Risk of tenant default higher in logistics than retail or leisure
New data on tenant default risk from Income Analytics has underscored the vulnerability of many logistics occupiers.
The findings, shared exclusively with React News, show that the projected risk of default is much higher in logistics than in a number of other sectors. Using company level data from Dun & Bradstreet, Income Analytics analysed the probability of failure for the top 200 companies in various sector weighted by revenue. Logistics is split out from industrial with the former comprising the likes of DHL and FedEx that move goods around and the latter manufacturing and other industrial occupiers.
Income Analytics founder and chief executive Matt Richardson said the high projected default rate for logistics partly reflected the fact that aside from a small number of large logistics businesses, there are a large number of smaller players, often reliant on single contracts and operating off low margins. “We’ve got a market where the hottest sector is logistics – driven by weight of money – and yet the underlying defaults on the cashflows unless you have those top tenants are actually looking quite risky,” he said.
Investors have become increasingly willing to accept relatively high business failure rates in logistics because of the sheer weight of occupier demand for warehouse space which has made the task of reletting empty properties relatively straightforward, invariably at higher rents.
However, Richardson warned that investors need to be mindful of the costs involved in reletting properties and the lost income during void periods. He added that “a massive recessions is about to come crashing over us” and that this will impact consumer spending, and by extension logistics.
Amazon announced last month that it planned to slow its take-up of logistics space. This is already having an impact on the US market where the online retail giant has much more space per capita than in Europe, where there is so far no sign of a slowdown in occupier demand.
The probability of default data from Income Analytics is modelled over 10 years to reflect the risk for landlords over the duration of a lease. The idea is replicate the way that bond investors model risk.
Read the full article on REACT.
Real estate data veteran Mallinson joins Income Analytics
February 6th 2023, London. Income Analytics (INCANS) announced today that Simon Mallinson has been appointed as its Chief Operating Officer. Established in 2020, INCANS is focused on helping clients quantify tenant income risk and minimise future losses. “We are excited Simon Mallinson has joined us as we enter the next stage of our growth” said Matthew Richardson, co-founder and CEO of INCANS. “Simon has a wealth of global experience delivering real-time, actionable data to real estate professionals and is the right individual to reinforce INCANS growth”.
Retailer health check: who will be next after Joules?
Great to see our tenant default analysis feature in a recent piece by React News.
How NewRiver is stress-testing its portfolio
In a recent article run by EG, Pui-Guan Man looks at how real estate investors and owners are using INCANS® scores to help quantify the future cashflow at risk caused by potential tenant defaults.
UK CRE investment markets go "income only" as yield gap over bonds disappear
Since 2008, commercial real estate has enjoyed an unprecedented bull run in terms of capital value growth. That charge is now over. Today’s economic realities mean that the returns from real estate investments are likely to be “income only” for the foreseeable future. Under such conditions investors need to shift their attention to the quality and duration of their rental cashflows.
Logistics tenants are under pressure while retail woes continue
Businesses in the logistics sector are the highest risk tenants, while those in healthcare and education present the lowest risk. These are the findings of the INCANS Top 200 Averages for Q2 2022. The ratings, created by Income Analytics, give real estate professionals a likelihood of tenant failure by using advanced statistical modelling. The lower the score, the higher the risk of default. The following are most challenged sectors using data to the end of Q2 2022:
Driving with the rearview mirror: CRE needs a new roadmap for recession risks
Navigating the post-pandemic economy is turning out to be hard. Ahead are hidden hazards, sharp corners and unpredictable oncoming traffic. UK inflation rose to 9.1% in May, according to data released today. In the U.S. it is 8.5%, both at 40 year highs and both expected to grow. Energy prices are soaring, and growth on both sides of the Atlantic is doubtful: U.S. first-quarter growth was 0.1% whilst UK GDP fell by 0.3% in April.
Income Analytics partners with EG Radius to supply tenant and asset risk solution for the UK real estate industry
Matthew Richardson, Founder and CEO of Income Analytics, said: “We very much welcome the opportunity to work with EG in providing a “best in class” tenant risk solution to their clients. It is an area of the market that has been neglected for far too long, and recent events have only confirmed the need for landlords to better understand their tenants and the challenges they face.” "The INCANS® Scoring system was set up to answer a simple question – “What is the % probability that a tenant will default during the term of their lease?” We are delighted to be able to offer this capability alongside EG’s extensive data sharing platform.”
Income Analytics releases industry market averages to the platform
We are pleased to announce the product release of our Top 200 Industry and Property Sector Averages. This is the result of months of analysis by our research team, bringing this data to life for the first time.
New PDF report release
We are delighted to announce that we have released a new set of tenant, asset and portfolio level PDF reports. These will be available on the INCANS platform from Monday 7th February 2022 and have been developed in response to client feedback over the last 12 months.
MSCI on calculating the risk to real estate income
In this month's PERE publication René Veerman from MSCI Real Estate writes about how Covid has shown the need for data tools that enable investors to understand the risk that tenant defaults pose to cashflows and hence why MSCI Inc. has invested in Income Analytics and is providing access to the INCANS tenant income risk dashboard to its global client base.
MSCI: "Understanding Tenant Default Risk with Income Analytics"
Check out this fantastic new video by MSCI Real Estate MSCI Inc. on our partnership and 'how and why 'this is such an exciting and important partnership for the global commercial real estate industry.
Welcome to new starter Lucy Baker
We are excited to announce that Lucy Baker has joined Income Analytics as our new Account Manager, she will be working closely with all clients as well as our Sales team.
"Why The UK's Supply Chain Crisis Could Be A Mega-Headache For Landlords"
Exclusive data provided to Bisnow by Income Analytics shows it likely means more bad news for landlords, some of whose tenants may now fail to make it through the vital pre-Christmas trading period.
Real estate’s income risk in the wake of COVID-19
In this blog by MSCI, the relationship between the MSCI UK Indices and the INCANS scores is analysed delivering some fascinating insights
Power of Data Podcast
Matt Richardson, CEO Income Analytics, is interviewed for the Dun & Bradstreet Power of Data podcast series by Nick White, Head of D&B Accelerate.
"Why We Need To Talk About Your Risky Tenants"
The founders of a new proptech venture that has just won backing from MSCI and Savills said UK commercial real estate needs to rethink its approach to cashflow.
MSCI and Savills lead funding round into Income Analytics
MSCI and Savills have led a funding round into Income Analytics, a data technology firm that provides investors with proprietary global rental default risk measures on commercial real estate income (the INCANS Scores) at tenant, asset, fund and portfolio levels
"Less Subjectivity Please! Issues With Framing & Subjectivity in Global Real Estate Markets"
Real estate investments vehicles are categorised in risk terms according to familiar yet subjective style labels such “core”, “core +”, “value add” or “opportunistic”. What empirical evidence supports the use of these labels?