With access to good data, policymakers can develop more effective and evidence-based policy recommendations, writes Jeff Rupp
Recently, both the European Central Bank and the European Commission have called for more robust statistics on commercial real estate.
After several highly frustrating experiences in the last few years, their tacit admission that good data on our industry is lacking is a very welcome step in the right direction.
The collection and analysis of high-quality and consistent commercial real estate data is essential for informed analyses, recommendations and decision-making that impact our economically and socially important sector.
Policymakers’ access to good data would also help avoid misinformed policy recommendations. As a particularly unfortunate example, in 2023, the European Systemic Risk Board (ESRB) used data on leverage from a few listed real estate developers as a proxy for the entire real estate investment sector.
This was problematic because it included the less transparent but much larger non-listed real estate funds sector, which is significantly less leveraged than listed property developers.
Leverage in non-listed real estate funds averages around 21% on an NAV-weighted basis, including leverage at both the fund and asset level, according to INREV indices.
This is in sharp contrast to the 80% assumed by the ESRB. This misinformed assumption unfortunately led to unfounded warnings regarding the systemic risk posed to the whole financial sector in Europe posed by the “highly leveraged” real estate investment sector. These warnings were echoed by the European Central Bank (ECB) shortly after.
Importance of good data
Obtaining good real estate investment market data is critical if policymakers, including the ESRB, ECB, European Commission and national regulators, continue making policy recommendations and legislative proposals affecting the real estate investment sector.
As the ECB noted when proposing new rules on investment fund statistics: “the extent of data on financial activities of investment funds currently reported under ECB regulations is not sufficient to provide policymakers with a comprehensive and timely picture of developments in the euro area investment fund sector, and more is needed.”
The European Commission drew very similar conclusions late last year and it is also seeking better data to gain a more comprehensive understanding of the real estate investment landscape.
In a regulation on investment statistics released on 27 June, however, the ECB took an important step toward closing the data gap.
Like the European Commission, they recognised higher quality, more granular and more frequent data are needed to better understand real estate investment market dynamics and support future policy recommendations.
Both institutions acknowledged that, unfortunately, the lack of such data available to public authorities until now has led to policy recommendations that are not based on a data-based understanding of the market.
Sources of data
The ECB’s approach to obtaining more and better data emphasises harmonisation and integration with existing data frameworks.
Leveraging existing resources such as the ECB’s Securities Holdings Statistics, Register of Institutions and Affiliates Data, and the European Securities and Markets Authority’s AIFMD and UCITSD data streams takes advantage of data gathered by other public institutions, which will reduce unnecessary reporting burdens for stakeholders.
This comprehensive approach should also present a more cohesive and representative picture of Europe’s real estate investment fund landscape while striking a positive balance between enhanced data availability and manageable reporting burdens.
The ECB’s new regulation will come into effect in December 2025 and is a very welcome step in the right direction. These improvements will ultimately benefit the entire European real estate investment fund sector and contribute to monitoring financial stability and systemic risk necessary for fiscal, monetary and macro-prudential policymaking.
At the same time, it will create a solid factual basis for research and policy recommendations on real estate investment funds.
The non-listed real estate industry is a critical financial sector and a significant asset class for pension funds and insurers. These institutions rely on it to generate the returns needed to meet their commitments to pensioners and policyholders.
Therefore, steps to obtain high-quality, consistent data for informed analysis and recommendations concerning our industry are both welcome and long overdue.
