Swiss M&A trends in Real Estate

Global real estate M&A transactions hit a decade low in the first quarter of 2024, with deal values of $217bn, down sharply from a peak of $840bn in the fourth quarter of 2021. This decline was largely driven by interest rate hikes initiated in 2022 after years of near-zero rates. However, by the third quarter of 2024, deal values had recovered to $253bn, suggesting that the market may have bottomed out. Despite this upturn, deal volumes remained subdued, averaging 7,649 transactions per quarter – a 4% decline from 2023. 

Looking ahead to 2025, deal activity is expected to increase, driven by greater market certainty, a broadening of investable asset classes, and a shift towards alternative real estate investments. Investors are actively seeking creative financing solutions to achieve higher returns, adapting to evolving capital allocation strategies, and global capital flows. The move by central banks to lower interest rates has boosted market sentiment, with leading investment banks and asset managers forecasting double-digit growth in deal activity over the coming year. 

Traditional real estate asset classes – office, retail, industrial, and multi-family – will continue to attract capital. However, alternative asset classes are seen as offering more attractive risk-adjusted returns. These include mixed-use developments near sports venues or manufacturing hubs, as well as repurposed retail space with age-restricted housing. Broader trends such as digitalisation, deglobalisation, and demographic shifts are also shaping investment opportunities, including the growing wellness sector.

But geopolitical and economic uncertainties remain, dampening optimism. Key risks include elections in several countries in 2025, potential changes in US trade policy, and broader economic dynamics. If new tariffs are introduced, they could lead to higher inflation and a stronger US dollar, potentially impacting interest rate cuts and investor confidence. Nevertheless, with capital increasingly flowing into alternative asset classes and a more stable financing environment, the real estate M&A market is poised for a more active year in 2025.

Convergence of real estate and infrastructure

The growing intersection of real estate and infrastructure is reshaping M&A activity. Infrastructure has seen strong growth over the past decade, and changing interactions between investors and users and the built environment are accelerating this convergence. The World Economic Forum describes this relationship as a two-way street, with investment in AI driving demand for data centers, digital infrastructure and power generation. Beyond digital assets, investor interest extends to fibre, towers, and manufacturing facilities linked to evolving supply chains. 

Deal structuring is adapting, with investors increasingly co-investing in projects or forming joint ventures with established operators, such as Digital Realty and Mitsubishi Corporation’s 2024 data center partnership. Financing strategies are also evolving, with opportunistic capital funding early development phases before transitioning to core investors or asset-backed securities. As real estate is playing a critical role in the global economy, investors are now actively managing assets, leveraging operational expertise, and applying sophisticated financing to generate returns in an increasingly competitive landscape.

Insurance as an emerging capital source

The insurance sector is playing a growing role as an alternative provider of capital, particularly as investor allocations shift from real estate to infrastructure and other asset classes. Private equity firms have entered the sector through acquisitions and strategic partnerships, such as Apollo’s investment in Athene and KKR’s acquisition of Global Atlantic, enabling them to access long-term capital at more favourable conditions in an environment of higher interest rates. 

These relationships are particularly relevant to real estate financing, as some traditional sources of capital have reduced their allocations. Beyond financing, some investors see greater value in owning assets through insurance structures rather than traditional real estate vehicles, leading to portfolio restructurings and new business models. This trend highlights the complexity of the current investment landscape and the continuing convergence of industry sectors.

Evolving business models

Over the past decade, companies with significant real estate holdings have restructured their ownership models to improve capital efficiency and move towards asset-light operations. Early adopters in the hospitality and gaming sectors led the way, with brands such as Hilton and La Quinta spinning off hotel assets into publicly traded real estate investment trusts (REITs). Similarly, Wyndham and Marriott separated their hotel and timeshare businesses, while gaming operators such as VICI Properties followed suit with casino assets. Looking ahead, wellness operators, renewable energy firms, tech companies, and consumer brands are expected to adopt similar strategies. 

After several challenging years of interest rate uncertainty, real estate M&A began to stabilise by mid-2024 as interest rates eased and deal economics improved. As noted above, Q1 2024 marked a decade low in deal value, but signs of recovery emerged by Q3 2024. However, this rebound was not sufficient to offset the weak first half of the year, resulting in a 13% decline in global deal values for the first nine months of 2024 compared to the same period in 2023.

Regional real estate M&A trends showed mixed results. Europe, the Middle East, and Africa (EMEA) saw a modest 2% increase in deal value in the first nine months of 2024 compared to the same period last year. In contrast, the Americas experienced a 1% decline, while Asia Pacific saw a more significant 24% drop over the same period.

^{Note: Total real estate transaction values (excluding development properties) based on properties and portfolios of $10m and greater.
Source: MSCI Real Data Analytics}

Global real estate deal volumes declined in the first quarter of 2024, primarily driven by two factors: uncertainty in the interest rate environment and a persistent valuation gap between buyers and sellers. However, we anticipate a shift towards greater market stability in the coming months. This outlook is based on the European Central Bank’s interest rate cuts in June 2024, along with the increasing likelihood of a rate cut by the US Federal Reserve. We expect these monetary policy adjustments to act as catalysts, stimulating transaction activity across various asset classes in the real estate sector.

