The first half of our fiscal year 2023/24 was successful from an operating perspective, particularly in the letting business. Although the office market has also become increasingly challenging in Switzerland, we succeeded in growing rental income and WALT and enhancing financial sustainability within the portfolio.
Successes in the letting business led to a substantial increase in WALT (weighted average lease term) from 2.9 to 6.3 years as of 30 September 2023. This has a stabilizing effect on the portfolio and also helps to secure our rental income in the long term. The large number of tenants who have remained loyal to us for many years is in our view a sign of the quality and financial sustainability of our portfolio, while also reflecting our focused efforts in asset management.
The 2.3% increase in rental income compared with the previous year is the result both of rental agreements concluded last year (0.8%) and – thanks to the high proportion of indexation in our rental agreements – inflation-related rent adjustments amounting to 1.5%. This resulted in rental income totalling CHF 4.5 million (previous year: CHF 4.4 million). The vacancy rate remained unchanged at 8.9%.
The general market backdrop, such as restrained demand from buyers, rising yield requirements on the part of investors and higher interest rates, led to an increase of 10 bps in the average nominal discount rate, which had a negative effect on portfolio revaluation. However, this was partly compensated by positive effects from lease extensions and indexation. The total asset value of the portfolio as of 30 September 2023 was CHF 225.9 million, down slightly by 0.5% or CHF 1.2 million compared with 31 March 2023.
Key portfolio data
Properties at a Glance
We successfully negotiated an early lease extension with a renowned law firm that has been based in Holbeinstrasse 22/30 in Zurich, which is centrally located in Zurich’s Seefeld district, since 2010. The lease agreement for around 4 000 m2 of office space, which originally expired in April 2025, was extended during the reporting period until at least 2035. This lease accounts for one third of total rental income. With the extension, the WALT of the property increased to 8.7 years.
At Morgenstrasse 136 in Bern-Bümpliz, the contract with a longstanding top 5 tenant for 1 600 m2 of office and exhibition space was also extended until September 2029. After the lease with another prime tenant in the property was already extended in the previous financial year, the WALT of the property rose further to 5.6 years. The carcass space on the second and third floors of the property, which continues to be actively marketed, accounts for 80% of our total vacancy potential.
Cost-effective space sharing model
Attractive flexible space at
Gewerbestrasse 12a in Egg nr Zurich
At Gewerbestrasse 12a in Egg near Zurich, vacant space was converted into a new offering, with the conversion completed in May 2023. A modern, partly fitted out, modular floor concept was created on an area of around 400 m2, which offers common areas for shared use as well as individual office units. The model is designed to cater to the strong demand for small and flexible office spaces. We are therefore targeting smaller companies that are attracted by a cost-effective space sharing model as potential tenants. The redesigned space accounts for 75% of the current vacant area in Egg.
In view of the initial progress we have made, and the positive response to our active marketing, we are optimistic that we will be able to continue reducing vacancies in the second half of the current financial year.
Our major tenants are well-known companies and administrative bodies of the City of Zurich. These tenants account for just under half of our rental income.
Lease Contract Analysis
The chart illustrates the timeline of expiring leases based on effective rental income (contract rent) and on the assumption that expiring leases will be extended or renewed at the rents applicable at the present time (market rent).
Future-proof thanks to energy efficiency
Three of our six properties are certified according to the Minergie® standard. 30% of our usable space is already powered by renewable energy sources
Züblin continues to focus on selective investments in office properties in its established core markets, with an emphasis on our home market of Switzerland. However, we will only make acquisitions if they meet the investment criteria we have defined, complement the portfolio in a sustainable manner and ensure the creation of added value in the long term.