New prospects on global real estate markets as trends reverse
With global real estate investments showing signs of recovery, now is an interesting time for Swiss pension funds to consider this asset class – especially given the looming investment crisis on the domestic market.
Following years of declining property valuations, there are mounting signs of a recovery in global real estate investments. The MSCI Global Quarterly Property Index has posted positive results since autumn 2024. Over the past twelve months, the index has delivered a return of 3.9%* across all sectors.
Recovery is underway – but progress varies
The logistics and residential sectors are currently performing particularly well, generating returns of 5.0%* and 5.1%* respectively over the past twelve months. Demand for logistics space has increased in Europe and Australia, driven by e-commerce, urbanisation and technological innovations. The residential sector, particularly in Europe and the USA, is another key driver of the recovery.
Progress in the office sector is more hesitant and uneven. Nevertheless, a trend reversal is evident, with the sector posting a return of 0.8%* in the first quarter of 2025. Transaction volumes are slowly rising from a low level. At the same time, rents are going up in several European markets. Modern office properties with attractive sustainability features are in particular demand.
More than just a workplace – the office reimagined
Increasingly, we are seeing reports that large international companies are bringing their employees back to the office. With modern offices evolving into a tool to help attract talent, they are now much more than just a workplace. Ideally, locations combine the working environment with leisure, sport and entertainment. Along with a decline in construction activity, office properties in good locations are once again turning into attractive investment opportunities.
These trends suggest that most global property sectors have reached or already passed a cyclical low, making it an interesting time for long-term investors, such as Swiss pension funds, to look into international real estate investments.
Domestic market holds limited prospects
The situation is quite different for Swiss real estate. Residential properties in regions with strong economies are in high demand, but the market is tight. Competition has increased further with the return of low interest rates, and large numbers of institutional investors are chasing the same high-yield properties.
2025 is shaping up to be a record year on the capital markets. The first half of the year has seen capital increases and new issues totalling around 3 billion Swiss francs. Driven by the SNB’s zero interest rate policy, the market is also expected to fully absorb the transactions announced for the second half of the year.
This is pushing up prices even more and making it difficult to invest in new properties offering an attractive risk/return profile. Pension funds looking to expand their real estate portfolio and make it fit for the future should therefore consider alternatives.
The case for global real estate investments
Investing in global real estate offers access to significantly larger and more liquid markets. This makes it easier to find suitable properties and strategically expand the real estate portfolio.
Another advantage is geographical diversification, as real estate markets follow different trends around the world. This allows pension funds to reduce cluster risks in their home market and build a more robust overall portfolio.
As a tangible asset, international real estate also offers some protection against inflation. In an environment dominated by geopolitical tension and economic uncertainty, it can boost stability across the overall investment portfolio.
Good time to look into international real estate investments
Valuations of international real estate investments adjusted in recent years, making this an interesting time for Swiss pension funds to look into this asset class. AFIAA offers a choice between direct (AFIAA Global investment group) and indirect international investments (AFIAA Diversified indirect investment group).
More about AFIAA Global More about AFIAA Diversified indirect
* Figures as at 3 July 2025 in US dollars. Source: MSCI Real Assets, MSCI Global Quarterly Property Index
The details provided in this article are for information purposes only and do not constitute an offer or a recommendation to buy or sell financial products. No liability is accepted for the completeness and accuracy of the information. Qualified advisers should be consulted before any investment decisions are taken. Past performance figures and information on market trends are no guarantee for current and future results. The investment value and return are affected by the market and valuation cycle fluctuations inherent in real estate investments as well as exchange rate movements.
