Switzerland's real estate market: Direct real estate investments

Residential real estate market

Strong demand continues to characterise the Swiss rental flat market. Although net migration in 2024 was lower than in the previous year (99 000) at around 84 000 people, according to the State Secretariat for Migration (SEM), it was still well above the five-year average. At the same time, residential construction output fell short of demand at under 50 000 new units. If demolitions and renovations are included, supply will not be able to keep pace with demand despite a slight increase in building applications and permits.

This lack of supply is reflected in falling supply ratios and the fact that both inflation and the reference interest rate have largely been passed on to rents. According to real estate service provider IAZI, residential rents rose by a median of 4.5% in 2024 - the highest increase in two decades. Rents are also expected to remain stable in 2025, even though the reference interest rate was lowered from 1.75% to 1.5% on 3 March 2025. The resulting entitlement to a rent reduction of 2.91% can be partially offset by inflation and increased costs. This mixture of falling interest rates and constant income is already reflected in the annual financial statements. There are hardly any value adjustments to be observed. The stable development of discount rates and the prospect of falling Vacancies and rising rents are also having a positive effect.

Commercial real estate 

The first effects of the new interest rate environment are also becoming apparent in the commercial space sector. The market is experiencing an increase in transactions, supported by continued solid, albeit slightly declining, employment growth of 1% in the fourth quarter of 2024. The increasing return of many employees to the Office is another positive signal for the office market.

The merger of UBS and Credit Suisse has so far only had a limited impact on the supply of space, as current rental agreements are in place and space has been allocated elsewhere. According to CBRE, the structural change in the financial sector in the Zurich area is increasingly being absorbed by demand from the information and communication technology sector. In Geneva, a decline in supply ratios can also be observed - a positive trend after banks such as Pictet, Rothschild and Lombard Odier had previously adjusted their space. The annual reports of listed real estate companies confirm the trend: higher rental income and constant Vacancy rates. However, letting older properties in peripheral locations remains a challenge.

Retail space market

Structural change continues to shape the retail real estate market. According to the Swiss Retail Association, online retail reached a record volume of CHF 18 billion in 2024, which corresponds to a share of around 17% of total retail sales. Around 30% of this was attributable to providers abroad. A study by HSG St. Gallen also shows that Chinese platforms such as Temu, Shein and AliExpress are becoming increasingly popular in Switzerland and are now among the ten most used.

The retail space market on Zurich's Bahnhofstrasse is a special case. According to JLL, with prime rents of CHF 10 250 per square metre per year and a vacancy rate of 0%, this is an outstanding position in Europe – surpassed only by Paris and London.