Wellness

The wellness trend is gaining traction among investors looking to diversify portfolios and capitalise on emerging asset classes. Driven by changing demographics and consumer preferences, the wellness real estate sector is expected to grow at a CAGR of 15.8% to exceed $900 billion by 2028, according to the Global Wellness Institute. This trend is particularly relevant for residential, hospitality, and leisure real estate. In residential markets, wellness-focused developments – especially in the senior housing sector – are in demand as consumers seek holistic living environments that promote wellbeing and social interaction. Similarly, the hospitality and travel industries are expanding their wellness offerings, with luxury wellness retreats experiencing strong growth. 

Recent M&A and strategic partnerships highlight this momentum. For instance, Therme Group is expanding globally and acquired Therme Erding in Germany in late 2024. The Well partnered with Auberge Resorts Collection to integrate wellness spaces into hospitality venues, while Maybourne Hotel Group has collaborated with wellness experts to enhance its offerings.

Senior housing

The global ageing population is driving demand for senior housing, yet supply remains constrained due to financing challenges, labour shortages, and rising construction costs. Developers must also accommodate diverse lifestyle preferences, requiring a range of housing options that incorporate wellness and accessibility features. To meet demand, investors and operators are adopting innovative strategies, including retrofitting apartments for senior-friendly living, converting retail space into mixed-use developments, and improving accessibility and proximity to medical services. In some regions, there is also a growing preference for “ageing in place”, allowing seniors to remain in familiar environments with the support they need. 

The M&A landscape in senior housing is evolving, with US public REITs acquiring portfolios and non-traditional market players repositioning their strategies. Recent deals include Welltower’s acquisition of adult communities in early 2024 and Ventas’ purchase of a 20-asset portfolio in late 2024. As this trend expands globally, investors will need strong partnerships with developers to create senior housing that aligns with wellness trends and evolving consumer expectations.

The Swiss real estate market experienced a remarkable evolution in 2024, largely shaped by the monetary policy of the Swiss National Bank. Interest rate cuts, which were more pronounced than expected, led to a decline in the attractiveness of alternative investments such as Swiss government bonds, while real estate once again came into focus for investors. At the same time, mortgage rates for Swiss properties fell significantly. By December 2024, interest rates for ten-year fixed-rate mortgages had declined to an average of 1.26%, representing a reduction of more than 60 basis points since March 2024. Despite these developments, banks continue to act cautiously and maintain high margins. However, in an international comparison, margins in the Swiss real estate market remain relatively moderate, as higher volatility and associated risks push margins in other markets to significantly higher levels.

The merger of UBS and Credit Suisse has altered the competitive landscape of the Swiss capital market. With fewer key lenders in the market, the newly consolidated bank has gained a stronger market position. At the same time, regulatory pressure remains high. The Basel III regulations, particularly the tightened capital requirements set to take effect in 2025, present challenges for both banks and borrowers. The introduction of the so-called “Output Floor” establishes a minimum threshold for risk-weighted assets, requiring banks to hold greater amounts of equity capital to back their financing. These stricter requirements impact lending criteria for mortgages and the financing of real estate investments.

The transaction market remained challenging in 2024. According to MSCI, total transaction volume reached approximately CHF 4 billion, a significant decline compared to previous years. A substantial portion of capital increases by institutional investors was allocated to the refurbishment of existing properties to meet the increasingly urgent sustainability targets for 2030, 2040, and 2050. These capital increases had no direct effect on the transaction market. A similar trend was observed in the growing shift of directly held real estate from insurance balance sheets to third-party client portfolios. Since these reallocations took place within existing structures, they did not contribute to market liquidity. However, towards the end of the year, an uptick in transaction activity was noted.

For 2025, large-scale capital increases are once again planned, and the transaction market is expected to gain momentum from the second quarter onward – particularly if the SNB continues to lower interest rates. However, it remains to be seen how much of the newly raised capital will actually flow into fresh investments. A significant portion is likely to be reinvested in the refurbishment of existing properties, as the market continues to be characterized by a high proportion of so-called “brown” buildings. Institutional investors are under increasing pressure to make their portfolios more sustainable. To alleviate the burden on their development teams and accelerate the transformation of their holdings, many investors now prefer to acquire green properties directly. This trend is further widening the gap in price expectations between sustainable and non-sustainable assets.

In the medium to long term, market development will also be influenced by global factors. Economic and geopolitical developments in the United States under President Donald Trump could create new market dynamics, while Europe is facing several economic, political, and societal challenges. Issues such as competitiveness, geopolitical tensions, migration, the energy transition, digitalisation, and demographic shifts will play a decisive role in shaping the economic landscape in the coming years. For Switzerland, as a highly export-dependent economy – particularly in relation to Germany, its most important trading partner – these developments are of great significance.

As a result, the Swiss real estate market remains an arena shaped by monetary policy decisions, regulatory frameworks, and global influences. The increasing focus on sustainable investments is set to play a defining role in the long-term transformation of the market structure.