Cushman & Wakefield, one of the world's leading real estate consultancies, has developed the TIME Score Index. This simplifies the presentation of key figures that are important for investment decisions. The index, whose name stands for "Timing Investment Market Entry/Exit", identifies important changes in the commercial property environment. It is based on historical market data and economic indicators to assess the current cyclical positioning and to signal future market conditions.
The index consists of four sub-indices: Growth path (e.g. level of business investment, GDP growth, 5-year swap rates), cyclical factors (price adjustment, credit availability), risks (risk premium, country risk) and dynamics (liquidity, share of cross-border capital, transaction volume, economic sentiment).
Back-testing of the TIME score up to the third quarter of 2008 has shown that the index is able to predict future movements, recognise changes in sentiment and identify growth phases at an early stage. The rating scale ranges from 1 (contraction) to 5 (expansion). Higher values indicate favourable investment conditions, while lower values indicate periods of uncertainty and recommend strategic adjustments.
At a pan-European level, the TIME Score currently shows that sectors such as logistics and industrial property, residential property, retail property and hotel and restaurant property have reached a value of 2.5 or more. This marks the transition from a cautious phase to a turning phase in which investors can benefit from early periods of growth and expansion. Only the office sector is below the turning point.
Ideal time for (re)entering investments in Germany is approaching
"The TIME Score in Germany was 2.5 across all sectors in Q1 2024, in line with the overall European index value. Although this was slightly lower than in the previous quarter, it was higher than in any quarter since Q3 2022, indicating that the market is currently in a transition phase and that market entry opportunities are increasing," explains Helge Zahrnt, Head of Research & Insight at Cushman & Wakefield in Germany.
Although there is still uncertainty, real investment opportunities are opening up. A value of just under 3 marks a window of opportunity for a suitable entry point into the market, as this is the best time to benefit from future market developments.
Recognising market trends in advance
The TIME Score is a leading indicator. Correlation analyses show that it leads investment transactions in Germany by a good six months to a year. This means that it is able to recognise improvements in sentiment and thus a revival in activity at an early stage. As 2024 progresses, the "momentum" category should make a greater contribution and the score will increase further.
Simon Jeschioro, Head of Capital Markets & Investment Advisory at Cushman & Wakefield in Germany, explains: "The cyclical nature of property means that timing is crucial for investors. The TIME Score simplifies the presentation of the key figures that are relevant for investment decisions. It provides investors waiting for favourable conditions with a strategic tool to identify optimal times for entry and exit scenarios for the property market."
