Plazza AG: Vacancy rate further reduced

For the 2017 financial year, Plazza AG continues to expect an operating result slightly above the previous year's figure. According to the company, real estate income increased as expected to CHF 7.7 million (previous year: CHF 7.2 million) in the first half of 2017. The main reason for this was that vacant space in two commercial properties in the city of Zurich could be rented out. Some of these new leases were already recognized in the income statement in the reporting period. More than 60 percent of Plazza's real estate income comes from residential properties. The vacancy rate across all portfolio properties fell further to 12.2 (16.9) percent.

Housing market: "Shift toward the tenant market"

Operating expenses were in line with the prior-year period. As a result, operating profit before depreciation, amortization and revaluation increased to 5.2 (4.7) million. Due to the lower revaluation result - 4.9 million compared with 5.4 million in the previous year - profit was slightly down on the same period last year at 7.8 (7.9) million. Plazza invested 16.8 (10.4) million in development projects and portfolio properties in the first half of the year. The value of the portfolio increased to 557.7 (536) million in the period under review.

"In the residential market, a shift towards a tenant market became apparent in the first half of 2017. In many regions of Switzerland, supply has grown and can no longer be absorbed directly by the market," writes Plazza AG in its release on the half-year figures. However, the company is hardly feeling the effects of this development, as its residential properties in the mid-price segment and in central locations continue to be in high demand. This is evidenced by the low vacancy rate of 2.6 percent in this segment.

Market for commercial properties: "Challenging

By contrast, the market for commercial properties, in which Plazza generates around 14 percent of its real estate income, remains "challenging". In this environment, however, Plazza has been able to "make significant progress". For example, the vacancy rate in this segment fell to 30 percent as of June 30, down from 45 percent previously. For the second half of the year, Plazza expects a further reduction in vacancies, "although a sustained improvement in the general market situation is not to be expected".

Plazza is currently implementing three major development projects in Wallisellen, Crissier and Regensdorf, all of which are developing according to plan, according to the company. The completion of the "Im Glattgarten" project in Wallisellen is scheduled for 2018. As expected, the reference interest rate was lowered to a record low of 1.5 percent at the beginning of June 2017. This will slightly reduce Plazza's rental income in the residential segment, especially from 2018 onwards. However, the attractive residential properties will remain "a reliable earnings pillar," it says.