All About the Z-Score
Whether you’re a developer or an investor, if you’re contemplating an expansion into a new market, the Z-score analysis is our favourite model – and one that sets Cortland Consult apart.
Inspired by the refined data analytics frameworks that have under-pinned high-level investment strategies in the US multifamily market for more than a decade, we’ve created an original model that ranks potential locations for investment – all customised to a client’s investment strategy.
The Maths Definition
At its basic function, a Z-score describes the position of a raw score in terms of its distance from the mean when measured in standard deviation units. The Z-score is positive if the value lies above the mean and negative if it lies below the mean. But that’s the boring bit – so here’s how we use it.
How We Use It
We take these calculations and rank locations in a consideration set based on a range of socio-economic criteria and BTR fundamentals to understand how they compare and to assess BTR viability. There are currently 65 locations across the UK included in the Z-Score and 144 postcodes, excluding the London Boroughs. The primary indicators we focus on include the following:
- 20-39 year olds population (%)
- GDP (Per Capita)
- Forecast Employment Growth
- Number of People Privately Renting as a Percentage of Population
- Forecast Rental Supply Growth
- Current Effective Rent Growth
- Forecast Effective Rent Growth
- Total Number of Households
- Number of People Privately Renting
- Number of Private Rented Households
- BTR Completions
- BTR Pipeline
- Average Rental Yield
- Travel to Work Data - Sustainable Methods of Transport
- Full-time Student
- Number of Professionals - Higher earners
- Age 20-25
- Age 26-30
- Age 31-35
- Age 36-40
- 1 Person Households
- Population Growth
- Experian Mosaic UK 7 'Rental Hub'
We break down the geographies by postcode district and can currently provide this analysis for core cities, London boroughs, and commuter towns. We then provide this analysis using a data visualisation platform that creates an interactive dashboard for our clients.
Equipped with this level of detail on local markets and socio-economic trends, our clients can be confident in their decision-making and their investment strategy vision.
Interested in learning more or discovering how our Z-score model can help you pinpoint your next development market? We’d love to chat!