Demand for Swiss real estate remains high

The Swiss economy grew by 0.8% in Q1 2025, mainly due to early export activities ahead of Liberation Day. However, momentum slowed in Q2, with GDP growth at just 0.1%, though this was still stronger than expected. According to the State Secretariat for Economic Affairs, a decline in the industrial sector was balanced by growth in services. According to the GDP flash for the third quarter of 2025, a sharp decline in the industrial sector led to a contraction of -0.5%. For the whole year, Swiss GDP is expected to grow by 1.3% in 2025 (excluding sporting events).¹ Inflation remains low at 0.2% in the first nine months of 2025 and thus at the lower end of the Swiss National Bank’s (SNB) target range. Following two 25 basis point rate cut each in March and June, the SNB policy rate is now at 0.0%, with expectations for a sideways movement, although downside risks remain.

US tariffs announced on July 31 were higher than anticipated, rising to 39% instead of the 31% announced in April. About 60% of Swiss exports to the US, representing 10% of total exports, are subject to these tariffs. On 14 November, it was announced that Switzerland and the US had agreed on a trade deal, which will lower the US tariff rate for Swiss exports to 15%, bringing it in line with the rate applied to EU exports. Swiss companies, in turn, have committed to invest around USD 200 billion in the US, with a large portion coming from the pharma sector. While the trade deal supports industries that were heavily affected by the increased tariffs, pressure on the economy remains. At around 1%, the Swiss economy is expected to grow below average in 2026 as well.¹

¹ These forecasts are not a reliable indicator of future developments.

In times of high uncertainty, investors look for safe havens. As the income from real estate are generated domestically and is therefore largely safe from (any further) trade policy disputes, the popularity of this asset class, which is already traditionally regarded as a "safe haven", is increasing further.

Aside from flight to safety, the increased demand for real estate investments since last year can be explained by the higher attractiveness of the risk premium compared to 2022 and 2023. Since the low point of just 15 basis points in the fourth quarter of 2022, the premium rose to 170 basis points by the second quarter of 2025. In addition to the decline in yields on Swiss government bonds, the correction in net initial yields on prime real estate between mid-2022 and early 2024 contributed to this. Since then, real estate yields have largely stabilized with occasional compressions since the second half of 2024.²

Following restrained momentum in 2022 and 2023, capital market transactions have thus increased noticeably in 2024 and once again exceeded the CHF 4 billion mark (Figure 1). A further increase is becoming apparent for 2025: by 13 October, around CHF 4.2 billion had already been raised by funds and real estate companies, and a further CHF 960 million has already been announced. Further, one successful initial offering took place, as well as one listing with two more announced for the rest of the year. On the investment foundation side, the additional capital raised in the year to date already amounts to CHF 1.9 billion with numerous oversubscriptions reported and another CHF 1.2 billion announced for 4Q25.

² Past performance is no guarantee of future developments.

At the same time, the premiums of listed funds are stable, respectively continue to trend upwards without showing pressure from the high number of emissions and listings. With approx. 37% by the end of October, the average agio of the SXI Real Estate Fund Index still remains below the peak of over 40% in Summer 2021, but is also well above the long-term average of about 20%: The agio between residential and commercial vehicles continue to show a substantial gap. While the gap reduced slightly in Q2, it slightly widened again with the announcement of higher tariffs at the beginning of August which are affecting commercial property more strongly. Agios of the residential funds on the other hance increased further with the backing of strong fundamental data and safe haven characteristics.

Demand for rental apartments in the Swiss housing market remains high. In the second half of 2024, the total Swiss population slipped over the 9 million mark. In 2025, net immigration has declined significantly compared to the high levels of previous years, but remains positive. From January to September 2025, net immigration amounted to just under 50,000 people, which is about 17% below the previous year’s level. On the supply side, planning activity has picked up again somewhat since the low point in 2023. This is certainly partly because construction prices are proving to be reasonably stable. Compared to the second half of 2024, construction prices rose by 0.6% in the first half of 2025. Although this is still 16.4% higher overall than in 2020, the pace of inflation has slowed significantly since 2023. The increase in planning applications that we observed again since mid-2022 is reflected with some delay through the rise in building permits, where the annual total rose again to just under 40,500 in the third quarter of 2025 (Figure 2). Despite the somewhat faster pace in planning, it will still take some time before building permits are reflected in supply, as is evident when looking at completed units. In addition, the number of building applications, after rising between mid-2022 and mid-2024, has dropped sharply again this year.

