ABSTRACT
The chapter lays out the toolkit for analysing the real estate market. It starts from the definition of key performance indicators (KPIs). The chapter discusses the typical relation of the economic KPIs with the business cycle and then focuses on the physical and economic KPIs that may be used for valuation and risk definition purposes, also from the point of view of characterising the ex ante real estate market investment opportunity set. In order to provide empirical content to the KPIs, the chapter reports available evidence on commercial real estate prices, highlighting the quick recovery of prices after the sub-prime crisis and the general good performance in the past two decades. The previous elements are the required inputs for any exercise of strategic real estate planning and risk analysis. The attention paid in the chapter to financial and operational risk is consistent with the general topic of the book, strictly connected to non-performing exposure and new quantitative techniques, and opens the way to the application of Chapter 8.
