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Switzerland has made tremendous efforts to reduce its buildings’ CO₂ emissions – partly due to political pressure. A total of over CHF 75 billion may be necessary to renovate existing apartment buildings, for example, as over two thirds of them continue to use oil- or gas-fired heating.

1. Are energy-saving renovations economically viable? Most of the costs can be added to the monthly rent as a value-adding investment. Given that energy-saving investments are also tax-deductible, any increase in net rents (excluding service charges) usually covers the costs involved. If not, it is better to hold off on renovating.
2. Do energy-saving renovations lead to lower gross rents? As explained in point (1), such renovations usually lead to an increase in net rents. However, lower energy consumption leads to lower ancillary costs. If a great deal of energy is saved – as is the case with old buildings in need of renovation – gross rents decrease, to the benefit of tenants. However, if gross rents were to rise, the following question would need to be answered.
3. Will the market allow for higher gross rents to be charged? Higher gross rents should be achievable if market rents (average rents for new lettings) are higher than the property’s current rental price. This is especially true of older buildings in large city centers and booming urban areas. Major investments in energy-saving renovations pay off less in less central locations where a greater number of properties are unoccupied. If higher gross rents cannot be achieved, the effective rental yield disappears and the investment would not be financially worthwhile for the owner.

Energy-saving renovations can be carried out as part of a partial or full renovation. The latter may be more cost-effective in some circumstances, especially if it is crucial to the structure of the building. It is mainly worthwhile in the case of older, centrally located buildings requiring renovation, where quality and market rent premiums are likely to be particularly high.