Portfolio
The good quality of the individual properties together with the good tenant struc-ture has a lasting effect on Züblin’s portfolio. The portfolio has proven to be solid in regards of the COVID-19 related corona lockdown and generated unchanged rental income of CHF 4.7 million as compared to the first six months of 2019/20. The investment value of CHF 218.0 million remained stable as compared to 31 March 2020.
Portfolio Development
The Züblin portfolio was barely under pressure as a result of the lockdown. The total value as of 30 September 2020 remains stable at CHF 218.0 million (as compared to CHF 217.9 million as of 31 March 2020). Annualized rental income as of 30 September 2020 remains unchanged at CHF 9.4 million.
The vacancy rate rose slightly from 8.2% to 8.8% during the reporting period due to two expiring rental agreements in Baden. The letting of the vacant units has been initiated and is showing demand. In the Zurich Holbeinstrasse property, a 5-year contract for 170 m2 was concluded after the reporting date. The weighted average lease term (WALT) of the overall portfolio decreased from 3.8 to 3.4 years mainly due to the normal expiry of existing lease contracts.
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Stable Portfolio Value of CHF 218 million
Impact COVID-19
Covid-19 and the lockdown caused a strong slowdown in the rental market. Companies have either postponed or stopped their planned expansion plans or have postponed their plans to change premises for the time being.
The lockdown and the measures imposed by the Swiss authorities mainly affected the tenant segments of gastronomy, retail and sport/leisure activities. In consultations with the affected tenants and based on the parliamentary initiative to reduce commercial rents, Züblin has granted rent deferrals and rent reductions. The resulting total reduction in income amounts to TCHF 48 or 0.5% of the annualized rental income.
Outlook
The Swiss economy has recovered from the historic downturn in March 2020 faster than expected. Nevertheless, there is considerable uncertainty about the further development of the pandemic and its economic implications. It is currently difficult to assess as to how possible changes in the office environment as well as potential re-designs of the workplace concepts will impact on the on the real estate sector. Züblin is evaluating possibilities and measures to convert its office space into more flexible concepts meeting tenants potential future demands.
Although the local transaction market has temporarily slowed down due to the lockdown, the current demand for office properties remains high. While good inner-city locations are generating all-time high yields, office buildings on the peripheral locations are increasingly under pressure.
Züblin has a solid portfolio and is therefore well positioned to handle the further development and the possible effects of the pandemic. Furthermore, the company has sufficient financial resources to benefit from interesting investment opportunities. Züblin’s goal remains to maintain a healthy mix of stable rental income, value creation and risk in order to achieve its strategically targeted returns.
Portfolio Overview
WALT Overall Portfolio
3.4 years
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Major Tenants
The five largest tenants are all renowned companies or the municipal administration and account for 57% of the rental income.
Lease contract analysis in CHF Mio.
