Chair:  
Paul McNamara, PRUPIM         

Speaker:     
Paul Mitchell, Paul Mitchell Real Estate Consultancy

Panellists:                          
Matthew Richardson, FIL Investments International
Brett Robinson, Seven Dials Fund Management
Kieran Farrelly, CBRE Global Investors

Paul Mitchell discussed his work into the nature of individual property risk in the UK commercial market.  It represents a more comprehensive and technical version of the paper prepared jointly with Paul McNamara for October 2011’s Nick Tyrrell Memorial Seminar in addition to incorporating additional data and analysis.

The research is based on the statistical analysis of the performance and characteristics of 200 properties held continuously by PRUPIM since 2000 and also on detailed case studies of 25 of these assets.

Previous research by practitioners and academics has struggled to find conclusive evidence on common factors affecting property performance. The new research finds that, for the majority of properties, the market explains most assets’ performance and that specific risk is typically low.  For the minority, high volatility and specific risk is mainly associated with lease events and in particular the run-up to expiry, rather than the event itself; the idiosyncratic nature of this lease risk may help explain why past studies have had difficulty explaining individual property risk.

These findings have implications for portfolio strategy and risk control and for the contribution of researchers to the investment process.

The presentation was followed by a panel discussion and open debate.