Question 1

What is the CMI?

Accepted Answer

The Commercial Markets Index® (CMI) is a comprehensive scoring system that evaluates commercial real estate markets across the United States. It assesses fundamental factors such as population, employment, income, environmental, and property performance metrics to provide a comparative score for each Metropolitan Statistical Area (MSA). The CMI aims to highlight trends, opportunities, and risks within commercial real estate markets.

Question 2

What commercial real estate properties make up the CMI?

Accepted Answer

The CMI analyzes over 20,000 commercial real estate properties underlying approximately 315 separate CMBS securitizations and $200 billion in original mortgage loans associated with the properties. The property dataset begins with those whose mortgage loans were securitized within the past 10 years. We narrowed the dataset to properties backing CMBS transactions included in certain CMBX derivative series (specifically CMBX 6 thru CMBX 16), as we believe this subset of properties is representative of the market, and is a population widely referenced and accepted as benchmarks by many CRE market participants.

Our population excludes those properties for which the original securitized mortgage loan has been defeased, paid off, or liquidated. We further exclude those properties which are identified as multifamily co-operatives, identified as "other" in the original offering materials (i.e. properties such as ground leases, parking garages, land, golf courses, daycare centers, and other specialty or non-standard property types).

Question 3

What is a CMI score and what does it mean?

Accepted Answer

The CMI score is based on 15 fundamental factors that we believe are important to overall commercial property performance regardless of the specific market. We calculate results for each factor, helping us to understand how each MSA stacks up against the national average as well as to each other.

The 15 fundamental factors are: 1) Population Rank, 2) Population 5-Yr Growth Rate, 3) Unemployment Rate, 4) Employment Volatility, 5) Median Household Income, 6) Median Household Income 5-Yr Growth Rate, 7) Per Capita Space, 8) Average Occupancy, 9) Average Occupancy to UW Multiple, 10) Average Revenue / SF, 11) Average Revenue / SF to UW Multiple, 12) Distressed Asset Percentage, 13) Capital Rank, 14) Industry Growth Score, 15) Natural Disaster Costs ($mm).

We compare the resulting measurement for any specific factor within the MSA to our pre-defined ranges of what we believe to be a positive influence for CRE, a neutral influence for CRE, or a negative influence for CRE. We assign a weighted numerical score, based on the positive, neutral, or negative influences that are associated with each factor. Then we sum the scores to determine an annual CMI score between 1 and 10.

We have developed pre-defined ranges for each of the 15 factors and for each year, based on national averages and independent research, to ensure we are grading each MSA in a systematic and unbiased approach.

Once all scores are determined, we review the distribution of scores, other factors, and assign the MSA to a category which allows for expression of an opinion based on the following thresholds: 9 - 10 = Excellent, 7 - 8 = Very Good, 5 - 6 = Good, 3 - 4 Fair, 1 - 2 Poor.

Question 4

What data is used to create the index?

Accepted Answer

Data is sourced from multiple notable sources measuring different factors impacting commercial real estate including: U.S. Bureau of Labor Statistics (BLS), U.S. Census Bureau, U.S. Bureau of Economic Analysis (BEA), National Oceanic and Atmospheric Administration (NOAA), Commercial Real Estate Finance Council (CREFC) Investor Reporting Package data, and National Center for Education Statistics and Integrated Postsecondary Education Data Systems (NCES and IPEDS).

Question 5

What does the CMI tell me, and how can I use it?

Accepted Answer

The CMI provides a relative ranking of both MSA and asset type strength as well as the general direction we believe the market is moving. The index applies a consistent set of criteria to each MSA and property type allowing for comparability. The CMI may identify relative strength (or weakness) of the market in question when compared to its region, state, other MSAs or nationally.

The index can identify those markets (and implicitly properties) which are in stronger markets, those in weaker markets, and those which are trending positive or negative based on historical scores.

CRE professionals may find it useful to combine property prices or values with the index to identify assets which may be over or under priced, opportunities, or sale candidates when compared to the respective market fundamentals and market trends.

Question 6

Can I see a specific property type within an MSA?

Accepted Answer

Yes, the CMI allows for comparisons of specific asset types within any given market, adjusting units of measure and scoring thresholds accordingly for meaningful comparisons.

Question 7

Is the CMI Score ranking a specific asset?

Accepted Answer

No. The CMI Score is a relative ranking of an MSA and not a rank or score of a specific asset.

Question 8

Does the index forecast market conditions?

