Research - MAY 2, 2014

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ODCE returns down, but vacancies hit post-GFC low

by Reg Clodfelter

Open-end core funds produced the lowest returns since 2012 in the first quarter, but the total occupancy rate hit a level it has not achieved since fourth quarter 2007, according to the National Council of Real Estate Investment Fiduciaries, which released the first quarter results for the NCREIF Open-end Diversified Core Equity index.

The ODCE’s index-wide return for the quarter was only 2.52 percent — split almost evenly with 1.24 percent derived from income and 1.28 percent from appreciation — a year-over-year drop of 16 basis points and a 65 basis point drop from the previous quarter. The 2.52 percent return was not only the lowest since fourth quarter 2012 but also marked the first time the ODCE was outperformed by the NPI since that same quarter. A trend that, if it continues, could be further proof that core markets have continued to lose momentum as prices continue to rise.

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