Switzerland real estate outlook – Edition June 2026

When uncertainty becomes the constant

The year 2025 was marked by a high degree of economic policy uncertainty. In particular, US import tariffs placed a noticeable burden on export‑oriented economies such as Switzerland. Yet, the Swiss economy still managed to grow by 1.4% in 2025 (adjusted for calendar effects and major sporting events). With the start of 2026, geopolitical risks have once again come to the forefront. The conflict in the Middle East has driven commodity markets into extreme volatility and fueled concerns about stagflation. Europe is feeling inflationary pressure acutely, which is dampening and further postponing the expected economic recovery.

Switzerland, by contrast, remains resilient in international comparison: a lower energy share in the consumer basket, regulated electricity prices, and a strong Swiss franc all appear to be providing stabilizing effects. The latter has also contributed to Switzerland’s currently very low inflation rate, which averaged 0.2% in 2025. Inflation in 2026 is likely to come in higher than previously expected, but still within the Swiss National Bank’s (SNB) target range of 0% to 2%, with current projections at 0.6%. The SNB’s policy rate is therefore expected to remain unchanged in 2026.

Nevertheless, the longer the conflict persists, the Swiss economy, too, will increasingly feel the strain. While the strong franc helps to dampen inflation, its safe‑haven status reinforces appreciation pressures and places an additional burden on the export sector. As an open, export-oriented economy, Switzerland is also not immune to an economic downturn abroad. At 0.7%, economic growth (adjusted for sport events) in 2026 is therefore not only expected to be substantially lower than last year but also lower than projected at the beginning of this year.

Listed market rebounds in April

Swiss real estate enjoyed exceptionally high popularity over the past year, reflected in a record year for capital market transactions, which totaled around CHF 7.5 billion, according to the data registered by alphaprop. Approximately CHF 3.7 billion of this volume was attributable to listed real estate funds. Despite the high volume of new capital raisings, the premiums of listed funds continued to rise over the course of 2025, increasing from an average of around 31% at the beginning of January to approximately 36% by the end of December.

After the strong momentum continued in the first two months of 2026, the SWIIT corrected by 5.3% in March amid rising stagflation concerns and a broader correction in global financial markets. The average premium declined from 38.2% at the end of February to 30.2% at the end of March (see Fig. 1). Besides geopolitical tensions, one listing and a new launch amplified the correction. However, the correction in the real estate index was still smaller than that of the Swiss equity index SMI ( 8.8%), which likely reflects investors’ continued focus on the domestic, stable, income generating characteristics of real estate. Since the beginning of April, the SWIIT Index has staged a strong rebound and even reached a new all time high of 615.91 points on 14 April 2026. While this was not fully sustained, the average premium at the end of April was back at 36.9%.

Figure 1: Premium of Swiss real estate funds (% vs. NAV)

Sources: UBS Asset Management Switzerland AG, Datastream, last annual and semi-annual reports of the companies. Data as of 30 April 2026.
Past / expected performance is not a guarantee for future results.

The defensive characteristics of real estate are becoming more evident in the current volatile environment. Due to the high share of rental income in total returns, volatility is lower than that of other asset classes, which appears to be driving demand for real estate, especially in these turbulent times. This is particularly true for the residential segment, which is fundamentally strong in Switzerland and largely unaffected by economic uncertainty arising from geopolitical or trade policy factors. We therefore expect demand for Swiss real estate, particularly in the residential sector, to remain high in 2026.

Switzerland’s residential market remains underpinned by structural and demographic trends. Although net immigration in 2025 was below the record levels of previous years, it still remains above the long‑term average and provides lasting support to demand. Beyond immigration, long‑term structural trends are also shaping housing demand in Switzerland. These include the increasing individualization of households, which is being reinforced by an aging population. Urbanization likewise plays a central role, with demand growing disproportionately in cities and their agglomerations, where supply – and the ability to expand it – is limited.

