"Income data transparency key to unlocking billion-dollar inflows of institutional capital into commercial real estate", says property data firm Income Analytics
2.06.21
Commercial real estate could attract billions of pounds of passive capital in the way fixed income and equities do if the sector reported income data more accurately and transparently to investors, according to Matthew Richardson, the chief executive of property data firm Income Analytics.
Passive capital invests by replicating a specific benchmark or index such as the S&P 500 in order to match its performance. While MSCI can provide similar benchmarks the inherent illiquidity of commercial real estate prevents investors from using them to deliver tracker strategies.
The level, duration and quality of the rental income paid is the most reliable guide to the long-term performance of commercial real estate, but currently the sector does not provide this data consistently to investors.
Instead, real estate investors are largely guided by subjective labels such as Core, or Core-plus, which do not truly capture the risk and volatility of investments.
Matthew Richardson, founder and CEO of Income Analytics, said:
“We are the only industry that I can think of that pre-labels what our fund is, most other people look at the actual performance and then relate the risk to the historic performance and likely future performance.
“When you actually look at the long term performance of real estate in the developed market around the world, the bulk of your long-term returns comes out of your cash flow – out of your income. And that’s also the most stable part of your income, and the bit you can control. What an investor really needs to have is a number for default or a failure number. I need to know the percentage probability that my tenant or counterparty in the agreement is going to go bust and leave me high and dry.”
Moving to a reporting standard for income is particularly crucial for commercial real estate compared to residential as income is a much more important factor for investors to understand as lot sizes are larger, with space treated as a commodity.
Income Analytics is able to offer investors essentially an Experian style credit check of a commercial real estate investment by assigning a score (INCAN score) to companies, giving a forward-looking and data-based benchmark.
The company feeds Dun & Bradstreet data, a primary global credit rating agency, into its analytical models to produce unique reports into the creditworthiness of a business and understand its likelihood of failure.
The Income Analytics’ reports include:
- 10-year tenant income risk forecast;
- Global tenant scores;
- Bond equivalent ratings; and
- Global corporate family tree.
This data enables investors to better understand who the counterparty is, what relation they have to a parent company and where responsibility lies for the payment of rent, in addition to establishing what percentage of their cash is at risk if the counterparty fails or defaults.
Stronger commercial real estate data will also potentially enable funds to automate parts of their due diligence processes, meaning they will be able to more efficiently allocate capital to commercial real estate.
Matthew Richardson, founder and CEO of Income Analytics, added:
“It’s no secret that Covid-19 has severely impacted the world’s financial markets, and the hunt for yield we saw from investors post-global financial crisis is only going to increase, especially as blue-chip investments like gilts yield ever lower, and sometimes even negative returns.
“But commercial real estate runs the real risk of missing out on billions of dollars worth of capital if it does not provide the levels of data many investors will need to make any investment stack up. Given that the yields the sector can offer will be at least 2 or 3 percentage points higher than gilts, commercial real estate really needs to get its house in order on data reporting to ensure it does not miss out.
“What we have set out to do is to restructure how that credit agency data works, so we can convert that number into a percentage which can then be forecast forward and move us away as a sector from subjective labelling to something driven by the data.”
See the full article HERE
Related Stories
Income Analytics Webinar: European Office Real Estate 2025: Buying the U?
Join Income Analytics CEO Matt Richardson for an in-depth discussion on why Office Real Estate is back on the menu with some investors and the key trends driving the sector across UK and continental European Markets.
Q1 2025 Income Analytics T200 Reports
June, 10th 2025, London. Income Analytics' releases its latest T200 reports.
From Global Expansion to Distress: The Story of Groupe Casino
Groupe Casino, the French supermarket giant, has seen both highs and lows in its tenant global scores — and our CEO and Co-Founder, Matt Richardson, has some compelling thoughts on the subject.
Revisiting Retail - Webinar Summary
May, 12th 2025, London. Income Analytics' hosts a webinar focused on the retail sector.
Q4 2024 Income Analytics T200 Reports
March, 12th 2025, London. Income Analytics' releases its latest T200 reports.
Review - Why Logistics Real Estate Leads the Way
The Income Analytics webinar, "Why Logistics Real Estate Leads the Way: Stability, Demand, and Resilience," explored key trends and investment strategies in the European logistics real estate market.
Q3 2024 Income Analytics T200 Reports
January 14th, 2025, London. Income Analytics' releases the latest T200 reports showing commercial real estate continues to deliver a durable income stream across multiple sectors.
The Problem with UK REITS
January 13th, 2025, London. Our CEO, Matt Richardson, has been published discussing UK REITS in The Property Chronicle.
Q2 2024 Income Analytics T200 Reports
September 23rd 2024, London. Income Analytics' releases the latest T200 reports showing a lead for Healthcare while Hotels lag.
Divergence within UK Retail Parks
July 29th 2024, London. UK Retail Parks have some strong occupiers, but there are weaker credit risks landlords should look out for.
Office Inflection
July 19th 2024, London. Investors to make sense of the strong credit ratings of many of their typical office tenants, with slowing take-up and falling values across the sector.
Anne Conlan Joins Income Analytics
July 9th 2024, London. Anne Conlan has joined Income Analytics as Account Director to support existing clients.
Income to Drive Total Returns
July 4th 2024, London. Real estate association INREV released a survey showing 79% of respondents believe income will drive return. How are investors ensuring they have strong, stable cashflows?
Q1 2024 Income Analytics T200 Reports
May 22nd 2024, London. Office occupier scores are stable across all regions, while some UK sectors are being hit by the cost of living crisis.
Q4 2023 Income Analytics T200 Reports
March 6th 2024, London. UK retailer scores struggle to improve while European logistics operators trend higher. Healthcare continues to be strong globally.
Income Risk is Specific. Avoid Averages.
Focusing on averages can hid tenant specific risks.
Q3 2023 Income Analytics T200 reports
November 28th 2023, London. A common theme across all our regional T200 reports is a recovery of the leisure sector tenants post-pandemic. They have bounced back from a low base, and typically record INCANS® Tenant Global Scores below their regional averages, but they are the fastest improvers.
Matthew Richardson Interview: Further Corrections and Opportunities to Emerge
The main trends impacting the sector are non-property, external factors, our co-founder & CEO Matt Richardson pointed out when speaking with Real Asset Media at EXPO Real 2023. These are, notably, interest rates, central bank policy and political policy.
Q2 2023 Income Analytics T200 reports
August 22nd 2023, London. The latest T200 reports from Income Analytics (INCANS) shows a mixed picture for retail sector tenants across the UK, Western Europe and North America. In Europe, retailers score below their regional averages, while in North America they trend above the average. The leisure sector has improved but remains below average in Western Europe, while has rebounded after the pandemic to score above average in the UK and North America.