�۶���Ƶ

Despite the turbulent waters worldwide, the Swiss economy proved remarkably resilient in 2024, growing by 0.9% after adjustment for sporting events. Weak foreign trade was offset by above-average growth in private consumption and thus strong domestic demand. In contrast, after a period of high employment, the labor market cooled in the course of 2024. Following strong employment growth in 2023, growth flattened out in 2024 with an increase of 40,800 full-time equivalents (FTEs) and remained below the average of the last 10 years. The unemployment rate also rose from 2.5% in January 2024 to 2.9% in January 2025.

After sentiment brightened slightly at the beginning of the year, the high tariffs announced by the US government on 2 April and the subsequent rollercoaster ride of announcements quickly dampened the mood of the markets. The new US tariffs are likely to have only a limited direct impact on the Swiss economy in the short term, especially if pharmaceutical products, which account for the majority of exports to the US, are excluded from the tariffs. The uncertainty that is deterring companies from investing is likely to weigh more heavily than the tariffs directly. The global economy, and growth in the Eurozone in particular, is likely to be weaker and therefore also dampen growth in Switzerland. Compared to the forecast of 1.5% growth at the beginning of the year, adjusted for sporting events, we now expect growth of just 1.0% for 2025.

Inflation averaged 1.1% in 2024 and around 0.4% in the first quarter of 2025. In April, it fell to 0%. With reference to further downside risks for inflation, the Swiss National Bank (SNB) lowered the prime rate once again on 20 March 2025 by 25 basis points to 0.25%. In the base scenario, the prime rate was previously expected to remain at this level. The chances of further interest rate cuts by the SNB have increased significantly due to the tariff announcements. If the European economy deteriorates significantly, the European Central Bank could also cut its prime rate more than previously expected, which could lead to further appreciation of the Swiss franc. This in turn would significantly increase the risk of the inflation rate in Switzerland turning negative and thus justify further monetary easing by the SNB in the form of interest rate cuts.

After the attractiveness of Swiss real estate investments declined significantly in 2022 and 2023 due to the rapid rise in interest rates, the signs improved considerably again in 2024. The renewed rise in the risk premium on real estate investments made a significant contribution to this. After reaching a low of 15 basis points in the fourth quarter of 2022, this rose again to 180 basis points in the fourth quarter of 2024. The recovery consists of two factors: first, net initial yields on real estate rose by around 60 basis points on average between mid-2022 and early 2024. Second, the decline in the yield on Swiss Confederation bonds, from 1.65% at the end of December 2022 to 0.32% at the end of 2024, benefited the risk premium on real estate. After yields on Swiss Confederation bonds rose again significantly at the beginning of 2025, the announcement of tariffs led to a renewed decline, with the result that the risk premium is currently around 175 basis points.

A comparison of last year’s capital market transactions with those of the two previous years clearly shows the attractiveness. Following the low momentum in 2022 and 2023, volumes rose significantly in 2024 and exceeded the CHF 4 billion mark again. There are also no signs of a trend reversal in 2025 to date – on the contrary, capital market transactions are heading toward a new record high.

The picture on the Swiss rental housing market remains characterized by growth in demand that is outstripping the increase in supply. Although net immigration in 2024 was slightly down on the record year of 2023, at 83,400 it was the third-highest figure in the past 25 years, after 2008 and 2023. This means that Switzerland’s permanent population has grown by around 375,000 people in the past five years. At 20,800, net immigration in the first three months of the year also remained roughly at the previous year's level.

Despite the strong increase in demand, construction activity remains subdued, even if a slight improvement was observed in 2024. In addition to the interest rate cuts and the resulting improvement in the financing situation, a certain easing of construction prices is having a supporting effect. Following the significant increase between 2020 and 2022 due to supply chain problems and higher energy prices, a sideways movement has been observed here again since the beginning of 2023. This is likely to have fueled the visible upward trend in planning applications, i.e. applications for building permits, since the beginning of 2023. From a low point of 44,000 building applications at the end of 2022, the annual total has risen to 49,000 in the first quarter of 2025, according to preliminary figures. The number of permits has also risen again compared to the low point in 2023, but remains low compared to the long-term average. The fact that the gap between the number of planning applications and building permits is widening is probably a further indication of the increasing duration and complexity of the approval processes. This means that construction activity and thus the completion of additional living space is likely to remain subdued for a while yet.

