Outlook

Although the future course of the Swiss economy is difficult to judge, Allreal expects economic growth to weaken with fluctuations occurring in individual industries.

The oversupply of commercial space existing in various regions in Switzerland will result in increasingly severe crowding out strategies. This is connected with longer absorption periods, higher marketing expenses and concessions made to contractual agreements. Moreover, with regard to continued letting, older commercial real estate will show an additional need for investment. It will become increasingly difficult to find tenants for real estate that is badly accessible or located in peripheral areas.

The market for residential units is likely to be characterised in the future by sound demand for central locations and well accessible suburban areas. However, as the supply of higher-priced rental apartments and condominiums increasingly exceeds demand, contract conclusions will remain extremely demanding.

Additions made 2013 and later resulted in distinctive growth of Allreal’s real estate portfolio. Following completion of the dynamic growth phase, our focus is now on consolidating the strongly enlarged portfolio of yield-producing properties and improving profitability by reducing vacancy-related revenue losses.

As a result of on-going high pressure from competition, decreasing margins and lower commissions from subcontractors, the development and realisation of projects with a good profit potential continues to be demanding. Higher profitability at a lower project volume, as aspired by Allreal, implies the prudent acquisition of third-party projects and the planning and realisation of market-orientated own projects for sale to investors.

Owing to the low number of new projects, decreasing demand for higher-priced residential ownership and tightened requirements concerning re-financing, Allreal expects sales of residential units in 2015 to remain at the previous year’s level, at best.  

The Board of Directors and Group Management expect the course of business to be carefully positive. This assessment of future prospects is based on various aspects: the potential resulting from downsizing vacancies of the enlarged portfolio, the low number of expiring rental agreements, the performance of the Project Development and Realisation departments, the available development reserves and secured plots of land and the advantageous financing thanks to the historically low level of interest.  

Despite challenges and imponderables, the company expects to achieve net profit for 2015 at least comparable to that of the period under review.