The value of the Swiss real estate investment market is estimated at over CHF 2 200 billion, making it larger than the capitalisation of all companies listed on the Swiss stock exchange. How do global megatrends affect Switzerland’s largest asset class and how can investors position themselves to safeguard the value of their property portfolios long term?
The residential investment market, valued at approximately CHF 1 700, represents the most important market for Swiss investors. A key driver of its positive development in the past has been population and economic growth of around 1 per cent (number of people) and 2 per cent (GDP increase) respectively. Demand for office, retail and logistics spaces also benefited from this. Further factors included the low interest rate environment, which made real estate attractive to institutional investors. Current geopolitical tensions and economic challenges, coupled with the digitalisation trend – which has gained new momentum through artificial intelligence – will shape the market environment for real estate going forward. As real estate is generally a late-cycle asset class, it is important for investors to engage more closely with global trends. We will subsequently focus on the four D’s used by various market participants: Demographics, Deglobalisation, Digitalisation and Decarbonisation.
Demography
According to the reference scenario calculated by the Federal Statistical Office (FSO), Switzerland's resident population is expected to rise from 9.1 million (as at Q3 2025) to 10.5 million in 2055. From 2035 onwards, this growth will be due exclusively to migration, and the birth surplus will be negative. According to the FSO, population growth will therefore become even more dependent on the economic situation, which has been the main driver of immigration to date. In addition, the population is ageing significantly. According to the reference scenario, Switzerland will have a total of 2.7 million people (+0.9 million compared to 2024) aged 65 or over in 2055. Regionally, according to the reference scenario, the population will grow by more than 20% in the cantons of Lucerne, St. Gallen, Vaud, Geneva, Thurgau and Aargau. Zug and Zurich are also likely to continue to grow above average, meaning that the urban economic areas of Zurich/Zug and the Lake Geneva basin are likely to retain their attractiveness.
This structural growth market offers investors a wide range of opportunities. Due to the limited supply of land and high property prices in urban locations, rental formats are likely to remain the dominant asset class. In addition to classic rental formats, age-appropriate housing options with and without services will increasingly be in demand due to the changing age pyramid. The recent takeover of Senevita by the Tertianum Group shows a consolidation trend among operators of retirement homes and nursing beds. Increased life expectancy will continue to delay entry into care facilities, which will pose a challenge for operators. But the younger generation (also known as "Generation Rent") is also likely to be increasingly interested in formats such as co-living in central locations. This opens up opportunities for real estate investors to repurpose outdated office structures for residential use with an external operator.
Deglobalisation
Trade disputes and geopolitical tensions with rising defence budgets are putting existing economic and security policy dependencies to the test. This current environment poses a major challenge, particularly for Switzerland as a small, open economy. Direct investments by the Swiss pharmaceutical industry in large markets such as the USA and China exemplify that location competition is likely to become increasingly fierce in the future. Investment is being made not only in local production but also in research & development. It is advantageous for Swiss companies that they have been forced to become continuously more efficient due to the sustained strength of the Swiss franc and already have local sites in the most important global sales markets. What this implies for commercial property demand in Switzerland will only become apparent in the future. It is positive to note that Switzerland has long focused on the knowledge economy due to the aforementioned strength of the franc and the high price/wage environment. In addition to the successful financial/insurance and life science clusters, a successful tech cluster has also been established over the past 20 years. In principle, Switzerland should become more efficient through the use of artificial intelligence and defend its location advantage. Furthermore, Switzerland scores points with stable political conditions and energy storage facilities (i.e. hydroelectric power plants). Hence, the relative location advantage is likely to strengthen further in the coming years. This will benefit not only the housing market but also infrastructure facilities (data centres) or office and research spaces in the already established clusters in the centres.
Digitisation
With the launch of the first “Large Language Models” (LLMs) and their associated tools such as ChatGPT or Copilot, the digitisation trend has gained new momentum. Currently, the market for artificial intelligence (AI) is primarily shaped by the enormous sums being invested worldwide in new data centres. On the application side, the IT industry (e.g. coding) is currently likely to be the largest user of AI. Exciting AI application possibilities also arise for the financial industry (banks, insurers, asset managers etc.) and professional service providers (law firms, management consultants, auditing, real estate services, advertising/communications etc.). Industry is also likely to benefit from this in research and process automation. What does this mean for the property market? On the investment side, there is additional demand for data centres. For example, the US corporation Microsoft has announced that it intends to expand its four data centres near Zurich and Geneva with advanced AI infrastructure and invest a total of USD 400 million. However, the property component of these investments is likely to be less than 10 percent, which is why we classify the topic of "data centres" primarily as infrastructure and not as a property investment. This would also create opportunities for repurposing industrial areas that have good connections to data and energy lines. Unlike a classic industrial or service sector settlement, a data centre would only create a limited number of new jobs in that region, meaning the housing market is unlikely to benefit much from this. The impact of AI on end-user markets cannot yet be fully quantified. According to a recently published study by the KOF Institute at ETH Zurich, the introduction of AI is already leaving its mark on the Swiss labour market. The AI effect was observed in the aforementioned AI-exposed areas such as software development or programming, where a relative increase in unemployment was identified. Conversely, however, highly exposed industries are likely to become more efficient, leading to cheaper or new products (e.g. the development of innovative drugs) and thus contributing to overall economic growth. Overall, therefore, the demand for space could shift between different sectors. Digitisation in other areas, such as e-commerce, is already well advanced but, in our view, requires additional logistics space for last-mile delivery and large distribution centres driven by the urbanisation trend and competition from foreign online providers. For example, Swiss Post has announced that it will build an additional parcel centre in Frauenfeld by 2029.
Decarbonisation
Decarbonisation is an important value and cost factor for the real estate industry. To achieve the declared climate neutrality target for existing buildings, significant investments by investors and the public sector are necessary. Major investors have fundamentally incorporated their decarbonisation plans into their DCF valuations. However, the actual payments still need to be made in the future. Without these investments, the risk of being left with so-called “stranded assets” in the long term would increase. Achieving climate neutrality also requires action from the public sector to equip cities and municipalities with sustainable district heating or energy networks (e.g. “Cool City” the city of Zurich). Investors are therefore well advised to align their long-term investment projects with the infrastructure plans of the public sector. In addition to reducing operational carbon, so-called embodied carbon in modernisation and repurposing projects is playing an increasingly important role. Several large Swiss investors have signed a charter to reduce the use of non-renewable primary raw materials to 50 percent of the total mass. Furthermore, physical climate risks must also be taken into greater consideration when planning investments. Rising insurance premiums or even the exclusion of insurance coverage due to climate change could also influence the value and prices of building stock in the future.