While the quarterly NPI total return remains modest, returns for the second quarter of 2018 were the highest return for the NCREIF Property Index since the second quarter of 2016, according to the National Council of Real Estate Investment Fiduciaries (NCREIF)
The total return was 1.81 percent in the second quarter, up slightly from 1.7 percent last quarter. This is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the United States.
The average quarterly return over the past five years was 2.38 percent or 9.85 percent annualized. Although the current quarter’s return of 1.81 percent or 7.44 percent annualized is down from the torrid pace during the previous five years, the downward drop in returns that we witnessed for several years stopped at the beginning of 2017 and returns have held remarkably steady since then.
The second quarter 2018 total return consisted of a 1.14 percent income return and 0.67 percent capital appreciation. The positive capital return indicates that, on average, properties in the NPI are still increasing in value after deducting capital expenditures that have been added.
Industrial properties, which are primarily warehouse, continue to be the stellar performer with a return of 3.58 percent for the quarter. A distant second was hotel at 1.95 percent followed by office and apartment, which were tied at 1.54 percent. Retail recovered nicely from 0.72 percent last quarter to 1.32 percent for the current quarter.
The NPI reflects investment performance for 7,672 commercial properties, totaling $581 billion of market value.
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