There are some initial signs of easing in the rental housing market. However, it remains unclear whether the significant decline in building applications already marks a trend reversal or merely a temporary dip.

Even if the impact of higher tariffs on growth should be limited, an economic slowdown tends to affect commercial space the most. Industrial and logistics spaces are likely to be the most affected by trade policy tensions. This is due to the high level of uncertainty, but also to the falling sales of export companies. Nevertheless, the situation on the rental market is better than might be expected under the circumstances and the low economic momentum.

The tailwind of strong employment growth, which has supported the office space market over the past two years, has dried up to some extent. Employment growth has declined over the last few quarters and was negative in the first quarter of 2025 not only in industry (where it was already negative in the previous quarter), but also in the service sector (Figure 7). In 2Q25, employment was positive again, but momentum remains low. With a decline in employment growth to below 20,000 full-time equivalents in the past 12 months, the need for additional office space due to employment has reduced significantly. Despite these challenges, the Swiss office space market remains robust. "Return-to-office" mandates have positively impacted the market, mitigating the decline in space requirements due to remote work.

Although take-up is currently lower than the long-term average, net absorption remains positive, and the vacancy rate has stabilized. Across Switzerland, the vacancy rate has decreased from a peak of 6.4% in the third quarter of 2023 to 6.1% in the second quarter of 2025. Office rents are also on an upward trend, with JLL prime rents rising by 6.9% in the third quarter of 2025 compared to the previous year. Average rents have increased for the fifth consecutive quarter, up 2.6% year on year in the third quarter of 2025.

The retail space market faces ongoing structural challenges through online competition as well as a difficult economic environment. Consumer sentiment has improved since the end of 2022 but remains volatile and below the long-term average. In the first quarter of 2025, they increased by 1% compared to the previous year, in the second quarter they declined by 0.5%, and in the third quarter growth was also modest at 0.3%. Asking rents have increased significantly since the low point in 2022, but they remain well below the levels of 10 years ago. The logistics and industrial space market is the one most affected by trade policy disruptions due the stronger export orientation. However, as many facilities are owned by the occupying companies, significant market movements are not expected in the short term. Despite the headwinds, positive structural factors support the logistics segment, which continues to show low supply ratios and rising prime rents.

The Swiss hotel industry remains very strong in 2025, despite economic challenges. With 34.4 million overnight stays between January and September 2025, the industry is on track for a record year The main driver continues to be the increase in urban centers, which is also supported in 2025 by major events such as the ESC (Eurovision Song Contest) in Basel and the Women’s European Football Championships. This means that major centers are still ahead of tourist centers. In addition to the big events, this was also supported by the continuing strong demand from American guests. They were not deterred by the strong nominal appreciation of the Swiss franc against the US dollar and once again recorded 8% more overnight stays in the first half of 2025 than in the same period of the previous year.

After a slight decline in value of 1.7% in 2023, Swiss real estate again posted positive performance of +1.1% in 2024. This was driven particularly by residential real estate, where values increased by 1.8%.

Office properties also recovered slightly last year following the decline in 2023, recording an increase in value of +0.2%. A similar trend is expected for the current year. Retail space was a positive surprise last year, with a 0.6% increase in value. Here we expect an increase in value of 0.8% for 2025. The fact that the increase in value here is more pronounced than in the office segment can be attributed to the consolidation that has already taken place and the comparatively low increase in value in the years before the pandemic and the turnaround in interest rates. In addition, international demand for high-quality retail space is rising noticeably again, while office space remains difficult to place on the transaction market. An average increase in value of 2.5% is expected for residential properties in 2025 due to continued high demand.⁴ 

A slightly more subdued development is expected for 2026. In the residential sector, the reduction in reference interest rates, increasing regulatory pressure and lower net migration could have an impact. In the commercial segment, the low economic momentum is likely to be felt as well as the rise in interest rates that is anticipated for the end of 2026 due to increasing inflationary pressure stemming from heightened infrastructure and defense spending in Europe.

⁴ Past performance and forecasts are not a reliable indicator of future development/performance.

Demand for Swiss real estate remains high, especially due to its status as a safe haven in a challenging macroeconomic environment.

Dr. Kerstin Hansen
Research & Strategy Real Estate DACH