Fitch Ratings in London will this week introduce a system for measuring the volatility of rental income in European commercial real estate across three property types and 25 regional markets.
Huxley Somerville, head of mortgage-backed securities, said Fitch anticipates the indicator will be useful to all market participants by informing investors and helping arrangers better understand Fitch’s methodology.
The European Property Market Metric combines the historical volatility of a property market with its future growth prospects to derive a single performance metric called a volatility group, or VG score. Volatility on a scale of one to five can then be ascribed and tracked for the rental income in the City of London office sector, for example, or the West End retail sector.
Fitch already offers a U.S. Property Market Metric incorporating data from five property types within 60 markets, which was launched in 1999.