Swiss real estate: International markets as new opportunities for returns!

Swiss real estate: International markets as new opportunities for returns!

International real estate markets are increasingly offering attractive diversification opportunities for Swiss real estate portfolios. How on fuW highlighted, important criteria for this diversification are valuation, market depth, transparency and timing. In the current volatile market environment, real estate has delivered stable returns compared to many other forms of investment.

Despite falling interest rates, the Swiss real estate market is showing dynamic development. Institutional investors are close to reaching the maximum investment limit of 30% in real estate, while this already accounts for over 25% of a typical institutional portfolio. Nevertheless, foreign markets only offer low diversification potential of around 2.5 to 3% compared to their Swiss counterpart.

Market changes and opportunities

The potential for greater leeway is particularly evident in indirect investments, particularly in unlisted real estate investments abroad. The Swiss market is heavily focused on residential properties and has a low sector depth compared to the USA, where 40% of the market is made up of industrial and logistics sectors. Opportunities arise in international markets, particularly in warehouse space, medical practices and student housing.

JLL's Transparency Index highlights that Switzerland ranks 17th, behind countries such as the UK, France and the USA. While Swiss real estate funds show stable dividends, the premiums are often volatile. Valuations worldwide have fallen under tight monetary policy, with declines of up to 18% in the US and up to 23% in Europe.

Market analyzes and trends

As the Trade newspaper reports, the financing problem in the office segment remains acute. The market is signaling that the correction triggered by interest rate hikes and new ways of working since the pandemic is not yet complete. However, the situation in the retail space sector is somewhat better. Shopping malls, which were already under pressure from online retail before 2020, do not see any recovery in the short term.

In comparison, the losses in the residential and logistics segment are less substantial than in the office market. Overall, these analyzes give the impression that there are also opportunities behind the current challenges. Historically, market slumps are often followed by long bull phases. Participation in international vehicles in unlisted real estate investments could provide an opportunity to increase decorrelation with global equity markets and achieve geographical diversification and expansion of return sources.