- June 1, 2018: Vol. 30, Number 6

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A tale of two sectors: Real estate returns diverge in first quarter

by Jeffrey Fisher

Returns for commercial real estate started 2018 at virtually the same level as they were during 2017, although the disparity among returns for the different property sectors continues to widen, according to the NCREIF Property Index (NPI). The NPI reflects investment performance for 7,553 commercial properties, totaling $567 billion of market value, owned and managed by the nation’s largest institutional investors and pension funds.

While the quarterly NPI total return remains modest, returns for first quarter 2018 were slightly higher than first quarter 2017. The total return was 1.70 percent in the first quarter of this year, down from 1.80 percent in fourth quarter 2017. For the current and previous three quarters, the total return was slightly more than 7 percent — a bit of an improvement over the four quarters of 2017. This is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the United States.

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