Real Estate Performance in 4Q21
- The NCREIF Open End Diversified Core Equity (ODCE) Index posted its best return ever in 4Q21 (+7.7%); the NCREIF Property Index (+6.1%) had its best quarter since at least 1Q96.
- Within the NPI, Industrial was the best performer, and income returns were positive across sectors.
- Appraisers are pricing in a recovery due to strong fundamentals in Industrial and Multifamily.
- Return dispersion by manager within the ODCE Index was due to the composition of underlying portfolios.
- Niche sectors such as self-storage and life sciences continued to be accretive.
Compression in vacancy rates
- Vacancy rates kept compressing in Industrial and Multifamily as demand continued.
- Net operating income turned negative for Office as the Omicron variant delayed many return-to-work plans.
- 4Q21 rent collections were stable across all sectors.
- Demand outpaced supply as new construction of preleased Industrial and Multifamily occurred.
Global REITs and U.S. REITs outperform
- Global REITs outperformed in 4Q21, increasing 10.4% compared to 7.8% for global equities (MSCI World).
- U.S. REITs rose 16.3% in 4Q21, beating the S&P 500 Index, which gained 11.0%.
- Global REITs were trading below NAV, except for those in Australia, Japan, the United States, and Canada.
- Property sectors were mixed as out-of-favor sectors such as Office, Hotels, and Retail traded below NAV.
- Ongoing volatility in REIT share prices offers opportunities to purchase mispriced securities, individual assets from REIT owners, and discounted debt, as well as lend to companies and/or execute take-privates of public companies.
