ICRES Session 2: Data sources for CRE statistics

1. Developing data sources for a Commercial Property Statistical System (CPSS) in IrelandErin Dwyer-Bond (CSO Ireland), Barra Casey (CSO Ireland) and Dermot Coates (Central Bank of Ireland) ICRES Session 2: Data sources for CRE statistics

2. Contents • Introduction • Data source(s) for: • a price index • a rental index and rental yield index • building permits, starts and completions • vacancy rates Note: Credit exposure and lending standards is excluded from presentation but included in paper

3. Introduction Ireland an exemplar of how risks in commercial property can manifest in negatives impacts on the financial system and economic activity This paper takes a holistic approach to analyzing data sources Usefulness of the paper relates to the centralization of the analysis on available data sources and the documentation of the substantial challenges ahead. Allows a better assessment of the strategic approach and prioritization that should be taken in Ireland

4. Data source(s) for a price index

5. Stamp duty data from Revenue Legal obligation on buyers of commercial property to pay stamp duty Contains information on transaction price and characteristics of the buyer and seller Very little information on property characteristics e.g. type, floor area, location Attempts to link to other data sets have not been successful (Ottawa Group 2017 paper: https://bit.ly/2H15hpU) Ongoing work relates to filling this data gap

6. Analyzing the stamp duty data Commercial property transactions, open-market and non-market activity, 2010 - 2018

7. Figure 1: Volume of commercial property transactions, Jan 2010 to Nov 2018

8. Figure 2: Value (€millions) of commercial property transactions, Jan 2010 to Nov 2018

9. Figure 3: Value (€millions) of commercial & residential property transactions, Jan 2010 to Nov 2018

10. Figure 4: Median prices (€s) of commercial & residential property transactions, Jan 2010 to Nov 2018

11. Other findings Mixed-use properties (commercial component) significant in terms of volume (9-15%) but less so in terms of value (4-5%) The supply of new commercial properties almost disappeared between 2013 and 2017 Dublin dominates in terms of the value of commercial property transactions (64-78%)

12. What’s the challenge? Working with the relevant authorities to decide the collection mechanism for the characteristic information on commercial property sales – these need to be linkable to the stamp duty returns Devising a hedonic model for commercial property sales with low transaction numbers (especially when the market is depressed).

13. Data source(s) for a rental index and rental yield index

14. Commercial Property Lease Register Based on stamp duty returns with additional information (i.e. lease characteristics) collected from the tenants by the Property Services Regulatory Authority (PSRA) All information is published online in public lease register Response burden for additional information is high on tenants This has resulted in low response rates e.g. 59% in 2018 (much lower before marketing campaign was initiated) Nevertheless, it is a rich data source

15. Additional data collection Type and floor area of leased property Commencement date of the terms of the lease Capital contributions paid in respect of the property The frequency of rent reviews Liability for rates, insurance, service charges and repairs Particulars relating to rent-free periods, fitting-out time & allowances etc Particulars related to break-out clauses

16. Figure 11a: Trend in leased office space, 2013 and 2018

17. Figure 12: Profile of reported rents (all leases)

18. Figure 13a: Average market rent per sq. m. in the office market, 2013 and 2018

19. What’s the challenge? Working with the PSRA to ensure high compliance in relation to the collection of the additional characteristics information for the commercial property leases Devising a hedonic model for commercial property leases with low transaction numbers.

20. Data source(s) for building permits, starts and completions

21. Building Control Management System (BCMS) There is a statutory duty to design and construct buildings according to building control regulations Responsibility for compliance rests with the designers, builders and building owners. Building Control Authorities (BCAs) can inspect, enforce and prosecute Commencement Notice (CN) and Certificate of Compliance on Completion – loaded to the electronic Building Control Management System (BCMS)

22. Building Control Management System (BCMS) CSO are waiting to receive this dataset but there is potential to compile statistics on the pipeline of commercial property (ideally linked to planning permission information) There are concerns about data quality e.g. matching commencements and completions, database integrity, categorization (consistency across administrative datasets is also a concern) A detailed microdata analysis is required when the dataset is received

23. What’s the challenge? Securing access to the relevant datasets Assessing the datasets in terms of their statistical quality Devising solutions to statistical quality problems Working with the relevant authorities to ensure the administrative systems also enable the production of useful statistics.

24. Data source(s) for vacancy rates

25. Geodirectory The GeoDirectory (joint venture between postal service and national mapping agency) contains 210,000 commercial building records (i.e. non-residential) and includes a flag to indicate if an “address point” is vacant Address point is defined as “a unit as opposed to a building which can comprise one or more units” No information on square footage – this is problematic Information is published by EY-DKM Economic Advisory Services and published on a bi-annual basis in the GeoView report (https://go.ey.com/2GmBmao)

26. Geoview Report

27. What’s the challenge? Look at solutions to supplementing the Geodirectory with characteristic information such as floor area and type of property.

28. Questions, comments or suggestions would be very welcome