International Conference on Real Estate Statistics Short-term business indicators for commercial real estate Session 3 - Wednesday 20 February 2019 CRE statistics: prices and beyond Luxembourg, European Convention Center, 20-22 February 2019

Contents Who are we? Real estate in short-term statistics New data requirements Business statistics work stream Conclusions

1.1 Who are we? Eurostat's Unit G3 STS Team validates, processes, aggregates and publishes short-term business statistics based on Council Regulation 1165/98 concerning short-term statistics

1.2 ESS Short-term Business Statistics Coverage: Industry, construction, trade and other services Monthly data with data/press releases at t + 30-48 days. Basic aim: to monitor closely the business cycle in the European economy

2.1 STS Regulation 1165/98 Annex B NACE rev. 2.0 Section F Building construction Residential buildings 1 dwelling 2+ dwellings Residencies for communities Non-residential buildings Office buildings Other non-residential buildings Civil Engineering Building permits, measured in m2

2.2 EU28 building permits (m2) and building construction (index 2015=100)

2.3 EU28 building permits in 2017 (m2)

2.4 STS Regulation 1165/98 Annex D NACE rev. 2.0 Sections G-N (STS) G H I J L L68 L68.1 L68.2 L68.3 M N

2. 5 Value added for NACE rev. 2 2.5 Value added for NACE rev. 2.0 class L68: "Real estate activities" (2015, M €) Source: Eurostat [sbs_na_1a_se_r2]

3.1 New data requirements 01/2017: European Systemic Risk Board recommendation of 31 October 2016 on closing real estate gaps (ESRB/2016/14) 11/2017: ECOFIN Council Conclusions on European Statistics 01/2018: Opinion of the ECB of 2 January 2018 on a proposal for a regulation of the EP and the council on European business statistics ("FRIBS") 05/2018: ESSC meeting: ESS strategy for commercial real estate indicators Overall: more and better official data on commercial properties is needed for detecting systemic economic risks

3.2 New data requirements (cont’d) ESSC meeting 05/2018: final minutes: ESS strategy for commercial real estate indicators Summary of the discussion: A large majority of Member States expressed their support for the proposals put forward by Eurostat and a large number of them volunteered to join the Task Force CREI. One delegate advocated that such a strategy is needed for all real estate, not just commercial real estate, while another delegate urged Eurostat to give grants to Member States for work in this area.” ... “Eurostat thanked for the support received. Eurostat will explore the possibilities to provide financial support to Member states for this project”.

3.3 New data requirements (cont’d) Commercial Real Estate Indicators (CREI) (III) ESCB Lending standards Credit exposure (II) ESS Business Statistics Vacancy rates Works completions Construction starts Building permits (I) ESS Macroeconomic Statistics Rental yield index Rental index Price index TF CREI STS CREI TF

4.1 Business Statistics Work Stream (II) STS CREIs (STS Commercial Real Estate Indicators) comprise the following indicators: Construction starts Works completions Vacancy rates Building permits: more breakdowns may be needed The basic aim is to add these indicators to the other STS indicators produced regularly.

4.2 STS CREIs - Data availability in EU Member States ‘Construction starts' and 'Works completions' are considered as feasible indicators in the medium term - several countries already compile data on 'construction starts' or 'works completions' 'Vacancy rates' need methodological development – such indicators are often produced by private data provider or other data sources 'Building permits' are already produced in STS statistics (possibly more breakdowns needed)

4.3 Other Work Streams (I and III) Work stream I: Task Force CREI (prices) in October 2018: ESS and the international banking authorities Presentations on data availability of CRE prices, rents and yields Work stream III: the work of the ECB focusses on: Financial indicators such as credit exposures or lending standards

4.4 STS Working Group meeting 11/2018 Conclusions on the STS Commercial Real Estate Indicators (CREI’s) Eurostat provided an overview of the user needs and the work progress related to the CREIs', presented the outcome of the EU Survey on the availability of STS CREI’s related data, and outlined possible ways forward for the next work steps on the STS CREI’s; Three different work streams/Task Forces dealing with the CREIs exist: PRICES CREI work stream/TF, STS CREI work stream/TF and the ESCB financial variables work stream/TF; Data on construction starts and works completion are available in several Member States while almost no data is available on vacancy rates. Construction starts and completions are related to building permits. For the vacancy rates private or other data sources could be envisaged; The first meeting of the STS CREI Task Force will be organised in Q2/2019. Many Member States expressed interest to take part in the STS CREI Task Force.

4.5 STS CREI Task Force in May 2019 Our work program for developing the new STS CREI indicator: Common definitions and methodology Deciding on the common measurement unit Selecting of the classification systems Developing Data Structure Definition and weights Pilot data exchange Capacity building

5. Conclusions The European Statistical System works to improve CREIs in two fronts: Price statistics: Prices, rents and yields STS: Building process and vacancy rates Some data already exist in the EU Member States, but they need to be harmonised, collected and aggregated Organisational/methodological questions need to be discussed with the Member States We expect a first data output step-by-step (in the medium term).