Global property markets: Why it pays to look abroad
The Swiss property market is becoming increasingly challenging for pension funds. Attractive investment opportunities are in short supply, while investors have substantial amounts of capital to deploy. This is prompting many pension funds to consider broadening their focus to international property markets. This opens up a much wider range of opportunities, including market segments that are only available to a limited extent in Switzerland.
International property markets differ from the Swiss market in several respects. They are more exposed to shifts in the economic cycle, interest rates and geopolitical developments. Since 2022, higher financing costs and economic uncertainty have led to lower valuations in many countries. This period of correction now appears to be largely over and valuations have been stable for several quarters.
While substantial capital continues to compete for limited supply in Switzerland, many international property markets are experiencing a shortage of investment capital. This presents attractive entry opportunities for Swiss pension funds. High-quality properties in prime locations are currently more readily available than during periods of high market liquidity and strong investor demand.
Diversification strengthens the portfolio
The case for investing in international property should not be driven by current market conditions or short-term market movements. What matters is the contribution these investments can make to the long-term stability and diversification of the overall portfolio. International property markets are influenced by a different mix of economic and regional factors from those affecting the Swiss market. Their performance therefore often follows a different path from that of Swiss property, equities and bonds.
KGAST versus Swiss property investments (Global Real Estate Fund Index Core hedged in CHF; KGAST (Swiss real estate investment foundations)). Source: NCREIF, INREV, ANREV and KGAST, own chart, AFIAA Real Estate Investment AG, September 2026.
The Global Real Estate Fund Core Index provides a useful benchmark for international property investments. Since 2005, and after hedging currency exposure against the Swiss franc, the index has shown a correlation of 0.29 with Swiss property investments (KGAST), 0.20 with the Swiss Market Index (SMI) and 0.35 with the Swiss Bond Index (SBI). These relatively low correlations underline the diversification benefits of international property and make it a valuable addition to existing investment portfolios.
Over the full period under review, the index delivered an annual return of 3.5% in Swiss francs, compared with a higher return for the KGAST. However, there were several market phases in which international property investments delivered higher returns than Swiss property. As the markets follow different cycles, international property can also be expected to outperform Swiss investments at certain points in the future.
Access to long-term growth trends
International property investments provide access to sectors that are only available to a limited extent in the Swiss market, including logistics, alternative residential formats and data centres.
The strong investor focus on data centres is currently absorbing a significant share of available investment capital. By contrast, investment in traditional sectors such as offices, residential property, retail and logistics has been much more cautious. This could support rental growth in these sectors over the medium term and, in turn, improve the income generated by these properties.
What sets successful office properties apart today
The quality of property is a more important driver of investment performance in the office market than it was just a few years ago. New ways of working, digitalisation and growing demands for sustainability and energy efficiency are reshaping demand.
Today, there is particular demand for modern, flexible and energy-efficient office buildings in attractive locations. Older properties in less accessible locations, however, are facing increasing pressure. Careful selection of locations and properties, combined with active asset management, is therefore key to investment success.
For many years, AFIAA has pursued a strategy focused on prime locations in economically strong and growing metropolitan areas. This approach has continued to prove its value in a challenging market environment. New York is one example, where demand for high-quality office space has increased noticeably this year, benefiting the AFIAA portfolio as well.
Key takeaways
- International property investments can improve the risk-return profile of pension funds by offering low correlations with Swiss property, equities and bonds.
- A lack of investment capital in many international markets is creating attractive entry opportunities and making it easier to access high-quality properties.
- International property investments provide access to areas with strong long-term growth potential, such as data centres, logistics and alternative residential formats, which are only available to a limited extent in Switzerland.
- Investment performance increasingly depends on the quality of locations, careful property selection and active asset management, particularly in the office sector.
Are you interested in international real estate investments?
We offer Swiss pension funds both direct and indirect international real estate investments. For direct investments, choose the AFIAA Global investment group; for indirect investments, choose the AFIAA Diversified indirect investment group.
More about AFIAA Global More about AFIAA Diversified indirect
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.
