We show that a proper assessment of the linkages between commercial real estate markets and the economy requires state of the art modelling techniques, which treat economic variables endogenously and allow for a number of long run relationships. We therefore use a long run structural modelling approach, which incorporates equilibrium relationships that are predicted by economic theory, in an otherwise unrestricted vector autoregressive model. The application of this approach to Swiss multifamily data for the period 1974Q1–2012Q2 shows that four long run equilibrium relations exist among inflation, long- and short-term interest rates, real M2, real GDP, real construction expenditures, real market rents, and capitalization rates. The analysis of the short run dynamics additionally suggests that the linkages between the real estate and economic variables are bi-directional. Given that the basic principles of macroeconomics and of real estate economics that underlie our model are country-independent, our main findings should provide for a better understanding of the various linkages and feedback mechanisms between any developed economy and its real estate markets and thereby help in the identification and quantification of both market interventions by policy makers and risks borne by investors.