Given that labor market dynamics are currently subdued, immigration is likely to decline slightly in 2026. At the same time, the conflict in the Middle East and higher economic sensitivity within the eurozone are increasing Switzerland’s relative attractiveness. Net migration between January and March 2026 amounted to 18,800 and is thus very close to the first-quarter average (on an annualized basis) of the last ten years. Besides migration, structural trends are expected to continue to influence housing demand. Chief among them is demographic aging, which will significantly increase the need for senior‑friendly housing over the coming decade.

Slight improvement in planning activity

On the supply side, planning activity has picked up somewhat. In 1Q26, the yearly sum of building permits reached almost 41,000 units again. However, it takes time for these permits to translate into actual market supply. This is evident when looking simultaneously at completions (see Fig. 2): while building permits rose by around 10% in 2024 compared with the previous year, completions still declined by roughly 13% over the same period. After building applications – an even earlier indicator of future supply trends – fell by about 9% in 2025 compared with the previous year, they are now showing clear signs of stabilizing or improving again.

The sharp increase in construction and financing costs between 2021 and 2023 has had a lasting dampening effect on planning activity. Against this backdrop, the current conflict in the Middle East has raised concerns that further cost increases could occur, potentially leading to renewed caution regarding new projects. In addition, political uncertainties continue to weigh on supply development. Discussions around housing‑policy initiatives, such as the ‘Wohnschutzinitiative’ in the city of Zurich, as well as generally lengthy approval procedures, continue to delay construction projects. In the short term, a strong acceleration of supply dynamics therefore appears unlikely. As a result, supply scarcity is expected to continue shaping the housing market over the coming quarters.

Figure 2: Construction and planning activity on the Swiss residential real estate market (total over 12 months, number of residential units)

Rental growth moderates

In 2025, asking rents continued to rise, albeit at a more moderate pace than in the previous year. Last year, rental growth amounted to 1.8% (2024: 4.7%). The increase in rents was evident in almost all regions of Switzerland. The only exception was Southern Switzerland, where asking rents declined by around 1.5%. In Eastern Switzerland and Central Switzerland, by contrast, rental growth was above average at 2.7% and 2.5%, respectively.

The mortgage reference rate, which partly determines in-contract rents in Switzerland, currently stands at 1.25%, following two reductions in March and September 2025, which have led to some downward pressure on in-contract rents. By the end of 2025, the underlying average mortgage rate reached 1.32%, leaving it just 6 basis points below the threshold for a renewed increase in the reference rate to 1.5%. With long‑term interest rates having risen, the likelihood of another uptick in the mortgage reference rate has increased.

Structural and cyclical challenges

Over the past decade, commercial rental markets worldwide have faced numerous challenges. Structural shifts, such as the increasing prevalence of mobile and remote working, have been dampening demand for office space, while the growth of e‑commerce continues to put pressure on retail space. At the same time, the logistics sector has benefited significantly from this development. Adding to this has been the overall subdued economic momentum that has persisted since the COVID‑19 pandemic. In both international and historical comparisons, Switzerland’s commercial real estate markets nonetheless remain resilient. Population growth not only supports the residential market but also positively impacts employment and consumption, which in turn provides tailwinds for commercial real estate in Switzerland.

Figure 3: Swiss permanent population (total, lhs; year-on-year growth; %, rhs)

Office: Improvement despite weaker labor market

The tailwind from strong employment growth that supported the office market over the past two years has somewhat faded. Yet, the space weighted average vacancy rate has declined further, standing at 5.2% in 1Q26 compared with 5.6% in 1Q25. After several years of declining asking rents, 2025 saw an increase of around 2.3%, according to Wüest Partner. In 1Q26, the upward trend continued as rents rose by 0.9% year-on-year. Prime rents also recorded a clear upward trend in most markets, underscoring the continued demand for modern, well located office space. Exceptions to the growth in prime rents last year were Basel and Lausanne - both locations that had previously been characterized by rising vacancy rates amid high construction activity. Overall, however, construction activity in the office segment is declining across Switzerland, and the development pipeline for the coming years remains low.