Accepted Answer

No. The CMI presents a current score for each MSA, our rationale, a 5-year history, and the ability to identify trends to date. Although the CMI contains no forecasted or forward-looking information, it is useful for individual users to understand the impacts of changing market conditions over time.

Question 9

Does the CMI track every property nationally and within each of the MSAs?

Accepted Answer

No. The CMI is comprised of a limited sample of assets and information about the markets and properties. Investors should be aware that actual markets will contain significantly more properties and other factors which may influence the actual performance of such markets. In addition, certain properties and markets may contain key dependencies. The results of changes in dependencies and the potential impact of other changes are not forecasted or considered.

Question 10

How often will the underlying CMI data be updated?

Accepted Answer

The CMI scores are calculated annually in the initial index. We will update underlying information on a periodic basis when it becomes available and expect to constantly update and improve data quality wherever and whenever possible. We may add additional securitizations or non-securitized properties to our population provided there is sufficient history to make the index comparable across periods. As the debt on existing properties is retired, repaid, defeased, or otherwise liquidated, we may remove properties from the population to avoid underlying stagnation and related distortion. The CMI will be recalculated when new data is incorporated. We expect that index values for prior periods will be restated to maintain comparability when underlying properties or certain other factors change. As a result, index values for any MSA or property type for that publication date should be comparable, whereas values reported in different publication dates may not be.

Question 11

Will there be changes or future enhancements to the CMI?

Accepted Answer

Yes, the CMI may undergo adjustments and enhancements over time to reflect evolving market conditions and information. Changes to the index structure will be noted, and historical periods may be recalculated for comparability.

Question 12

Can I use the CMI for investment decisions?

Accepted Answer

No. Opinions, estimates, forecasts and other views contained herein are those of CWFS Data Insights LLC ("CWFS") and do not necessarily represent the views of its affiliated companies or its management, and should not be construed as indicating its collective view of business conditions, prospects or expected results. Additionally, this does not constitute a solicitation to purchase or sell any security or real estate, nor should it be construed in any way as investment, tax, legal or accounting advice. Although CWFS attempts to provide reliable, useful information, it does not guarantee that the information is accurate, complete or suitable for any particular purpose. All content is subject to change without notice and CWFS is under no obligation to update, correct or modify the content. The information is therefore provided on an "as is" basis, with no representations or warranties of any kind whatsoever. By accessing and/or reviewing the CMI, you acknowledge and agree that the CMI is not an appraisal or formal opinion of value and neither CWFS nor its affiliates shall have any liability whatsoever to you in respect of any loss or damage suffered by you or any third party as a result of or in connection with any investment, transaction, opinion, forecast, or any other conclusion, or any course of action determined or taken by you or any third party, whether or not based on the data, content information or materials contained in the CMI.

Question 13

How often does the Market Economics data get updated?

Accepted Answer

1. Top Industries: Released annually (US Census Bureau)
2. Population: Annual estimate released in July (US Census Bureau)
3. Median Household Income: Released annually in November for previous year (U.S. Bureau of Economic Analysis)
4. Employment: Civilian labor force, unemployment, and nonfarm payroll data released monthly (U.S. Bureau of Labor Statistics)
5. Estimated cost of Natural Disasters: Released quarterly (National Oceanic and Atmospheric Administration)
6. Top Universities and Enrollment: Provisional figures released in June, final figures in December (National Center for Education Statistics)
7. Top Employers: Updated periodically by analysts
8. Housing Affordability: Released annually in September (US Census Bureau)
9. Rent Affordability: Released annually in September (US Census Bureau)
10. Cultural, Sports, Shopping, and Other Attractions: Updated periodically by analysts
11. Key Dependencies and CRE Demand Drivers: Updated periodically by analysts
12. Our Thoughts: Updated periodically by analysts

Question 14

What does Top Industry's stability mean?

Accepted Answer

Primary: Industries we believe draw capital to the MSA.
Neutral: Healthcare, Waste Management, Other Professional Services.
Secondary: Industries we believe depend on the presence of Primary and Neutral Industries.

Question 15

Where are the Top Employers in each MSA from?

Accepted Answer

The top employers were identified by using industry employment counts at the MSA level from the Bureau of Labor Statistics and matching by industry to the register of businesses in the area. This yielded an estimate of which employers in the area may be the largest in a given MSA in the absence of having firm and established employment counts linked to specific employers.

Question 16

What is the Median Household Income?

