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Research News

Nicole Lux, who is DMU's new senior research fellow in Commercial Property and Lending

Nicole Lux, who is DMU’s new senior research fellow in Commercial Property and Lending

Real estate investment barriers in South America

This is a funding request for a new research project focusing on South American real estate investment.

Our research project focuses on real estate markets and urban development in South America, considering commercial, residential and infrastructure sectors.

The main objective is to expose risks that are connected to the urban development context of each country including transparency of markets, urban equity and development regulations. The approach will provide investors and regulators and other researchers with a comprehensive picture of each country under study, from the high level of governance to the detail of the individual commercial, residential and infrastructure sectors. This research will provide a crucial analysis of the regulatory framework that underpins real estate markets and investments in a growing but little researched region of the Americas.

The project consists of four different stages:

  1. An analysis of key real estate drivers and real estate market fundamentals. This part will include a novel ranking methodology that can capture the particularities of the region in terms of the diversity of its economies and the maturity of markets, and will help to identify and rank best countries for real estate investment in South America, grouping them into two major sectors: mature markets and emerging markets.
  2. Particulars of commercial and residential real estate sectors; this part is an analysis of the particularities of these markets and the context in which investors and developers operate. The analysis includes residential and commercial real estate and looks at private sector development as well as government led schemes and public-private partnerships. In order to breach the gap between theory and practice, the project provides a number of case studies from key players in major cities. We will be collaborating with a range of experienced academics from the region who will provide the context of local development policies, legislation, valuation methods and taxation.
  3. Infrastructure development. Real estate development is fundamentally dependent on quality infrastructure; primarily reliable power supplies, water and sanitation and good transport connects. Key infrastructure sectors include energy, water and sanitation and transport. Delivery of this infrastructure needs to be integrated with land use planning and have long-term future delivery strategies. Equally important is the integration with the protection of the region’s natural resources, eco-systems and biodiversity and strategies for local food production. Our research presents and analyses case studies in each classification group that was led by 5.1 government, 5.2 international investors, 5.3 Public Private Partnership 5.4 international development bank and discusses successes and failures.
  4. The fourth part concentrates on investment barriers and the evaluation of real estate markets and future growth potential. This part will discuss various economic and financial barriers to real estate investment in Latin American markets. It also includes the presentation of results of an investor survey undertaken as parot fot the research. Following this classification this section will present suitable case studies to examine the applicability of those barriers in South America and to question what mechanisms, if any, are needed to solve them. Formal Barriers: including restrictions to capital accounts, legal barriers, taxation and costs including taxation of foreign owners.

Who is the project of interest to?

We believe that this research should be of interest to anyone investing or planning to invest in South America as well as government officials, regulators, practitioners, policymakers and developers.

Our classification of real estate markets considering country specific political and economic factors as well as real estate market fundamentals brings a completely new angle to evaluate effectiveness and sustainability of local urban development and market development and helps the distinguish between markets in Latin America.

Distinctive features of the research include:

  • Selection of 30 case studies from market practitioners to understand differences in markets and their development
  • historic evaluation of the emergence of real estate markets and planning in Latin America to understand origins of current planning regulations that affect urban development.
  • analysis of local culture and consumer behavioural preferences and their influence on commercial real estate assets such shopping centres, offices and hotels.
  • a full study of the residential sector according to different types of schemes and main actors/developers and the economic and political context they operate.
  • a sets of case studies on infrastructure development in South America according to main actors and organisations behind the schemes.
  • an evaluation formal and informal barriers that all selected countries present to international cross border investment.


The final results of this project will be available in December 2016


Anyone interested supporting our study, we are seeking funding at different levels. If you wish to become a sponsor any funding organisation will receive a copy of the final research which will be published by Rutledge and a bespoke in-house presentation of our research findings including the investment survey results. If you wish to become a key sponsor we are also happy to discuss any bespoke research report of a selected topic that might be useful for your business.

Suggested sponsorship levels:

  • Key sponsors: £10,000
  • Other sponsors: £5,000

Thank you for considering this request.  Please let us know if you need any additional information that may influence your decision to approve funding. You can contact me directly via email

This is a research initiative of academics and professionals from the University of Sao Paolo, University of Reading, UK  and Cass Business School, City University London.

For more information see one of our previous posts and follow this blog and research news.

The team

Dr Claudia Murray, School of Real Estate & Planning University of Reading. In Buenos Aires Claudia worked for several architectural firms specialising in international architectural competitions at small and large scale. She was also a part-time lecturer at the Faculty of Architecture, Design and Urbanism (Universidad de Buenos Aires) until 1997 when she moved to London. After achieving several grants including the Visiting Arts Board and Arts and Humanities Research Council, she completed her postgraduate studies in King’s College London and joined the School of Real Estate & Planning in 2008.

