Swiss offices get riskier as franc hurts landlords

When Swiss Life Holding AG bought an office building in Geneva earlier this month for 535 million Swiss francs ($613 million), it set a record for the city. A day later, the central bank unexpectedly scrapped its currency cap, making the job of leasing the property more difficult.

Investors such as Swiss Life, Switzerland's largest life insurer, and Pensimo Management AG, a Zurich-based pension fund manager which sealed Bern's biggest office deal last year, keep buying properties even as rising vacancy rates cause rents to fall, eroding returns. That's because of a lack of high-yielding alternatives in a country with one of the world's lowest interest rates.

"There's a decoupling of the commercial real estate market from the occupier market," said Fredy Hasenmaile, head of property research at Credit Suisse Group AG in Zurich. "Prices keep going up and we expect vacancies to rise further in the next two years."