Accepted Answer

Median Household Income is the midpoint value for the range of observed income levels in an MSA. This means that half of the households in the MSA have an income above the median household income, and half have an income below the median household income.

Question 17

What does Housing Affordability mean and how is it calculated?

Accepted Answer

Housing Affordability is determined by calculating the estimated annual mortgage payment (based on a 30-year amortizing loan with a 20% down payment) for a house at the Median Property Value and dividing this by the Median Household Income.

For instance, if the Median Property Value is $300,000 with a 4% interest rate, the annual mortgage payment is $13,750. Given a Median Household Income of $50,000, the ratio is 27%. This means that a Median Household in the MSA spends 27% of their income on their mortgage payment to afford a home at the Median Property Value. However, it is important to note that the Housing Affordability ratio does not consider other factors such as property taxes, insurance, and maintenance, or other necessary costs, such as food, transportation, healthcare, savings for emergencies and retirement, other debt or financial obligations, or government programs such as down payment assistance.

Question 18

What does Rent Affordability mean and how is it calculated?

Accepted Answer

Rent Affordability is calculated by dividing the Median Rent by the Median Household Income.

For example, if the Median Rent is $12,000 per year and the Median Household Income is $60,000 per year, the Rent Affordability ratio would be 20%. This means that a Median Household in the MSA spends 20% of their income to rent an apartment or home at the Median Rent. However, it is important to note that the Rent Affordability ratio does not consider other necessary costs like food, transportation, healthcare, savings for emergencies and retirement, other debt or financial obligations nor does it consider government policies like rent control.

Question 19

How is the 5 year CAGR calculated?

Accepted Answer

The compound annual growth rate (CAGR) is the average yearly growth rate over a specified period of time.

Question 20

What is the methodology and data source for the NOAA Estimated Cost of Natural Disaster?

Accepted Answer

The data is sourced from NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2023).

NCEI tracks and evaluates climate events in the U.S. and globally that have great economic and societal impacts. The statistics represent the estimated total costs of these events -- that is, the costs in terms of dollars that would not have been incurred had the event not taken place. These costs include: physical damage to residential, commercial, and municipal buildings; material assets (content) within buildings; time element losses such as business interruption or loss of living quarters; damage to vehicles and boats; public assets including roads, bridges, levees; electrical infrastructure and offshore energy platforms; agricultural assets including crops, livestock, and commercial timber; and wildfire suppression costs, among others. However, these disaster costs do not take into account losses to: natural capital or environmental degradation; mental or physical healthcare related costs, the value of a statistical life (VSL); or supply chain, contingent business interruption costs. Therefore, our estimates should be considered conservative with respect to what is truly lost, but cannot be completely measured due to a lack of consistently available data. More than one dozen public and private sector data sources help capture the total, direct costs (both insured and uninsured) of the weather and climate events. Sources include the National Weather Service, the Federal Emergency Management Agency, U.S. Department of Agriculture, National Interagency Fire Center, U.S. Army Corps, individual state emergency management agencies, state and regional climate centers and insurance industry estimates, among others.

Question 21

What is First Street?

Accepted Answer

First Street is the leading provider of climate risk data. First Street's mission is to connect climate risk to financial risk. First Street leverages the most advanced climate science and engineering approaches to quantify and communicate the risk for every property in the country. First Street provides the most in-depth, property-specific, climate risk assessment possible in an easy-to-understand user interface.

Question 22

What is Flood Factor?

Accepted Answer

A property's Flood Factor® is an indicator of its comprehensive, thirty-year risk of flooding from rainfall, overflowing rivers and streams, high tides, and storm surges, ranging from 1–10. Properties with higher Flood Factors are either more likely to flood, more likely to experience high floods or both.

Question 23

What is Fire Factor?

Accepted Answer

A property's Fire Factor® is an indicator of its comprehensive, aggregate thirty-year risk of exposure to wildfires ranging from 1 (minimal risk) to 10 (extreme risk) based on the likelihood of direct wildfire impact or indirect exposure to embers from nearby wildfires. Properties with higher Fire Factors are more likely to burn, meaning there is a higher likelihood that they will ignite in the event a wildfire occurs in that area.

Question 24

What is Wind Factor?

Accepted Answer

A property's Wind Factor™ is an indicator of its risk of extreme wind exposure over the next thirty years. The model assigns each property a Wind Factor, ranging from 1 (minimal risk) to 10 (extreme risk). A property's Wind Factor is based on a 30-year aggregate estimate, which means that a property with a higher Wind Factor has a higher likelihood to experience higher winds more frequently today or in the future than a property with a lower Wind Factor score.

