Owing to the looming development and not very optimistic forecast for 2016, Allreal anticipates economic growth to show a slightly positive trend, at best. Positive impulses for the real estate sector and the construction industry are hardly to be expected.

As a result of the high investment pressure, which was further accentuated by the introduction of negative interest rates in Switzerland, demand for yield-producing properties with a good rental situation remains strong and supports high prices. This permits Allreal to sell especially its development properties at a profit.

Several regions, some of them more than others, show a clear over-supply of commercial space and high-end rental and condominium apartments. Consequently, in the regions concerned, the surplus is leading to a level of competition that is increasingly cut-throat as well as longer absorption periods, higher marketing expenses and concessions made in terms of contractual details.

Owing to the large supply of commercial properties, additional investment needs are required for older commercial buildings no longer suitable contemporary usage.

Apart from the luxury segment, the market for residential real estate continues to be characterised by sound demand, especially in central locations and urban agglomerations with good accessibility.

As a result of lower construction activity, competition among general contractors is intensifying and, consequently, leading to lower fees and flattening margins while the level of risk in rising.

Allreal is the only listed real-estate company that combines a real-estate portfolio comprising residential and commercial properties with the activities of a general contractor. Owing to this business model and its financial power, Allreal enjoys good preconditions for the continuation of successful business activity.

Allreal has defined various measures and initiatives to secure profitability. In terms of real estate, priority is given to the continued reduction of vacancy-related loss of earnings and to a higher share of residential properties in the overall portfolio. The Projects & Development division consistently restricts its choice of projects to those with predictable risks and sound profit expectations. The division’s restraint concerning acquisition of third-party projects will result in a lower project volume, on the one hand, and in a larger share of high-quality own projects profitable across the long term, on the other. Moreover, it is essential to maximise the potential inherent in existing development reserves while taking advantage of opportunities arising in the market.

Based on available information and a careful assessment of economic and project-related opportunities and risks, Allreal expects to achieve net profit for the 2016 financial year comparable to that of the period under review.

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