Real Estate Research Centre launches monthly Monitor to track debt and capital markets

A new Monitor from the Real Estate Research Centre aims to provide snapshots of debt and capital market valuations.

The Real Estate Research Centre at Bayes Business School (formerly Cass) has launched the new monthly Commercial Real Estate Market Monitor to provide an  independent view for real estate professionals, analysts, researchers and investment managers.

The progress report will give fresh insights into how debt and capital markets are valuing financial instruments, drawing upon key academic research for identifying leading indicators within capital markets. Information will be drawn from more than 350 listed European real estate companies, 180 European bond issues and the European real estate securities fund found on Bloomberg and Reuters.

The monitor will use a ‘traffic light’ system to show a snapshot of current market conditions, based on four key areas:

  • Sentiment Indicators – measuring the change in analyst recommendations month-to-month, along with both the absolute and relative performance of the European Public Real Estate Association (EPRA) Index against the Stix 600 European Equity Index.
  • Factor Analysis – measuring performance based on size by gross market capitalisation, dividend yield weighting and loan-to-value leverage.
  • Valuation – measuring size of dividend yield and the discount to Net Asset Value (NAV).
  • Mergers & Acquisitions – measuring fluctuations in public and private valuations via the parallel asset pricing model and new cash released by takeovers.

Alex Moss, Director of the Real Estate Research Centre and co-author of the monitor, said:

“Much like many industries at this time, the real estate sector is facing great turbulence and uncertainty as the UK and Europe seek to recover from the pandemic.

“The Commercial Real Estate Market Monitor aims to enhance links with practitioners and stimulating ideas for future research report, while highlighting academic expertise within the Real Estate Research Centre.

“Each month, the monitor will show the direction of travel of several key factors and make informed recommendations along the way. It is just the latest way in which we aim to connect academic research with industry practice.

“We are particularly intrigued to see how the balance of analyst recommendations – which is currently positive - develops over time, as well as comparing relative valuations of the more expensive sectors like logistics against less demanding ones like retail, and how the sector as a whole performs in the face of inflation and the post-Covid economic recovery.”

Dr Nicole Lux, Senior Research Fellow at Bayes, co-author of the monitor and author of the bi-annual Bayes Commercial Real Estate (CRE) Lending Report, said:

“The new monitor gives an alternative sector view, providing more frequent and independent opinion. Whereas the CRE Lending Report is a twice-yearly survey of lenders, this is a snapshot of publicly-traded real estate instruments.

“Findings from the monitor’s first set of results show that Euro bond issuance has picked up significantly since the start of the Pandemic, growing from €43 billion in 2020 to €78 billion at the end of 2021. It therefore presents the second most significant source of funding for large real estate projects after bank financing.

“The monitor also indicates some competitive pricing of these bonds close to 1 per cent – far below the rate of normal mortgage loans. These trends in particular will be interesting to track across the coming months.”

You can sign up to receive updates from the Commercial Real Estate Market Monthly Monitor. December’s Monthly Monitor issue is available to view and download.

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