Dr Nicole Lux Visiting Lecturer at Cass Business School, City University, London. She is also a member of the INREV Research Committee and the Association of Property Lenders. She has more than 15 years experience in real estate finance gained at large top-tier investment banks and financial service firms. Amongst others she has worked at Citigroup, Deutsche Bank and Moodys’ Investors Service negotiating real estate lending transactions across Europe. Her most recent book on Real Estate risk analysis has been published by Euromoney in 2012.

Professor Elaine Monetti, School of Civil Engineering at the University of  São Paulo (USP). Eliane has 10 years experience in working for several private firms in the area  project management and real estate development. In 1989 she joined the School of Civil Engineering (USP) as a full-time lecturer where she got her master and doctorate degree researching shopping centres. Besides teaching at undergraduate level she has also supervised many researchers at the Graduate Program in Civil Engineering. Eliane was one of the founders of the Real Estate Research Group at USP, the first one in Brazil focusing real estate matters.

Camilla Ween, Urbanist, Architect And Transport Planner and Director of Goldstein Ween Architects. She is a Harvard Loeb Fellow. She consults as an urbanist and transport planning professional with UK and overseas clients, and has recently been working with the Independent Transport Commission (on capturing additional benefits from high speed rail) and the Foresight Future Cities project. She writes extensively; her recent book Future Cities was published in 2014. She worked for Transport for London for 11 years advising the mayor on the impact of land use development and policy

Consultancy & Advisory News

It is perfectly acceptable to real estate managers and investors to discuss market risk or interest rates, but when it comes to credit risk and estimating economic capital most managers are out of their comfort zone. The biggest hole in that ground is produced by discussions on correlations, lack of data and in-transparency of the real estate sector.

It is not a reflection on the management, it is a simple manifestation of the disconnect that exist today between the real world and applied statistical modelling. And when it comes to banking regulation and economic capital for the banking industry, the disconnect is only growing larger.

While regulatory capital model compensate for expected risk, economic capital should account for unexpected risk. The difference between two estimates is the amount you need to put aside for economic capital modelling.

I am an academic and experienced professional in real estate lending, deal execution, risk and recovery with 15 years experience in real estate finance transactions across capital structure, CMBS (UK/Germany) and VBA programming for structured finance. Experienced in working in multi-lingual and multi-cultural environments across Europe.

Following the financial crisis 2008 I have focused on finding solutions for distressed real estate bank loans and securitisations. Driven by the idea of improving industry underwriting and modelling standards I have published my first book with the title  “Assessing real estate risk – applied models, concepts, methods”, Euromoney in October 2012.

I have worked with:

  • Real Estate Investment Managers
  • Banks
  • Service providers
  • Regulators

I provide consultancy and advisory in the following areas:

  • real estate credit analysis
  • rating and default modelling for CMBS/RMBS, real estate loan book
  • credit risk reporting process, early warning indicators, Basel II risk weighting optimisation
  • risk & return pricing

Find more information here

New Real Estate Investment Research on South America

There is a lack of research and relevant studies for investment in South America to help guide investors, developers and researchers.  Hence we have joined forces to address this issue. This exciting new project focuses on real estate investment markets and urban development in South America covering commercial, residential and infrastructure sectors. The research presents a number of case studies from practitioners to expose risks that are connected to the urban development, market transparency, regulatory barriers in each market analysed. It provides a guide for investors, developers and policymaking organisations by identifying risks and opportunities in each market. Key areas include:

  • Economic drivers
  • Real estate market fundamentals
  • Commercial real estate, key players, risks
  • Residential real estate, key players, risks
  • Real estate funding vehicles
  • Transport
  • Infrastructure development
  • Assessment of policies and market entry barriers

This research will be the first of its kind to cover real estate markets in South America. The trans-disciplinary approach is original and provides a model framework for analysis to connect theory to observed reality.

eisenmann-and-the-mediaMore about development and urbanism here!

Successful development is closely related to good urban practice and design, which integrates sustainable mobility and public transport as well as public open space and social infrastructure. The research will explore how well these aspects have been addressed in the case-studies and analyse the relationship between commercial success and these aspects.

This research will be available end of 2016. Find out more about the authors:

Dr Claudia Murray is a research follow at the University of Reading. She has a doctorate from King’s College London and is an expert in housing and real estate development in South America. She has published extensive papers on housing and real estate markets.

Dr Nicole Lux is a real estate professional in London and Frankfurt with over 15 years experience in real estate equity investing and risk analysis. She has worked at major international banks and is a visiting lecturer at Cass Business School and guest lecturer at Said, Oxford Business School.

