Internet update

Citation

Almond, N. (2009), "Internet update", Property Management, Vol. 27 No. 3. https://doi.org/10.1108/pm.2009.11327caa.001

Internet update

Article Type: Internet update From: Property Management, Volume 27, Issue 3

Global commercial real estate markets are suffering in the wake of the banking crisis and the recessionary environment emerging in many countries across the globe. Record levels of investment activity were fuelled by the availability of cheap and plentiful debt, with many investors now realising that the impact of leverage on performance works both ways. But information about lending to real estate is available on the internet? Within this editorial, I will focus on a number of sources of data and other reports on bank lending, as well as the growth in Commercial Mortgaged Backed Securities (CMBS).

In UK, the starting point is the Bank of England (www.bankofengland.co.uk). For general sentiment, the Credit Conditions Survey and the Financial Stability Review are both worth taking a look at. These can both be found under the publications section. In the case of the former, this provides a barometer for the appetite of banks’ willingness to lend towards real estate and other segments. Although, only a recent survey, it is a useful survey for measuring current sentiment. The Financial Stability Review, on the other hand is a more detailed publication looking at the financial stability of the nation. With lending to real estate accounting for a significant proportion of overall outstanding debt (currently over 10 percent) there is often commentary within the review on the health of lending and risks posed to the stability of the financial system. You will need to search through each report to find the relevant sections.

Underpinning some of the above analysis is the quarterly reporting on actual lending. Press notices and data are available from the web site, although finding this can be a little tricky. Starting from the homepage, select the “statistics” section, then choose “monetary and financial statistics”, and then “statistical releases”. There is list of different outputs; the real estate figures can be found under “Analysis of bank and building society deposits from and lending to UK residents”. The press notice and supplementary tables can be found in pdf format, with the current data also available to download as an excel file. More detailed and historic data is available from the “Interactive Database” available on the site. I typed in real estate under the search criteria and it returned 99 observations, with some data subsets of the main lending series, for example, lending by foreign-based banks in UK. The data is available to download, although the level of history will vary. Some data is available back to 1986 enabling analysis over the previous downturn, which includes for example the total outstanding debt to real estate. Other datasets are only available since 1997, for example lending by overseas banks based in UK. Footnotes and explanatory notes can also be pulled off in the excel sheet making interpretation easy, especially when may of the datasets have specific codes.

Although not free, DeMontfort University produce a bi-annual report, on bank lending to commercial real estate. The report effectively summarises a survey of the majority of lenders to UK real estate including UK and foreign banks as well as building societies. Although the time series is relatively limited, just over five years, it is nonetheless a good source of information, covering not only traditional lending, but also the growth in recent years of securitisation. For further information visit: www.dmu.ac.uk/faculties/business_and_law/business/CPLR/index.jsp

Outside UK, data is more sporadic, with few Central Banks reporting on lending to commercial real estate. For a general view across Europe, the best site to visit is the European Central Bank (www.ecb.int/). As with UK, the financial stability review is worth a visit to check out the view of the risks real estate poses to the financial system across the Euro area. Also of interest is the ECBs recent report on commercial real estate entitled “Commercial property markets – financial stability risks, recent developments and EU banks” exposures’. The report can be found under the publications section, and by selecting publications by date (under December 2008)[1]. This report provides an overview of the European property markets and the risks and exposures on EU banks. There are also some details of a survey undertaken by the ECB on lending exposures across Europe, although given the availability of data there are various caveats attached to the results or the level of detail published. Nonetheless, this is a useful output and extends the knowledge of European markets.

Also within the review are details of other studies investigating previous lending booms and busts. I followed-up on a couple of these reports, including two working papers by the IMF entitled “Lending booms, real estate bubbles and the Asian crisis” and “Real estate market developments and financial sector soundness”. One further paper, with a more European theme was “The Swedish banking crisis: roots and consequences” published in the Oxford Review of Economic Policy. A quick search on Google for these titles will provide easy access to these papers.

Within the context of this article, it is not possible to cover all European markets. Data is available in some countries, for example Germany publishes data on the commercial mortgage market. It is worthwhile browsing the various Central Bank websites across Europe to see what is available; be aware some data may only be available to download in the local language and not English.

Part of the growth in lending has been supported by an increase in securitisation, which has enabled banks to remove loans off their balance sheet and increase their lending capacity. Data on the issuance of CMBS and the CMBS market in general is thin, with the market relatively opaque in Europe and UK. Much of the literature is produced by organisations such as Barclays Capital, Merrill Lynch and Fitch Ratings, and is not widely available free of charge. The DeMontfort survey, mentioned earlier does provide some detail on the issuance of CMBS. In Europe, one useful site is the European Securitisation forum (www.europeansecuritisation.com/). Under the “research” section you can find monthly and quarterly data supplements on issuance and pricing. Also worth a look is the Commercial Mortgage Securities Association (www.cmsaglobal.org). For those looking for data, the best place is the “resources” section, and by selecting the “Compendium of Statistics” I downloaded a 46-page guide on CMBS issuance, including country level data at a global level, along with more detailed statistics on the US market, including delinquencies. It is worthwhile browsing the site for detail.

Finally, there are always the various property and other news sites to check out for topical articles. Subject to subscriptions, Property Week, EGi and the Financial Times are worth a look.

The view expressed are those of the author and not those of DTZ.

Nigel AlmondAssociate DirectorDTZ

Note

1. A direct link to the pdf is available via: www.ecb.int/pub/pdf/other/commercialpropertymarkets200812en.pdf