Nevertheless, the market is not free of risks. Availability rates suggest that further home office related space consolidations may occur in certain markets – developments that are not yet fully reflected in vacancy figures. On the other hand, announced return to office policies could counteract this trend. Beyond remote work, rising AI adoption may also pose a longer term risk to office demand by accelerating efficiency gains and reducing headcount and space needs.

Retail: Subdued sentiment but rising rents

The retail space market is also developing positively despite a challenging environment. Consumer sentiment remains below average and volatile, with job security in particular perceived as low. Nevertheless, retail sales overall have developed positively, supported by population growth, rising real wages and a strong tourism sector. After several years of declining rents, asking rents in the retail market rose again in 2025 by around 2.9% and by 0.7% in 1Q26. Although rent levels remain below those of 10 years ago, this development sends a positive signal. Prime rents in absolute top locations increased by around 3.7% in 2025, marking the fifth consecutive year of growth.

Logistics: Especially modern supply remains scarce

The logistics market continues to benefit from structural drivers such as the expansion of e commerce and efforts to strengthen supply chain resilience. In Switzerland, however, the market remains relatively small and is heavily dominated by owner occupied space. In 2025, the availability rate stood at around 2.1%, below the previous year’s level of 2.5%, despite the difficult environment facing the export industry, which is closely linked to the logistics sector. The structural tailwinds for the logistics segment remain intact. In the short term, however, headwinds are also expected in view of the global economic outlook, US import tariffs and the strong Swiss franc.

Hotels: Another exceptional year in 2025

Swiss hotels performed extremely well in 2025. According to the Federal Statistical Office, a new record year was logged with 43.9 million overnight stays, representing an increase of 2.6% compared with the previous year. Growth continued to be driven primarily by foreign guests, whose overnight stays rose by 3.7%. Domestic guests, however, also reached a new high, with 21.1 million overnight stays, up 1.4%. The first two months of the year also showed growth, with year-on-year increases of 2.6% in January and 2.9% in February. However, another rise in overnight stays in 2026 is increasingly questionable given the globally weakened economic outlook, a potentially rising savings rate amid inflation concerns, a strong Swiss franc, and increasing jet fuel prices.

Capital growth expected weaker, but positive

The Swiss real estate market experienced very strong demand in 2025, supported by the perceived safe‑haven character of Swiss property and the return to a low‑interest‑rate environment. In our baseline scenario, we expect these conditions to remain broadly unchanged in 2026, and also demand for Swiss real estate investments to stay at a high level. Capital-raising activity remains strong, evidenced by announced and completed issuances as well as new listings in the first quarter of 2026. Supply in the direct transaction market remains measured, with pricing momentum correspondingly elevated – especially in the residential segment.

Despite higher long‑term interest rates due to geopolitical tensions and higher inflation expectations, we still expect positive capital growth in 2026, albeit somewhat weaker than in the previous year. Fundamentals in the residential segment remain particularly robust.

After an appreciation of 3.2% in 2025, we anticipate growth of around 2.1% for 2026. In the commercial sector, capital growth is likely to stay lower. Following increases of 0.7% for offices and 1.6% for retail properties in 2025, we expect capital growth of roughly 0.2% and 0.6%, respectively, in 2026.

While residential assets are expected to deliver higher capital growth than commercial properties, the latter remain attractive, especially when supported by active asset management. In addition to offering higher running income yields, commercial properties continue to provide compelling acquisition opportunities at more attractive yields and risk premia. Given robust fundamentals, moderate valuations, increasing regulation in the residential sector and inflation‑linked long‑term leases, we believe commercial real estate continues to represent an appealing investment opportunity in the current environment.

Figure 4: Income return, capital growth, and total return on Swiss real estate investments (by segment, in %)

Source: MSCI/Wüest Partner; Oxford Economics; UBS Asset Management; March 2026; latest data point: 2025.
Total return: standing investments (like‑for‑like). Past and expected performance is not a guarantee of future results.