The Swiss office real estate market has demonstrated resilience, according to a study published Thursday by Raiffeisen Schweiz, with structural factors offsetting pandemic-era disruptions. "Sustained employment growth in sectors with high office-based activity, limited new construction and tightening corporate homeoffice policies are supporting market stability," said Fredy Hasenmaile, chief economist at Raiffeisen Schweiz.
Despite concerns over a sharp correction, advertised office space has declined by about 25% compared with pre-pandemic levels, while vacancy rates in institutional portfolios stand at 7.5%, below the 2019 end-year level. Structural changes persist, with nearly 40% of Swiss workers operating partially from home, though many companies are encouraging a return to offices, constraining potential space reductions. Office employment continues to grow, while new office construction remains minimal.
The study identifies artificial intelligence as a potential disruptive force. Roughly two-thirds of office workers are employed in roles with high to very high AI exposure, though no broad-based reduction in office jobs has been observed. Early trends indicate weaker performance in AI-exposed professions, while roles requiring high human-machine complementarity are expanding. Raiffeisen modeled five scenarios for office space demand by 2031, ranging from a 14% increase under dominant productivity and employment effects to a 22% decline in a severe automation shock. Moderate scenarios, such as "AI as a tool," project a modest 1.6% decline in demand.
Office space is not expected to become obsolete, but the market is becoming more selective. Future demand will hinge on location, quality, flexibility and alternative-use potential. New construction should be approached cautiously, while existing assets will benefit from flexible usage concepts and conversion options. "The quality of individual properties will become decisive," the study notes, adding that office real estate remains an attractive investment but no longer as a blanket asset class.
The report also examines Switzerland’s residential property market, where homeownership offers a significant cost advantage over renting despite high prices. Depending on financing models and region, housing costs can be up to 25% lower than rental expenses. Signs of cooling dynamics are emerging, with slower demand growth, extended marketing periods and a slight decline in financed transactions. While tight supply may continue to support prices, indicators suggest the strongest phase of home price appreciation has passed.
Buy-to-let investments face growing challenges. Past gains were driven by rising prices and low interest rates, but risks such as vacancies, rental defaults and management costs have increased. Purchase prices for residential properties have outpaced rental yields, pressuring initial returns. "New buy-to-let investments are now more sensitive to interest rate movements and price trends," Hasenmaile said. "Achieving long-term returns comparable to equities or indirect real estate investments would require sustained and substantial value appreciation, which is not guaranteed given the expected slowdown in price momentum."
