Dear shareholders

Swiss real estate continued to become more attractive in the first half of the year. The main drivers are falling interest rates, a robust economy and population growth. Demand for commercial premises in well-connected locations remains intact, but the market is challenging. In the case of residential properties, demand continues to significantly exceed supply, particularly in urban locations. Vacancy rates are low and demand for home ownership is correspondingly high. In terms of realisation, the shortage of skilled workers continues, but building costs are no longer rising and construction activity has gained momentum.

“Swiss real estate continued to become more attractive in the first half of the year. The main drivers are falling interest rates, a robust economy and population growth.”

Even though there is increased global and economic uncertainty, the expectations for the Swiss economy are currently positive. Following the SNB’s interest rate cuts in March and June, the key interest rate currently stands at 0%. Accordingly, the interest rate environment continues to benefit the real estate sector. 

Allreal benefited from the positive environment, with its net profit increasing significantly in the first half of the year. As expected, rental income fell year on year owing to various portfolio changes. However, this effect was offset by higher earnings from Development & Realisation, a lower financial expense and the sale of an investment property that no longer fitted with the strategy. Including the latest rise in the value of the portfolio, Allreal achieved a significantly higher net profit of CHF 116.8 million (first half-year of 2024: CHF 67.2 million).

Balanced real estate portfolio ensures stable income over the long term

Our high-quality real estate portfolio in central locations in the Canton of Zurich and around Lake Geneva is generating stable income over the long term thanks to a balanced investment mix covering office, education, industry and residential use. We modernise or sell investment properties that are no longer optimally positioned in the market or if they lack development potential.

On Freiburgstrasse at Europaplatz in Bern, we finished the extensive renovation work for Forum West in the first half of the year – it now presents itself in new splendour. Since July, the property has been the new headquarters of the transport company BLS. Our property at Baarermatte in Baar near Zug is also undergoing a major transformation. The conversion of an office building at the end of its lifetime into a new mixed-use complex with the highest sustainability standards will generate significant added value. Following receipt of a legally enforceable construction permit this spring, demolition of the existing property will begin at the end of the summer.

Because we manage the technical and commercial aspects of our properties ourselves, we have first-hand knowledge of the challenges involved and are in close contact with our tenants. This also helps us when letting and re-letting our space.

In the first half of the year, we signed leases for around 44,000 m², including on Herostrasse, Vulkanstrasse and Zollstrasse/Josefstrasse/Klingenstrasse in the city of Zurich. Significant agreements were also reached for the Dreieck site in Winterthur and the Richti site in Wallisellen.

The high quality of our portfolio is also reflected in the valuations by Wüest Partner’s external real estate valuers. In the first half of the year, the portfolio underwent a positive revaluation of CHF 70.3 million, driven by the signing of new leases, higher market rents and the favourable interest rate environment.

“Our high-quality real estate portfolio in central locations in the Canton of Zurich and around Lake Geneva is generating stable income over the long term thanks to a balanced investment mix covering office, education, industry and residential use.”

Development & Realisation increases contribution to earnings

Our Development & Realisation activities are an integral part of our business model. Besides exploiting the potential in our own portfolio, we develop and build projects for sale as condominiums. Our projects on Spiserstrasse in Zurich and Avenue de l’Amandolier in Geneva will be completed as scheduled in the second half of the year. In both cases, all of the apartments have been sold. In Lucerne and Zumikon, we started marketing and constructing new properties for sale in the first half of the year. Demand is in line with our expectations. We are therefore confident that here, too, the units that are still free will be sold by the time construction is completed. We also anticipate the sale of condominiums to contribute to earnings accordingly over the next few years.

We are keeping a close eye on the expansion of our pipeline. After the balance sheet date, we acquired a new development plot at Geissacher in Zumikon. We will develop and realise a new residential development with condominiums over the next few years. In Zurich Seebach, we have developed the Köschenrüti garden town residential development for a customer as a full-service provider. The planning application for the project was submitted at the beginning of the year. The construction contract for the project was obtained in the first half of the year as well.

Focus on sustainability

In the first half of the year, we installed additional photovoltaic systems at our properties and in September we will complete the expansion begun in 2021 with the last major installation in the portfolio for the time being. In total, the installed kWp output exceeds 7,500 kWp.

We have also pushed ahead with our efforts to optimise the operation and energy of the properties in the portfolio, as well as signing a framework agreement for the long-term procurement of biogas in addition to several property renovations. In the future, around half of the gas required by our properties in German-speaking Switzerland will be covered by biogas. We see this as an important interim step on the way to decarbonising the portfolio. We will halve the share of fossil fuels in our energy consumption by 2030 and want to meet our net zero target across our portfolio by 2050.

Allreal is in good financial health, generating stable rental income over the long term and additional earnings from its attractive development pipeline. We are well positioned to continue to build value for our shareholders.