Risk analysis uncovers how new fundamentals impact asset values

Although value and risk are intertwined, they are ultimately separate metrics. A valuation analysis gives investors a monetary expression of their property or portfolio; it is effectively a price tag. A risk report, on the other hand, is an in-depth explanation of the many factors that could explain why the property’s value could be negatively impacted both now and into the future. Knowing the ‘why’ arms investors with an opportunity to be proactive rather than reactive in making investment decisions and managing assets throughout the investment lifecycle.

This relationship between value and risk is an established principle of commercial real estate investment, but defining risk and its impact on value has been a subjective undertaking. “Valuers have traditionally taken a qualitative approach, based on their professional opinion,” says Tyrone Hodge, Global Head of Risk Advisory, Value and Risk Advisory at JLL. “We are starting to look at it in another way, by developing a spectrum of factors that impact value. To collect and assess those factors, we lean heavily on data and analytics.”