Dr Eliane Monetti is a lecturer at the University of São Paolo School of Civil Engineering. She has a doctorate in construction and urban engineering and has published extensive papers on urbanism and real estate markets. She is a co-founder of the Real Estate Research Group at University of São Paolo.

Camilla Ween is an architect, Havard Loeb Follow, urbanist and expert in the integration of transportation into city development. She worked for Transport for London for 11 years, advising the Mayor on land use planning and policy. She writes extensively on urban issues. Her book Future Cities was published in 2014.

Research on the UK listed sector

The performance of a blended real estate portfolio for UK DC investors

Alex Moss, Consilia Capital & Cass Business School, City University, London, UK, and
Kieran Farrelly, The Townsend Group, London, UK are investigating the implications for UK DC pension fund investors who choose to combine global listed and UK unlisted real estate in a blended allocation relative to a pure unlisted solution.

A UK DC pension fund investor choosing to construct a blended global listed and UK unlisted real estate portfolio would have experienced material return enhancement relative to a pure unlisted solution. The “price” of this enhanced performance and improved liquidity profile is, unsurprisingly, higher portfolio volatility. However, because of the improved returns, the impact upon measured risk adjusted returns is less significant.

Click here to read more.


UK Property Risk Premium narrowing in 2014

The previous post looked at yield compression in seven selected European cities, below paragraph explores further what this mean for the sector as an asset class.

Due to changes in the 10yr government bond (UK 10yr gilt) rate and further declining property yields, the risk premium for property has again narrowed to historically low levels in London.


Continue reading

H1 2014 European Real Estate Performance

What do the leading agents say?

Direct real estate market

The improving market from end 2013 has given investors confidence for a good start in H1 2014.

CBRE reported total commercial real estate investment in Europe reached €37.9 billion in Q1 2014 – a 18% increase on Q1 2013. The fastest year-on-year growth in Q1 2014 was seen in Austria (+183%), Ireland (+179%), Spain (+132%) and Finland (+103%). The core markets of Sweden (+68%), Germany (+47%) and France (+37%) also showed significant growth compared to Q1 2013. (CBRE research more details here)

While Spain or Ireland are favoured by overseas investors looking for value-add opportunities, UK, Sweden or Germany are considered for their core investment opportunities. However, the German market has seen considerably more activity with UK and US investors now starting to look at larger non-core portfolios with assets in secondary locations.

London recorded its highest-ever quarterly investment total in Q4 2013, exceeding peak levels of 2007, as a result  Q1 2014 as been quiet for London due to lack of available investments.Therefore  UK investors have started looking outside the London market into regional UK centres as well as into diversifying asset class from office to logistics, business parks and more alternative sectors such as healthcare and hotels. There are perhaps five or six major regional UK cities being targeted by investors, with Manchester and Edinburgh leading the pack. (CBRE UK)

CBRE reports investment into Europe:

 €m Q1 2014 Q1 2013
UK                                                      11,435                                                            11,802
Germany                                                        9,923                                                              6,731
France                                                        3,475                                                              2,531
Spain                                                          988                                                                  426
Italy                                                          720                                                                 619
Nordics                                                        4,634                                                              4,166
CEE                                                        2,078                                                              3,216
Other                                                        4,644                                                              2,643
Total                                                      37,897                                                            32,134

Yields and return

Prime yields have tightened across most of European markets with yield compression spreading to secondary assets in stronger markets, notably the UK where the debt market has improved significantly, followed by Germany.  Core markets such as Central London are forecast to generate total returns in the 6-8% range, as currently low prime yields give little scope for yield compression as well as producing a relatively low income return. Prime office yields in London’s West End are now as low as 3.5%-4.0% and City offices 4.5%. (Colliers Research)

CBRE expects cities located in CEE and Eurozone peripheral countries, such as Dublin, Madrid, Moscow, Barcelona and Budapest to be the top performing cities in terms of total return, with an annual average return ranging from 12% to 15% over the 5-year to mid-2019.

IPD UK monthly index shows 3.9% total return over the first three month Jan – March 2014 compared to -1.5% for Equities and 2.5% for bonds. The prime performer was real estate securities with 6.3%. The performance of direct real estate shows that most of the return can be attributed to capital growth driven by yield compression with rental growth filtering through much slower. (IPD Research)

EMEA rental markets

The JLL office-clock shows rental growth slowing down for German cities, but London rents still accelerating over the next  12months. Most other European cities including Milan, Brussels, Paris, Madrid are now at the end of the bottom cycle and rental growth is expected to accelerate later this year assuming the overall Economic climate in Europe keeps improving, with Paris already leading the pack with +3.5%. This is also reflected in Paris increased office demand which was up 19% in Q1 2014. (JLL Research)

Real Estate Securities

Listed real estate markets were the top performer Q1 2014 with EPRA NAREIT Dev’d Europe delivering a 5.8% return.