The result of the high demand with little expansion in supply remains a persistently strong price dynamic. According to figures from Wüest Partner, the average asking rent in Switzerland rose by 4.7% in 2024, which is a record figure for the past 25 years. This was also boosted by the two reference interest rate increases in 2023, which were reflected in existing rents in 2024. In 2024, the reference interest rate, and thus existing rents, remained constant. Due to the high proportion of fixed-rate mortgages, the decline in mortgage interest rates only had a delayed impact over the course of 2024. However, the reference interest rate published on 3 March 2025 has fallen again from 1.75% to 1.5%. This means that rents, which were at the reference interest rate of 1.75%, are likely to fall again in summer 2025. In contrast, asking rents continued to rise in the first quarter, even if the year-on-year increase of +2.3% is slightly weaker than in 2024.

The economic slowdown has dampened employment growth in the Swiss labor market somewhat, but with an increase of around 40,800 full-time equivalents in 2024, momentum remains positive, resulting in further growth in demand for office space. In addition, the uncertainty caused by the establishment of the home office trend due to the pandemic is diminishing somewhat. According to JLL, 27% of Swiss companies currently anticipate a reduction in their space requirements over the next two years. In the medium to long term, however, employment growth and the increasing digitalization and tertiarization of the economy are likely to counteract this trend. Moreover, according to the Wüest Partner Office Space Barometer, no further increase in hours spent working from home is expected. On the contrary, an increasing number of “return-to-office mandates” from large companies have recently been seen internationally. However, the increased demands in terms of quality and location are likely to remain. This results in a degree of polarization in favor of very well-located, central, high-quality properties. Flexible concepts also remain in demand. Sustainability is playing an increasingly important role when renting, especially for larger companies. This can be seen on the one hand in the different trend in supply ratios in the centers compared to the agglomerations, but also in the different trend in average asking rents and prime rents.

Retail space faces similar challenges to office space. Online shopping represents a major structural challenge for brick-and-mortar retailers, but depressed consumer sentiment is also a headwind for the retail sector. However, since consumer sentiment has risen somewhat from very low levels and real wages have also received a boost thanks to easing inflationary pressure, retail sales have also recovered somewhat over the past year. After sales declined in 2022 and 2023, an increase of 1.4% was observed in real terms in 2024. As a result, rents for retail space are now also recovering. As the food segment in particular performed positively, grocery-anchored properties benefited disproportionately.

The logistics segment has been on the upswing globally for years and is also attracting increasing attention in Switzerland. However, due to the high proportion of owner occupation, this is still a niche market. Demand for space is nevertheless likely to continue to grow in the future. While the retail space segment has faced headwinds due to the growth of online retail, the trend means a sustained tailwind for the logistics segment. In addition to the continued growth in online trade, increasing protectionism is likely to support the domestic industrial and logistics segment. With the review of national security interests, more manufacturing is being brought back to the local level. Companies are also increasingly switching from just-in-time to just-in-case in order to increase the resilience of their supply chains.

The Swiss hotel industry escaped the gloomy consumer sentiment in Switzerland and abroad and recorded another record year in terms of overnight stays with 42.6 million in 2024 despite the strong Swiss franc. In the first three months of 2025, the previous year’s result was again narrowly exceeded. The ongoing recovery since the onset of the pandemic is broadly based. Contrary to many fears, the hotel industry in major centers is developing very positively and is recording new highs. Further growth in overnight stays is forecast for 2025. The city hotel industry in particular should continue to benefit from major events such as the Eurovision Song Contest in Basel and the European Women’s Football Championships. At the same time, the high level of geopolitical uncertainty and its potential impact on the global economy as well as exchange rate developments are leading to increasing risks for the Swiss hotel industry.

Globally, the real estate markets suffered significant value corrections during the cycle of interest rate hikes. In Switzerland, the corrections in 2023 remained relatively moderate. In 2024, positive performance was seen again across the market as a whole, supported in particular by the housing market, which has a high weighting in the Swiss index and again recorded a clearly positive capital return of 1.8%, while offices rose only slightly by 0.2% and retail space by 0.6%.

The interest rate cuts that have taken place have significantly increased demand for real estate again. As a result, we expect an increase in value of around 1.6% in 2025 as well, due to the continued positive rental growth prospects in the residential segment. In the commercial segment, we continue to see somewhat more subdued performance, particularly in view of the threat of an economic slowdown.