NCREIF Returns 4th Quarter 2021

ALL PROPERTY TYPES COMBINED: Income returns are tapering off as appreciation increases are recorded. The appreciation return spikes continue to be driven by record increases in industrial properties.

ALL PROPERTIES COMBINED: Annual return for Q4 came in at a near-record rate of 17.70% driven primarily by Industrial properties. Note in the lower graphic that quarterly income returns are DECLINING.

INDUSTRIAL: Total returns are being driven by record-shattering Appreciation returns. Income returns have been decreasing indicating that FUTURE income increases are anticipated, or CAP RATES are decreasing. With rising 10 Year Treasury rates, whether the lower cap rates can be maintained is subject to debate. It is true that demand for Industrial property increased during the 2020-2022 COVID outbreak as people stayed home and did more online shopping. With COVID becoming less of a public policy issue, it remains to be seen if the online shopping trend will remain at high levels.

INDUSTRIAL: Returns are THE LARGEST APPRECIATION EVER—since ~1976 NCREIF Index creation.

INDUSTRIAL PROPERTIES as a % of NCREIF: NCREIF’s composition by property type gradually changes over time. Below are the changes from the 10-year period from Q4 2011 to Q2 2021. There has been a material increase in industrial Properties. Because of this composition change, the Total NCREIF return is higher due to record-shattering returns posted by industrial properties.

APARTMENT: Income returns increased slightly over the past few quarters, but it is questionable if this alone warranted record appreciation spikes. Cap rates decreases may be a cause.

APARTMENT: APPRECIATION RETURNS are hitting record highs while INCOME returns are declining.

OFFICE: Income returns have increased in the past 2 quarters and appreciation returns have improved.

OFFICE: Historic Returns Q2 appreciation return is turned POSITIVE, first time in 6 quarters.

RETAIL: Income returns have been slowly increasing as property valuations have decreased.

RETAIL: Historic Returns Q2 return is turned POSITIVE, first time in many quarters.