Deepening the knowledge base
The Investment Property Forum has raised funds of about £750,000 (e1m) to fund a structured, rigorous and effective research programme and the appointment of a full time research director. I joined the IPF as Research Director, in November 2003, to lead this research programme.
The three-year programme supports the IPF’s wider goals of enhancing the knowledge, understanding and efficiency of property as an investment class. The initiative provides the UK property investment market with the ability to deliver substantial, objective and high quality analysis on a structured basis. It will enable the whole industry to engage with the other financial markets, wider business community and government on a range of complementary issues.
The programme is funded by a cross-section of 16 businesses, representing key market participants: Capital & Regional, Donaldsons, Grosvenor, GVA Grimley, Investment Property Databank, KPMG, La Salle Investment Management, Land Securities, Lovells, Morley Fund Management, Nabarro Nathanson, Prudential Property Investment Managers, Quintain Estates & Development, Scottish Widows Investment Partnership, SJ Berwin, and Strutt & Parker.
Two research projects were completed in 2004 under the auspices of the programme, and a further four projects are underway. The first project, Liquidity in Commercial Property Markets, was completed in April 2004. The project demonstrated that liquidity is a complex multi-dimensional concept when applied to the commercial property markets. The turnover evidence confirms that the UK is the most liquid of all European markets, although different sectors of the market have differential liquidity. Inevitably, the research raises questions for further work, and the IPF Research Steering Group will prioritise these recommendations.
The second project, commissioned jointly with the BPF and RICS is ‘Opening the Door to Property’. This project quantifies the universe of smaller investors, determines the extent of their current exposure to commercial property, assesses the extent to which existing UK investment vehicles meet their needs, and gauges the potential demand from these investors for tax transparent securitised real estate investment vehicles. It was submitted to HM treasury as part of the debate about the possible introduction of REIT type vehicles in the UK.
The other four projects are currently in hand and will be completed and published in the coming months:
q Integrating Social Responsibility in Property Investment Practice, Sustainable Property Appraisal , being undertaken by study by Kingston University. The IPF is contributing towards this consortium project. A summary of the project is reported in a separate article. The results will be reported at the IPD/IPF Annual conference in November 2004;
q Depreciation of UK Commercial Property, being undertaken by University of Reading and IPD. This is a study of the depreciation rates for different types of investment property over the last 20 years. The results will be reported at the IPD/IPF Annual conference in November 2004;
q The size of the UK Investible Universe, being undertaken by Cass Business School and DTZ. This is a study to accurately estimate the size of the total stock of investment grade property in the UK. The IPF intends to update this estimate on an ongoing basis;
q Lease styles and Income Growth, being undertaken by Alecta Investment Management Limited, Reading University and IPD. It is a study of the income returns, total returns and volatilities exhibited by UK property under different lease structures. This research is informed the IPF response to the consultation document issued by the Office of The Deputy Prime Minister about options for deterring or outlawing the use of upward only rent reviews.
For 2005, the IPF Research Steering group has a number of projects approved in principle and efforts are concentrated in turning these into live projects. Topics include property lending, regeneration, asset allocation, integration of property forecasts into risk and investment decisions, forecast disagreement in UK property markets, The investment performance of listed buildings and further work on liquidity. There is also a further list of ideas and proposals under consideration.
We are building links with INREV and EPRA to try to establish a common research agenda to allow us to undertake joint projects on topics of common interest. We are also keen to work with organisations which represent occupiers, to better understand at how occupiers make occupational decisions.
Our established quarterly publication Consensus Forecasts continues to generate great interest, with more organisations contributing their forecasts. Our regular Investment Intentions survey continues to be prepared under the editorship of Dr Karen Sieracki. Work is well in hand to launch of a new IPF quarterly Transactions Report. This will report on transactions activity in the UK investment market showing trends in transactions volumes broken down into investor’s types, property sectors, sales and purchases. It will use data kindly supplied by Property Data
IPF research documents are listed on the IPF website at www.ipf.org.uk. Members can access many of the reports whilst non-members can access summaries.
Charles Follows is research director of the Investment Property Forum
The type of research ideas which the IPF will consider taking forward will be those which meet the IPF's overall aims, and in particular:
q Enhance the knowledge and understanding of property as an investment asset class, both to property professionals, and to those outside property;
q Support or develops new or improves existing forms of investment in property;
q Support or develops improvements in the functioning of the investment property market in the UK ;
q Support or develop the activities of the IPF.
Preference will be given to research initiatives that can be shown to:
q Provide a platform for initiating and informing debate at the highest levels of government;
q Ensure property receives a fair hearing with investment asset allocators;
q Improve the functioning and efficiency of the property investment market.