The increasing scarcity of available building land in Switzerland is a problem that institutional investors and developers know all too well. What could be more obvious than to utilize a portfolio’s existing potential? With this in mind, a long-standing client commissioned Wüest Partner to identify the earnings potential and value reserves in its real estate portfolio.
The main focus of this assignment was the analysis of usage reserves within the scope of possibilities offered by building law, as well as the identification of potential utilization through demolition and new construction. As such, the selected properties were individually checked for usage reserves by means of an automated process.
The Potential Seeker, which was launched in February 2022 as a new module from Wüest Dimensions, was used for this assignment. The main role of the Potential Seeker is to determine real estate potential of both developed and undeveloped plots of land. It does this in a fully automated and particularly effective way, helping to identify the potential of unexploited plots.
For this purpose, Potential Seeker combines Wüest Partner’s internal data and models with publicly available external sources. These include the latest building regulations of cantons and municipalities, the building and zoning codes of each, as well as cadastral survey and topographic data. Information on bodies of water, slopes, building footprints and building lines also feed into the analysis. Potentials are then automatically calculated as the difference between the actual available area and the maximum possible area, according to zoning laws.
Within the scope of this assignment, Wüest Partner conducted a systematic analysis of more than 150 of the client’s properties using the Potential Seeker. From there, the properties with the largest value reserves were identified and the project concluded with interpretations of the results as well as recommendations for those responsible for the project. The following results are particularly deserving of attention:
- Every fourth property in the portfolio had a net value reserve that could be realized by means of an extension or a replacement building.
- The average net value reserve of the properties analyzed was around 20 percent, and for 2 percent of the properties, it was even over 100 percent.
- If the ten projects identified with the largest value reserves were implemented, the portfolio could generate an additional change in value yield of around 3 percent.