime is in charge of about 30 furnished apartments in Zürich, Zug, Lucerne, Basel, and Berne. Geneva soon will follow. The offer also includes a “digital butler”: an app that can be used to book additional services such as food, taxi rides, dry cleaning or massages. The providers of these services are not employees, but self-employed or established companies. Food, for example, can be supplied by restaurants near the respective apartments.

The more luxurious apartments are empty, the easier Le Bijou attains new objects. Fallegger is watching closely what is happening on the market: “As soon as I find an apartment that would be suitable for us, I get in touch with the landlords. Often, they do not want to know anything about our model because they think that it implicates a lot of work and trouble in their houses. ” Months later many apartments are still being advertised. “Then I contact them again and kindly ask whether the interest now has risen.”

If an apartment has been on the market for a long time, “this, of course, strengthens our negotiating position,” says Fallegger. She notices that the supply of matching objects is getting bigger and bigger. “In Geneva two years ago, very few interesting apartments were advertised. Today there are already around 100.” In Zurich, she is observing a similar development.

Data from the real estate advisory company Wüest Partner support this statement at least partially. In Zurich, 253 apartments that cost more than 4500 Swiss francs per month were advertised in the first quarter of this year. Ten years ago there were only 114 of them, that is not even half as many. But the situation was already worse. By mid-2012, 506 of these comfortable homes were empty. “The offer was significantly expanded in early 2012 and exceeded the demand,” says Robert Weinert from Wüest Partner. Only in the last two years, construction activity in this segment had been reduced again, which is why the number of offers is now declining slightly. According to Weinert until vacant, expensive apartments find a new tenant, it still takes much longer than on average.

Low fixed costs, high benefits

For many landlords, the young entrepreneurs should be right on cue. Less is the enthusiasm in the hotel industry. “We see ourselves as a competitor for deluxe hotels, which have not invested enough in recent years or were too little innovative,” says Fallegger. The needs of the travelers had changed. “Many of them want to stay in a central area, and be self-caterer from time to time.” Yngve Abrahamsen, a tourism expert at the Swiss Federal Institute of Economic Research (KOF), from the University of Science and Technology in Zurich (ETH) says that the absolute top addresses do not have to be afraid of the new competition. “A large part of their guests come from the Arab world. They tend to prefer classic overnight stays.”

Expensive hotels, which rely on business travelers, who stay more than one night, are rather in danger, says Abrahamsen “The cost pressure has always been enormous. As a result of the revaluation of the Swiss franc, it has risen once more. “According to Abrahamsen, those who have low fixed costs as Le Bijou therefore clearly are at an advantage. “A start-up which, unlike a hotel, does not have to pay hundreds of employees is able to deal better with the cost pressure.”

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