A broader evidence base of performance indicators and key data offers greater reliability – a selection.
Getty-Images

Indexes enhance real estate analyses

A broader evidence base of performance indicators and key data offers greater reliability – a selection.

The indexes used in the real estate industry, like those in other economic sectors, show the trend for certain segments over time. Data series compiled by experts and sentiment indicators based on surveys are condensed into performance indicators or key data from a variety of perspectives, supplying important information to market participants – from the trend for prices and yields in various markets to investment risks and opportunities.


Performance-based indexes

GPR 250 Index
Global Property Research (GPR) is a provider of real estate indexes with a proven track record. The GPR 250 stock index is composed of the 250 largest and most liquid listed property securities in the world. Stock indexes say nothing about real estate prices, because the performance of the entire listed company is being valued, not just the real estate portfolio. However, investors use them as a benchmark for their own portfolios. The GPR 250 also serves as a basis for indirect real estate investments and other indexes for specific regions and countries.


EPRA indexes
This index series, which represents general trends in eligible real estate equities world-wide, is published by the European Public Real Estate Association (EPRA) in cooperation with the British Financial Times Stock Exchange (FTSE) and the National Association of Real Estate Investment Trusts (NAREIT) in the United States. EPRA/NAREIT Developed Europe Index represents the performance of 100 real estate companies based in continental Europe. EPRA also maintains a sub-index for German real estate equities. The strict criteria for inclusion include the liquidity, size, and revenue of the index constituents. One major advantage of the EPRA indexes is their comparability with each other.


DIMAX
Deutscher Immobilienaktien Index

The Stuttgart private bankers Ellwanger & Geiger created the Deutscher Immobilienaktien Index (DIMAX), a comprehensive stock index for German property companies. The DIMAX currently includes 59 listed German companies, so it covers only the high-end segment, but its upward movement has for years confirmed the boom that the entire market has recently experienced. The DIMAX, whose function is comparable to that of the DAX, serves as a benchmark for securities portfolios.


GREFI
Global Real Estate Fund Index

The Global Real Estate Fund Index (GREFI) is jointly produced by data providers from the United States, Europe, and Asia and – like a series of fund indexes from MSCI IPD – reflects the trend for real estate funds. Based on net asset value (NAV) and dividends, the performance of 477 real estate funds is measured both on a global scale and broken down by regions and countries. The index makes a distinction by fund types such as German open-ended real estate funds. Investors use GREFI as a benchmark and to gain an overview of trends in various regions.


Valuation-based indexes

IPD country indexes
The country indexes published by MSCI IPD are recognised as a performance standard for real estate markets all over the world and also provide the basis for trading in real estate derivatives. The total return indexes are not based on actual purchase prices, but rather on valuations, cash flows, and CapEx (capital expenditures) at the property level. IPD receives data about this from institutional investors. “When it’s a question of what markets to get into as an investor, these indexes play a role,” says Marcus Cieleback, Head of Research at Patrizia Immobilien. MSCI IPD publishes the German Property Index (DIX) for the commercial real estate market in Germany each year. In addition to rental and leasing income (before taxes and financing), the index tracks changes in the value of directly held portfolio properties. The DIX helps institutional investors who want to compare the performance of their real estate portfolios with the overall market trend.


GPI German Property Index
Once each year, the consultant and analysis company bulwiengesa issues the German Property Index (GPI), which tracks capital growth and yields from rental income for commercial and residential properties. The calculation includes information on rents, purchase prices, initial yields, management costs, and vacancy rates obtained by bulwiengesa. “The GPI looks back at a relatively long data series and allows analyses that would otherwise be impossible,” says Marcus Cieleback of Patrizia Immobilien. The GPI has tracked the trend for yields in some 125 German cities since 1975, comparing A, B, C, and D cities.


vdp Property Price Index
The Association of German Pfandbrief Banks has published the vdp Property Price Index, one of the few transaction-based indexes for the German market, four times a year since 2005. Even the German Central Bank uses it. “The vdp index benefits from a relatively large quantity of data, because Pfandbrief banks input transaction data from their lending business into the database,” explains Jan Linsin of CBRE. As a result, the index reflects the trend for prices that were actually paid. However, it is less useful for the commercial real estate market, since vdp members focus on the financing of residential properties.


Sentiment indexes

Investment Climate Index 
Union Investment’s Investment Climate Index is a barometer of sentiment in the three largest real estate markets in Europe: the United Kingdom, Germany, and France. Some 160 European professional property investors have been surveyed every six months since 2008 to find out what they think of the market structure, background conditions, local conditions, expectations for their activities, and the outlook for individual segments.


IW Real Estate Index
(Immobilien-Index)

The sentiment indicator issued by the Cologne Institute for Economic Research (IW) in cooperation with the Roever Broenner Susat Mazars auditing firm is based on quarterly surveys of directors of large German real estate companies on how they assess their companies’ current state of business and how they expect it to develop. From their answers it is possible to draw conclusions for the economic prospects of the entire real estate sector for the next 12 months.


RICS indexes
The Royal Institution of Chartered Surveyors (RICS) constructs two indexes – each global and at country level – based on extensive surveys of its members: the Investor Sentiment Index (ISI) combines investor demand with the availability of properties for sale and expectations concerning real estate prices, while the Occupier Sentiment Index (OSI) tracks demand for rentable space, its availability, and incentives that letters offer potential tenants.


Print

More about these topics: