Real Estate Strategies

Malcolm Frodsham will be presenting this webinar tomorrow - if you haven't already done so you can sig up via the link below. https://lnkd.in/eQUbMBib

Many thanks to all of you who discussed explicit DCF with Malcolm Frodsham over recent weeks. Clearly, a change is no easy task! RICS #explicitdcfvaluations

How the RES Market Simulation Model can help your business... #realestatestrategies #resmarketsimulationmodel

While property markets are inherently idiosyncratic, they are also influenced by broader market drivers. Therefore, it is crucial to determine how many sectors of the market you should forecast.

𝐖𝐡𝐲 𝐬𝐞𝐭𝐭𝐥𝐞 𝐟𝐨𝐫 𝐠𝐞𝐧𝐞𝐫𝐢𝐜 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐧𝐬𝐢𝐠𝐡𝐭𝐬? The latest IPF UK Consensus Forecasts covered all industrials, all offices, two Central London office markets and three retail formats. How does this match up to your House View? Does it miss the sectors that you are interested in, for example Logistics, or Central London Retail? We can add a sector to our Market Simulation Model using the leasing and pricing characteristics of properties in the sector based on your in-house knowledge. 𝐎𝐮𝐫 𝐌𝐚𝐫𝐤𝐞𝐭 𝐒𝐢𝐦𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐌𝐨𝐝𝐞𝐥 𝐚𝐥𝐥𝐨𝐰𝐬 𝐲𝐨𝐮 𝐭𝐨 𝐭𝐚𝐢𝐥𝐨𝐫 𝐲𝐨𝐮𝐫 𝐚𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐭𝐨 𝐭𝐡𝐞 𝐬𝐞𝐜𝐭𝐨𝐫𝐬 𝐭𝐡𝐚𝐭 𝐦𝐚𝐭𝐭𝐞𝐫 𝐦𝐨𝐬𝐭 𝐭𝐨 𝐲𝐨𝐮. Contact us (contact@realestatestrategies.co.uk) to learn more and book an introductory meeting. #realestatestrategies #realestatemodelling

𝐂𝐫𝐞𝐚𝐭𝐞 𝐘𝐨𝐮𝐫 𝐂𝐮𝐬𝐭𝐨𝐦 𝐇𝐨𝐮𝐬𝐞 𝐕𝐢𝐞𝐰 𝐢𝐧 𝐉𝐮𝐬𝐭 𝐎𝐧𝐞 𝐌𝐞𝐞𝐭𝐢𝐧𝐠! Are you looking to quickly create your own House View on market returns tailored to your expectations for rents and yields? 𝐃𝐢𝐬𝐜𝐨𝐯𝐞𝐫 𝐎𝐮𝐫 𝐂𝐨𝐦𝐩𝐫𝐞𝐡𝐞𝐧𝐬𝐢𝐯𝐞 𝐒𝐨𝐥𝐮𝐭𝐢𝐨𝐧 📌 Tailored to your needs: Customise your House View for the sectors that matter most to you. 📌 Performance Measures Included: Projections for all key metrics. 📌 Efficient Collaboration: Create your own House View, leveraging your team’s knowledge of the prospects for rent and yield. 📌 Sensitivity analysis: Create multiple scenarios to test the upside and downside. 📌 Total flexibility: Delivered as an Excel add-in giving you all the familiarity and functionality of a spreadsheet 𝐊𝐞𝐲 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐬: 📌 Pre-Populated Framework: Our model comes pre-populated with your required  market dimensions, metrics and time horizon. 📌 Quarterly Updates: Stay ahead with quarterly updates reflecting the latest market pricing. 📌 Extensive Data Support: Comprehensive data on long-term average rental growth, depreciation, irrecoverable costs, and capital costs. 𝐆𝐞𝐭 𝐒𝐭𝐚𝐫𝐭𝐞𝐝 𝐓𝐨𝐝𝐚𝐲! Maximise your market insights and make informed decisions with the RES Market Simulation Model. Contact us (contact@realestatestrategies.co.uk) to learn more and book an introductory meeting. #realestatemodelling #realestatestrategies #resimulationmodel

I am pleased to share the latest insights from the May 2024 RES Forecasting Model, offering a comprehensive view of the UK real estate market across 64 categories. We've integrated MSCI quarterly data up to Q1 and the updated Oxford Economics forecast. Key points: * Forecast hinges on declining inflation, expected to drive Gilt yields to 3.1% by 2026, with modest economic growth by 2025. * Despite improvements, household expenditure and financial & business service employment growth remain modest. * MSCI Q1 2024 saw positive returns after two negative quarters, with industrial sectors leading. * Total return forecast for 2024 at 5.2%, with 0.7% capital growth, averaging 7.4% per annum over 2024-2028. Top Performers (Five-year total return 2024 to 2028): * London standard industrials remain at the top of the rankings ahead of retail warehouses and City offices. * Other industrial regions rise in the rankings as rental growth is stronger than previously expected. * Shopping centres remain at the bottom of the rankings. Two alternative scenarios that can be tested in the RES Model: 1.      Market Revitalisation: Investors could be drawn back to the market by a combination of rising property yields, falling gilt yields, and expectations of an improving economy – favouring Central London and shopping centres. 2.      Continued Decline: The market may experience further price drops due to an increase in non-performing loans or distressed borrowers – impacting the office sector most adversely. Which scenario would you put a higher probability on and have we got the sector impacts correct? For further information on the RES Forecasting service please email contact@realestatestrategies.co.uk #realestateforecasting #resforecast

RES forecast office rental growth by region, acknowledging that within each region, various drivers can influence rental trends. Looking at the MSCI data by construction date we can see that vacancy rates are much lower for newer stock (although not for the West End and Mid Town). This lower vacancy rate for newer stock is anticipated to result in stronger relative rental growth for such properties. For more information on the RES Forecasting Service please email contact@realestatestratgies.co.uk. #realestateforecastingservice

Further trouble with refinancing ahead? * Since the nadir of Q2 2009, according to the MSCI Quarterly Index, cumulative real estate capital growth is still in positive territory at +16.6%. However, there has been negligible capital growth since Q1 2010. Rolling five-year periods: * Over the 74 rolling five-year periods since Q4 2000, the typical length of a loan secured on a commercial property, capital growth has averaged 7.7%, with positive capital growth occurring in 43 (58%) of these periods. Impact on loan refinancing: * For the quarters from Q4 2017 to Q1 2019, average capital growth over the subsequent five years was negative. Consequently, properties secured on five-year loan terms that ended in the period from Q4 2022 to Q1 2024 are likely to have had lower values at refinancing than at loan origination. This issue is likely to have been prevalent on retail loans since Q2 2014 and in office loans since Q3 2017. * The pattern of refinancing has not yet reached an inflection point, where loans originated in 2019 did so into a falling market and are thus more likely to face challenges in refinancing. There may be a brief respite for loans originated in 2020/21 before loans originated at the market peak in late 2021 early 2022 require refinancing in late 2025/2026. * Consequently, we anticipate further borrower distress to persist through 2024, with potential respite in 2025. Nevertheless, the substantial declines in office capital growth from Q2 2019 to Q2 2022, approximately -28% across the board, indicates continued distress for many loans due for refinancing over the next three years. The latest RES forecast will be out next week. For information on the RES Forecasting Model please email contact@realestatestrategies.co.uk. #realestateforecasting #realestatestrategies #lending