Interview Peter Lehmann
Interview Peter Lehmann
For Peter Lehmann, CEO of Swiss Prime Site Immobilien, a strong customer focus is the basis for the positive results in the 2019 financial year. His actions are guided by the ability to identify needs in the market and realise them in projects.
Peter Lehmann: General conditions encouraged the real estate market to gain momentum in 2019. Specifically, I mean economic growth in Switzerland, interest rates and the demand for prime office and commercial spaces. We recorded excellent successes in portfolio management and asset management. Across the 2019 financial year, we were able to reduce the vacancy rate to 4.7%. In addition, our projects proceeded as planned. The overall level of pre-lettings was excellent.
For me, the customer and their needs are always the priority. We can only be successful as a company if we align our actions with market demand. Many companies are experiencing a generation change right now. Management is getting younger and has different needs in terms of the locations and areas that they want to offer their employees. This is our starting point when we look at making our portfolio and our projects attractive for the future.
Projects currently in our pipeline include YOND in Zurich, JED in Schlieren and West-Log in Altstetten, all of which exemplify our focus on the customer. Quite some time ago, we established that logistics real estate will be in strong demand over the coming years. As a consequence, and with the help of our network, we were able to buy the West-Log project before the ground-breaking ceremony. We then optimised it further and commissioned the construction. In Schlieren, we are bringing a concept to fruition for our two anchor tenants, Zühlke and Halter. The existing buildings of the former printing works on the site will be converted, creating an ecosystem for knowledge transfer, innovation and entrepreneurship. Our anchor tenants benefit from this, as will start-ups who want to use the spaces. On the same site, we are also investing in an emission-free new build with unique spaces; it’s something that has never been seen in Zurich before.
Some tenants already moved into this property at the end of 2019, and it’s been a success for us across the board. The idea was born a few years ago, when market research revealed increased demand by smaller companies for basic, flexible spaces. We therefore created the YOND concept, with high ceilings that offered the option of putting in intermediate floors. This was a completely innovative concept for Switzerland, with representatives from the city of Zurich and Avenir Suisse attending the ground-breaking ceremony, a testament to its great market potential. The current occupancy rate is over 80%. With tenants like Coople, Tadah, Vebego, JobCloud and Better Taste we have exactly the rental table that we envisaged in the concept phase.
Our building at Müllerstrasse in Zurich is a good example of this. We acquired the property at the end of 2018 together with two other properties in exchange for the 24% share in Sihlcity. The rental agreement with the current tenants was due to expire in 2021, which we used as an opportunity to re-position the building. Thanks to our strong network, we were able to achieve this really quickly. Once the current customers have moved out of the building, we will completely renovate it to prepare it for the specific needs of the new tenant. Our optimised marketability will then enable us to adjust the level of rent considerably, thereby significantly increasing the value of the building.
The major Espace Tourbillon project is proceeding as planned. All five properties are now well advanced. For the two buildings that were sold to the Hans Wilsdorf Foundation, we are now at the interior design stage. The other three properties and the underground logistics centre are nearly structurally complete. We are currently selling one of the three properties to companies in condominium ownership. This innovative idea has been well received by the market. The Alto Pont-Rouge project is also doing well. Preparatory work for construction is almost complete. With the new train station set to open within the next few years, the district will receive a real boost, and companies moving away from the city centre will need these spaces.
Schönburg in Berne is definitely one of them. Nearly all the flats are let and both the fitness centre and the retail spaces are open. I am confident that we will able to celebrate the hotel opening in spring 2020. The transformation of Stücki Park in Basel is well under way. We opened the Stücki Village in 2019 and held the ground-breaking ceremony for the first two extensions. The site is gradually beginning to come together and become a real centre for Basel-Nord.
«Many companies are experiencing a generation change right now. Management is getting younger and has different needs in terms of the locations and areas that they want to offer their employees.»
With the increase in online commerce, the dispersion of goods across the city is becoming much more important. We all want the goods we order online to be delivered to our home as quickly as possible. However, with traffic increasing, this is only possible if logistics processes are optimised. This is where the «last mile» that a package has to travel is so key. Goods being distributed from towns and cities need to be packaged differently so that they land in the customer’s letter box as quickly and efficiently as possible. Real estate located at the edge of towns and cities is perfect for this type of logistics. West-Log and Espace Tourbillon are two such properties.
