Long-term Value Methodologies in Commercial Real Estate Lending - Summary Report




This research reviews and builds on the Property Industry Alliance’s long-term value working group’s 2017 Report, Long-term value methodologies and real estate lending, developing the analysis of existing models and investigating alternative methods for assessing long-term value, along with other measures that may indicate when the probability and scale of potential falls in commercial real estate values is high. The research seeks to identify whether measures of long-term ‘sustainable’ rent and capitalisation rate can be determined and combined to produce measures of long-term ‘sustainable’ capital values.

This report summarises the research and key findings. The full report, to be published shortly, is designed to be read as one integrated document but can also be read as a series of individual papers:
•    A review of the 2017 PIA Report and the issues arising in terms of concepts and key issues;
•    A comparison of property indices;
•    Long-term sustainable rents;
•    Long-term sustainable capital valuation measures and cap rates; and
•    Leverage and leading indicators of potential downturns.