Moderation: Institutional real estate appreciation weakens, income holds steady
1 Representing $516.4 billion in market value, the quarterly total return of the NCREIF Property Index (NPI) continued to slow on weaker appreciation. The total return was 1.77 percent in third quarter 2016, down from 2.03 percent the previous quarter and 3.09 percent in third quarter 2015. This marked the first sub-2 percent total return since the commercial real estate recovery began in 2010. The third quarter 2016 total return consisted of a 1.16 percent income return and 0.60 percent appreciation. Although trending down since 2010, with property values rising faster than income, the quarterly income return has been relatively steady in 2016. Appreciation has been on a steeper downward trend, with the third-quarter capital return at less than one-third of the rate returned for the same period a year ago. On an annual basis, the NPI total return for the 12 months ended Sept. 30 was 9.22 percent, consisting of a 4.81 percent income return and 4.26 percent appreciation.