Swiss Real Estate Market: Between Sustained Strength and Slowing Momentum

Direct real estate investments

Real estate prices continued to rise in 2026. According to Wüest Partner, investment properties with rental apartments increased by 6.9% year-on-year on a quality-adjusted basis in the third quarter of 2025. Commercial properties with office and retail spaces also rose significantly, by 4.1%. Investors’ strong willingness to pay reflects broad-based confidence in the market. However, Swiss Finance & Property Ltd expects price momentum to flatten in 2026.

Rental apartments remain scarce

Rental apartments remain in short supply. The vacancy rate has been declining since 2020 (June 2025: 1.0%), while asking and market rents continue to rise. Net immigration to Switzerland picked up slightly in October but, at around 62 200, remains below the levels of 2024 (72 000) and 2023 (83 000). Between the third quarter of 2024 and the third quarter of 2025, market rents increased by 3.6%.

Regional differences are significant. While slight declines were recorded in the Jura and Alpine regions, rents in the Zurich region rose by 6.2%. Fahrländer Partner (FPRE) expects market rents to continue increasing in 2026, particularly in central locations and well-connected agglomerations. The ongoing housing shortage is likely to intensify political pressure. Several housing regulations are being planned, not only in major urban centers. The issue is expected to shape political debate and administrative processes for some time.

In the first three quarters of 2025, direct yields on multi-family houses declined because purchase prices rose significantly. Higher rental income was unable to offset this effect. Discount rates have returned to very low levels. According to recent real estate surveys, sentiment remains highly optimistic: 70% of respondents in a Fahrländer Partner survey expect rising or even strongly rising market values for multi-family houses over the next twelve months.

Prime locations remain attractive in the office market

The commercial real estate market is more heterogeneous in nature. The office market continues to reflect a mixed environment. While demand for office space in agglomerations has declined, many core cities still show strong demand and very low vacancy rates. Asking rents have been under pressure nationwide for some time. Over recent years, market rents have shown a slightly positive trend overall (+11.8%), although they have moved sideways over the past two years (-0.6%).

FPRE expects overall stable market conditions in 2026, despite pressure on peripheral locations and older office buildings.

Low interest rates continue to support market values, although income-side impulses are likely to remain limited. Location and property quality remain the decisive success factors in the office segment. For pure office properties, the provisional total return for 2025 stands at 5.2%, with a cash flow yield of 3.5% as the main component. In the long term, demand is concentrating on prime locations, while B- and C-locations are facing conversion pressure toward residential use. FPRE expects broadly stable income trends and slightly rising market values for office properties.

Retail market remains stable

The Swiss retail real estate market remains stable at the end of 2025, albeit under challenging conditions. Cyclically, retail is affected by weaker consumer sentiment and the strong Swiss franc, which encourages cross-border shopping. Despite modest nationwide growth, supply remains tight and prices stable. This is less a reflection of strong demand and more the result of limited new construction and selective conversions from retail to office space.

Stable market conditions are also expected in this commercial segment for 2026. Population growth structurally supports the food retail sector, while non-food and other segments remain more challenging.

Overall, the Swiss real estate market remains robust, supported by scarcity, low interest rates, and sustained investor interest. However, after years of strong price increases, momentum is likely to gradually moderate.

Indirect real estate investments

Indirect real estate investments delivered strong performance in 2025, ranging from 5% for real estate investment foundations to as much as 23.3% for real estate companies. This is despite stable interest rates and record-high capital increases.

Real estate funds posted their best quarterly result of the year at 5.1%, surpassed by listed real estate companies at +7.8%. This performance was driven by very strong demand for indirect real estate investments. In total, investment vehicles raised CHF 9 billion in new equity capital – 80% above the average of the past five years. Investment foundations and pension fund vehicles were particularly active, with more than half of capital increases carried out directly by such vehicles. Many of these issues were significantly oversubscribed. Even before the end of 2025, capital increases of over CHF 1 billion have already been announced for 2026.

The raised capital is being deployed into the direct market. Since for every Swiss franc of equity, an average of around 15% debt financing is added, more than CHF 10 billion likely flowed into the direct market in 2025 through construction projects and transactions. The clear preference is for residential real estate. Capital in the pension fund segment flowed into vehicles that are above-average exposed to residential space (around 65%). This has inevitably led to further price increases in the transaction market, reflected in gains of +6.9% for residential space and +4.1% for commercial space.

Performance in global markets

Despite two further rate cuts, US markets developed only moderately positively in the fourth quarter. For the full year, performance reached a solid 17.3%, which translated into only just under 2% for Swiss franc investors due to currency movements.

Global bond markets (Bloomberg Global Aggregate Bond Index) ended the year up 7.2% in USD. Unhedged in Swiss francs, this resulted in a loss, as the US dollar depreciated by 12.7% against the Swiss franc.

Performance of Swiss equities and bonds

Following the agreement with the US achieved by the Swiss delegation at the White House, the Swiss equity market (SMI Index, +9.6%) recovered significantly in the fourth quarter. For the full year, performance reached a strong 18.0%. The Swiss Bond Index AAA-BBB declined by 0.9% in the fourth quarter and stands at -0.1% year to date.

Dynamics of the Swiss real estate sector

The various real estate segments developed positively:

• Listed Swiss real estate funds (SWIIT Index) recorded a year-to-date performance of 10.6%.
• Listed real estate companies (REAL Index) rose by 23.3%.
• Real estate investment foundations (KGAST Immo Index), which are valued at net asset value, achieved a return of 5%.

Outlook

Thanks to persistently strong demand, the outlook for indirect real estate investments remains positive. As early as 2025, many market participants were expecting a rapid return to negative interest rates. Swiss Finance & Property Ltd does not share this view. While such a scenario cannot be completely ruled out, key interest rates are likely to remain close to zero for the foreseeable future. Given the high premiums, numerous capital increases are still to be expected, which could limit the potential for further price increases.