Alternatives

Best Location for Real Estate? Europe

Best Location for Real Estate in 3rd Quarter? Europe
clock
1 min 58 sec

The NCREIF Property Index advanced 1.7% during the third quarter (1.1% from income and 0.6% from appreciation). This marked the 35th consecutive quarter of positive returns for the Index. In the second quarter, appreciation return increased from the first quarter, the first such gain since the first quarter of 2015. But in the third quarter appreciation return resumed its declining pattern from the previous quarter’s level.

Industrial (+3.3%) was the best-performing sector for the sixth consecutive quarter followed by Hotel (+2.3%), Multi-Family (+1.7%), and Office (+1.4%); Retail (+1.2%) was the worst performer.

The West was the strongest region for the fourth quarter in a row, increasing 2.2%, and the East brought up the rear with a +1.3% return.

Transaction volume increased to $11.8 billion, up 53% from the second quarter and 22% from the third quarter of 2016. Appraisal capitalization rates fell 8 basis points to 4.39%. Transaction capitalization suffered a steeper decline, falling 83 bps to 5.26%. The spread between appraisal and transaction rates decreased to 87 bps.

Occupancy rates fell to 93.3%. Industrial and Retail occupancy rates increased slightly while Apartment and Office rates decreased.

The NCREIF Open End Diversified Core Equity Index rose 1.9% (1.1% from income and 0.8% from appreciation), a 17 bps increase from the second quarter. Appreciation return increased by 18 bps from the second quarter’s seven-year low.

Rolling One-Year Returns

Global real estate investment trusts (REITs), tracked by the FTSE EPRA/NAREIT Developed REIT Index (USD), outperformed U.S. REITs and posted a 1.8% return. U.S. REITs, as measured by the FTSE NAREIT Equity REITs Index, advanced 0.9% for the quarter.

In the U.S., REITs started the quarter with a strong July but then surrendered most of the gains with poor showings in August and September. Sectors experiencing strong secular demand, such as Industrial (+6.5%) and Data Centers (+5.2%), were the best performers as the continued rise of e-commerce and cloud storage provided ample tailwind. Hotels (+2.8%) and Self-Storage (+4.7%) also did well, buoyed by expectations of inflation and rising interest rates. Health Care (-5.4%) was the worst-performing sector.

Europe, as represented by the FTSE EPRA/NAREIT Europe Index, was again the strongest-performing region, rising 4.8% in U.S. dollar terms. Strong, diversified growth across the majority of the region’s economies was the main driver of positive returns. The region largely shrugged off destabilizing political events such as the Catalonian independence referendum.

For the second quarter in a row, the Asia-Pacific region outperformed the U.S. but underperformed Europe. Hong Kong provided the best regional performance while Japan lagged behind, hurt by a strengthening yen.

1.7%

Third quarter return of the NCREIF Property Index

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Private Markets

Income Returns Positive for Private Real Estate; REITs Top Equities

Munir Iman
Callan expert analyzes real estate in 3Q24.
Public Markets

Stellar Markets Across Asset Classes

Kyle Fekete
Callan expert assesses the global markets in 3Q24 and the outlook heading into the election.
Private Markets

Private Real Estate Income Is Positive, but Appreciation Falls

Munir Iman
Callan experts analyze commercial real estate and REITs in 2Q24.
Public Markets

Gains for Stocks Mask Wide Disparities; Little to No Change for Bonds

Kristin Bradbury
Callan expert analyzes the global stock and bond markets in 2Q24.
Private Markets

Commercial Real Estate Capital Markets: Insights for Institutional Investors

Christine Mays
A blog post on the state of the commercial real estate capital markets.
Private Markets

Private, Public Real Estate Indices Fall on Rate Concerns

Aaron Quach
Callan experts analyze commercial real estate and REITs in 1Q24.
Private Markets

Implementation Considerations for Institutional Investors in Rental Housing

Aaron Quach
A look at how to handle implementation issues with allocations to rental housing.
Private Markets

Senior Housing: Specialized Operating Expertise Required

Aaron Quach
A look at senior housing and issues for institutional investors.
Private Markets

Student Housing: A Resilient Sector but Facing Declining Demographics

Aaron Quach
A look at student housing and the issues for institutional investors.
Private Markets

Single-Family Rental Homes: Responding to Changing Lifestyles

Aaron Quach
A look at single-family rental homes and the issues for institutional investors.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.