Question 25

What is Heat Factor?

Accepted Answer

A property's Heat Factor® is an indicator of its risk of extreme heat exposure over the next thirty years. The model assigns each property a Heat Factor, ranging from 1 (minimal risk) to 10 (extreme risk). Heat Factors are based on the current average daily high temperature and humidity of a property's specific location during the hottest month of the year, and consider how it's expected to grow over the next 30 years. Properties with higher Heat Factors have higher current, and/or future "feels like" temperatures.

Question 26

How do GreatSchools ratings work?

Accepted Answer

School ratings follow a 1-10 scale, where 10 is the highest and 1 is the lowest. Ratings at the lower end of the scale (1-4) signal that the school is "below average," 5-6 indicate "average," and 7-10 are "above average."

Question 27

Have questions on the GreatSchools data?

Accepted Answer

Please visit https://greatschools.zendesk.com/hc/en-us

Question 28

What is a Subject Property?

Accepted Answer

The subject property refers to the specific commercial real estate asset being researched and valued.

Question 29

What are Sales Comps?

Accepted Answer

Sales comps, short for "comparable sales," are transactions of similar properties with similar characteristics and location to your subject property. Real estate professionals use them to estimate a property's market value, comparing factors such as location, size, condition, and amenities.

Question 30

Where is the Sale Comps data sourced from?

Accepted Answer

Sales comps that are displayed within Insights are sourced from Moody's. To qualify as a valid sales comp, the asset must have at least one arm's length sale.

Question 31

How is the sales comp list sorted?

Accepted Answer

By default, the sales comps list is sorted by Moody's Similarity Score, which groups the most relevant comparable properties to your subject property, facilitating due diligence and the underwriting process. You can rearrange the columns via drag and drop and sort the data by clicking the respective column headers in the table.

Question 32

What if my subject property isn't found?

Accepted Answer

If your subject property is not located within the Moody's database, a list of similar properties is provided for you to consider as alternatives.

Question 33

What is a Building Class and how are the different building classes defined?

Accepted Answer

Moody's provides a Building Class as an overall indicator of both a property's physical condition and operating performance. Here's a breakdown of the different classes:

Class A: Properties that tend to be the best in the market, have above average design, construction and finish, minimal or no deferred maintenance, superior locations, achieve the highest rents, and have tenants of strong credit quality.

Class B: Properties that tend to be in good to above average condition, have adequate construction but do not have design and finish reflective of the latest standards and preferences, have above average locations, are generally well maintained, and command average rents.

Class C: Properties that tend to be in average condition, exhibit some deferred maintenance, provide functional space for tenants, have less desirable locations, are usually managed by small local companies with limited experience, command below average rents, and have tenants of lower credit quality that provide a less stable income stream.

Question 34

What is a sales comp analysis?

Accepted Answer

The sale comps analysis is one of many valuation methods that are commonly used to help estimate the market value of a subject property. The sales comp analysis involves a side-by-side comparison of recently sold properties similar to the subject property. Comparable properties can be selected based on factors like location, size, age, condition, and amenities.

Question 35

How do I choose the best comps and how many can I pick for the Comps Analysis tool?

Accepted Answer

The best sales comps are properties that most closely match the attributes (size, age, location, etc.) of your subject property and are the most recent transactions possible. You can select up to 5 comps by checking the boxes on the sales comps table or you can click on any of the blue pins on the map.

Question 36

What are adjustments?

Accepted Answer

Adjustments are made to account for differences between properties, as no two properties are identical. For instance, if a comparable property is newer than your subject property, its sale price might be adjusted downward by a percentage to reflect this age difference.

Question 37

What does Variance to Average mean?

Accepted Answer

The variance to average is the difference between the adjusted price per unit of a comparable property and the average adjusted price per unit of all the comparable properties in your analysis. A positive variance indicates the comparable property's adjusted price per unit is higher than the average, while a negative variance indicates it's lower.

Question 38

Who can I speak with if I have questions on Moody's data?

Accepted Answer

Please reach out to Lisa Rothman, Associate Director of CRE Solutions at Moody's, at Lisa.Rothman@moodys.com

Frequently Asked Questions

Commercial Markets Index® (CMI)

Market Economics

Climate & Environmental Data

Schools & Education

Sales Comps