NCREIF First Quarter 2019 Update

Wednesday, May 8, 2019

HFF Research discusses the NCREIF Property Index’s (NPI) recently released first quarter 2019 results, which reflect trends in institutional investor ownership of U.S. commercial real estate assets. We consider the total TTM first quarter 2019 NPI return along with the return’s composition. Further, we delve into property specific relative returns, including retail’s rebound after the fourth quarter of 2018.


The National Council of Real Estate Investment Fiduciaries (NCREIF) has released first quarter 2019 results for the NCREIF Property Index (NPI), reflecting trends in institutional investor ownership of U.S. commercial real estate assets.

The NPI reflects investment performance for 7,913 commercial properties totaling approximately $630 billion of market value, with AUM rising 11.02% over the past year and 89.26% since the prior peak in the second quarter of 2008.

The first quarter 2019 NPI total return  ticked up to 1.80%, the second highest level seen since the second quarter of 2016 and healthily above the 2018 fourth quarter total return of 1.37%. Note that this is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the U.S.

The 2018 annual NPI total return registered at 6.83%.  Sixty-seven percent of this was due to income return, which has ticked up as a percentage of total return in recent years, the average since 2010 being 55%. The balance of the total return was due to capital appreciation. This total return was down slightly from the 7.12% return for the period of first quarter 2017 to first quarter 2018. For longer-term context, the annualized average total return for the past five years was 9.13% and 8.51% over the past decade.

Industrial properties, which are primarily warehouse, continue to be the stellar performer with a return of 3.02% for the quarter. In second was retail at 1.74%, coming back after standing as the only property group with negative growth in the fourth quarter of 2018. Following was office, multi-housing, seniors housing and hotel at 1.63%, 1.35%, 1.23% and 0.44%, respectively. Despite the gain of the lost ground seen this quarter by the retail property sector, the spread between industrial and retail returns continues to be a “tale of two sectors,” with online shopping creating increased demand for last mile warehouse space and hurting many traditional retailers.


NCREIF Returns Vs. Competitive Asset Classes

Private CRE Outperforms



Return Performance Drives Demand For CRE

Private commercial real estate has provided better risk-adjusted returns for investors over longer hold periods. Institutional and HNW allocations to real assets are thus increasing, having double over 10 years. Rising allocations of new capital will, over time, increase capital flows into the asset class, reducing historical price volatility and supporting valuations.



Higher Risk-Adjusted Returns For Core Retail and Industrial Assets



Tide Turns in Favor of Industrial



Capital Appreciation Expanding Once More, Healthy Composition



Total Returns by Property Type*

Multi-Housing – Total Returns By Hold Period



Industrial – Total Returns By Hold Period



Office – Total Returns By Hold Period



Retail – Total Returns By Hold Period



*Hold periods ending March 29, 2019; returns are provided on a compounding annual basis.

Sources: HFF Research, National Council of Real Estate Investment Fiduciaries, Dow Jones Corporate Bond Index, Bloomberg Commodity Index, Dow Jones CBOT Treasury Index, FTSE NAREIT Total Return Index, Standard & Poors, Barclays and National Association of Real Estate Investment Trusts

Prepared by HFF Research Analysts Laura Haltom and HFF Managing Director of Research Jimmy Hinton

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