portfolio
PORTFOLIO
Züblinʼs portfolio continues to perform well. Rental income was CHF 4.4 million in the first half of 2022/23 as a result of successful new lettings and long-standing tenants extending their contracts. The portfolio value rose by CHF 1.6 million to CHF 226.7 million as at 30 September 2022.
Portfolio Performance
The value of Züblinʼs portfolio increased slightly from CHF 225.1 million to CHF 226.7 million during the reporting period. The upward revaluation of CHF 1.6 million or 0.7% relates in particular to the properties in Zurich, where demand remains very high with a limited supply of comparable properties.
Rental income amounted to CHF 8.9 million on an annualised basis (31.03.2022: CHF 9.1 million). With the expiry of a lease in the Morgenstrasse property in Bern, a built-out commercial space of 806 m2 became vacant. The weighted average lease term (WALT) of the portfolio is 3.1 years.
Züblinʼs portfolio consists entirely of commercial properties with predominantly index-linked rental contracts. Hence the pickup in inflation due to supply bottlenecks and rising energy costs is not expected to have a significant impact on net operating income.
Portfolio Overview
Properties at a Glance
Leasing Activities
Various lease extensions were signed in the reporting period, illustrating the good relationships Züblin continues to enjoy with its long-standing core tenants. Furthermore, successful new lettings further consolidated the high tenant quality in the portfolio.
In the Morgenstrasse property in Bern, an insurance agency that has been at the location for many years extended its lease for 792 m2 by a further six years. During the marketing process for the property, demand in this district of Bern was still robust at the end of 2021. However, interest slackened off considerably in spring/summer 2022 for the spaces offered in shell construction on the second and third floors of the property.
Flexible use of space – higher workplace quality
Tenant fit-out geoPro Suisse AG in our Baden property Rütistrasse 3
In our Egg and Baden properties, contracts for 800 m2 and 170 m2 respectively were renegotiated with existing tenants and closed at market rents. In addition, through active asset management, we secured a successful local architectural studio in Baden as a tenant for an area of around 200 m2 as of 1 November 2022. As a result, this property is now also fully let. Active marketing of smaller spaces in the Gewerbestrasse property in Egg was also successful in securing lettings. In order to increase the attractiveness of our rental offering, a renovation project will be implemented in the Gewerbestrasse 12a property at the beginning of 2023.
Major Tenants
Our major tenants are all well-known companies or administrative bodies of the city of Zurich. Just under half of rental income is generated by our five largest tenants.
Lease Contract Analysis
The table below illustrates the expiry of leases based on effective rental income (actual rent) as well as the assumption that the expiring leases will be extended or renewed at the rents applicable at the present time (market rent).
Sustainability
At the beginning of the current financial year, Züblin carried out an analysis of the CO2 emissions of the portfolio in conjunction with specialised Swiss consultants. The aim was to obtain all relevant energy parameters and consumption data for the portfolio. Determining the potential energy savings enabled us to draw up a catalogue of different options for the six properties.
As part of Züblinʼs commitment to sustainability, which was initiated as long ago as 2006, the Holbeinstrasse 22/30 property in Zurich was completely renovated with a focus on energy efficiency. As a result, our properties have a Minergie certification level of 75%. 30% of the usable space in the portfolio is already being supplied with renewable energy. The data analysis showed that the CO2 emissions of our portfolio could be reduced to around 2 kgCO2/m2EBF*a by replacing four heat generators that are currently still operated with fossil energy sources. By comparison, the CO2 reduction path for institutional real estate portfolios in Switzerland including all potential measures is estimated at 2 and 5 kgCO2/m2EBF*a. The next step is to define and formulate Züblinʼs sustainability targets, which can then be used as the basis for determining the measures at the individual property level. As well as promoting the responsible use of resources, investments in the energy efficiency of our properties are an opportunity to secure the future viability of our space offering.
Energy efficient & future-proof
75% of the properties in Züblinʼs portfolio have a Minergie certificate – 30% of the usable space is already powered by renewable energy sources
Outlook
While the economy was still gripped by the pandemic last year, the war in Ukraine and rising interest rates have been creating market uncertainties since the beginning of 2022. Nevertheless, the Swiss office rental market was largely robust in the first half of 2022 and demand for attractive space in central locations in the countryʼs economic centres remained strong.
However, there were signs of a softening in the transaction market. Demand for properties in good locations with high cash-flow security remained high in the first half of the year, whereas demand for properties in peripheral locations tended to weaken and yields rose slightly as a result.
Züblinʼs focus in the second half of financial year 2022/23 will be on reducing CO2 emissions and the targeted measures to enhance the attractiveness of the space on offer. A disciplined acquisition process remains essential in this challenging market environment to achieve our goal of growing sustainably by acquiring properties that fit with our strategy.
Strategic Focus
Züblin continues to focus on selective investments in office properties in its established core markets. The emphasis is primarily on our home market of Switzerland. However, we will only make acquisitions if they meet the defined investment criteria, complement the portfolio and can be expected to create added value in the long term.