Absolutely. For example, in our portfolio we have the Iseli site in Regensdorf, a parcel of land with existing infrastructure that would be suitable for such a project.
No. From the point of view of the market for logistics real estate, the locations we have chosen absolutely are «prime». A logistics project in a rural area, on the other hand, would not fulfil this criterion.
We have different strategies that enable us to retain our focus on the market and our customers. Having an office in Geneva, for example, gives us a presence in French-speaking Switzerland. Our local specialists provide us with essential insights to make the right decisions. We also maintain very good personal contacts who help us invest in line with customers and the market.
We set sustainable goals and achieve them. Specifically, we have committed to a CO2 reduction pathway. By adopting a range of measures, we want to – we must – achieve this long-term goal. However, it’s not enough to try and invest in emission-free real estate by 2050. Given the long life cycle of properties, we have to do this today and tomorrow. We are enhancing our existing portfolio with different initiatives that move us closer to our goal. For example, we are currently looking for ways of installing as many photovoltaic systems on our buildings as possible. We are also investing in sustainable forms of construction. One specific example of this is the new build in JED in Schlieren. This is a building with no conventional heating, cooling or ventilation.
Given the climate crisis, we need to re-think our approach to new buildings. Looking to the past can help us do that. Our ancestors knew that thick walls help to keep out the weather. If our walls are thick enough, therefore, and the window areas are smaller, we can maintain the indoor climate almost regardless of the external temperature. We have taken advantage of precisely this fact, so in the JED new build, the walls are 80 centimetres thick. The windows are designed so that they let sufficient light into the building while being offset inwards so they receive very little direct sunlight, thereby minimising any heat gain. The temperature inside the building is an ideal 22 to 26 degrees. The humidity is maintained using sensors which automatically open/close the windows. Previously, you used to need 50 – 80 m² for building services systems, whereas now a small space of less than 10 m² is sufficient.
We have discovered that there are hardly any large interconnected spaces to rent in Zurich, although this is something our customers have a need for. We therefore decided to include as many support grids as possible on each floor. However, this does not mean that our customers have to accept any reductions in flexibility. Within the support grids, many areas can be specially reconfigured or separated according to requirements. They don’t have to be, but they can – and that’s what customers want today.
We think we will see more of this kind of construction in the future. It is crucial that we convert our existing buildings to be more efficient and make new real estate totally emissions-free.
«Co-working can function in different ways. Traditionally, successful locations are central, with good transport connections and high footfall.»
The trend for co-working and serviced offices has several drivers. Firstly, major start-ups are ensuring that the topic is being widely discussed in the media. Secondly, we are seeing a certain level of need on the market for this type of use. In a fully rented site, there are tenants who would like some overflow space for either seasonal or project-related reasons. It would offer additional employees a flexible workspace where they would still be close to their colleagues. Global companies are also interested in «single office provider» strategies. This is where they have a single agreement with a global provider. Employees can then use office facilities in any city in which the provider has a presence. These are exciting developments.
Co-working can function in different ways. Traditionally, successful locations are central, with good transport connections and high footfall. Concepts outside city centres can also be very promising. At some point, we will not all be able to – or even want to – commute into cities to work. Flexible workspaces outside city centres and in locations that can be reached from your house on foot will be worth considering. There are already examples of this around Zurich.
Successful co-working is about high footfall and the area’s visibility. Offering flexible working spaces in Prime Tower could be successful if we were to implement a model in which existing tenants in the tower could use them as part of the overflow space that we mentioned earlier. From a security perspective, a completely open co-working space would not be simple, but we wouldn’t want to rule it out completely. The site at Hardbrücke is almost perfect for this kind of service.
Good spaces in central locations will always be in demand. We see this every time rental contracts are due for renewal. We are confident that there will always be a need for bricks-and-mortar business. Whether this need will be as pronounced in the future as it is today, time will tell. Our collaboration with Pallas Kliniken in Jelmoli clearly shows that you can enhance or transform retail spaces and remain successful.
I am confident that the real estate market will continue to grow in 2020. The generally positive economic situation, political stability and high level of technology as well as digitalisation in Switzerland will ensure that we remain an ideal location for local and global companies.