Why greater disclosure and transparency could help minimise future defaults

Why company credit reports fail to show the whole picture when assessing income risk in commercial real estate.

Core, prime, opportunistic – what does it all mean? Years of subjective labelling of real estate assets is leading to poor decision making.

What lessons has the real estate industry learnt, 15 years on from the Credit Crunch?

In this quarter’s INCANS Risk Insight, the overall theme is how data will be crucial for allowing us in real estate to make better informed decisions.

For decades there have been calls for a re-think on CRE valuations. Now with the perfect storm of a data revolution, shorter leases, more operating expenses, ESG and Covid, this is the time the property valuation community could finally accept that analysis of the income is more important than capital values.

2021 will see commercial real estate tenants will pay rent of more than US$1,400bn. In a low capital growth market commercial real estate becomes a fixed income style investment with a floating capital opportunity attached. But, in the current pandemic, it’s important to understand the occupier, their business environment, along with specific requirements.

The growing popularity of commercial real estate as an investment is hardly surprising given the prevailing central bank policy of a zero-interest rate environment. Under such conditions government and corporate bond yields no longer deliver the required returns so investors have been forced to look elsewhere for a stable and recurring revenue stream.