NCREIF Property Index Released

Commercial Property Performance Steady in Third Quarter

CHICAGO, IL, October 25, 2017 – The National Council of Real Estate Investment Fiduciaries (NCREIF) has released third quarter 2017 results for the NCREIF Property Index (NPI). The NPI reflects investment performance for 7,165 commercial properties, totaling $543.5 billion of market value. The returns are detailed in the attached Snapshot Report.

The quarterly NPI total return remains modest and has been relatively stable, ranging from 1.55%-to-1.77% over the past five quarters. The total return was 1.70% in the third quarter 2017, down from 1.75% last quarter and 1.77% in the third quarter 2016. The third quarter 2017 total return consisted of a 1.14% income return and 0.56% appreciation. Over the past five quarters, both components of the total return have been relatively stable with the quarterly income return ranging from 1.14%-to-1.16% and appreciation in the 0.40%-to-0.60% range.

For the trailing year, the annual NPI total return was 6.89%, consisting of a 4.66% income return and 2.15% appreciation. For longer-term context, the annualized average total return for the past five years was 10.35% and 6.23% over the past decade.

Total Returns by Asset Class

The NPI represents unleveraged property performance. However, about half of the properties in the NPI utilize leverage, which can provide an opportunity for higher returns given the longevity of low interest rates. For the 3,568 NPI properties utilizing leverage, the leveraged total return outpaced the NPI at 2.01% in the third quarter 2017 and 8.96% for the trailing year.

Industrial remains the strongest performer by property type with total returns of 3.29% in the third quarter and 12.80% for the trailing year. Other NPI property types continue to trail industrial by a wide margin. In the third quarter, hotel experienced a reversal in its six-quarter depreciation trend with slight 0.08% appreciation in the third quarter, resulting in the second strongest quarterly total return, at 2.30%. Apartment landed in the middle of the pack for the quarter with a 1.66% total return, while having the second strongest trailing year total return of 6.22%. Office and retail both experienced a step down in quarterly appreciation this quarter for weaker total returns of 1.40% and 1.20%, respectively. Over the trailing year, total returns for both office and retail are roughly 6%, similar to the apartment sector.

NPI Total Returns by Property Type

After rising to a 16-year high of 93.3% last quarter, occupancy for NCREIF-tracked properties held steady in the third quarter. Quarterly occupancy changes were varied by property type, while year-over-year occupancy was fairly steady across the sectors. Industrial still has the highest occupancy rate, at 96.1%, which was up 20 basis points (bps) over the quarter. Retail was the only other property type to experience gains in the third quarter with occupancy up by 50 bps to 93.1%. Office occupancy was down slightly over the quarter to 88.6%, while apartment occupancy fell 60 bps to 93.5%. Net operating income (NOI) growth was 5.1% (including hotels) for the trailing year, remaining above its 3.2% long-term annual pace. Industrial holds the lead for annual NOI growth, at 8.4%, followed by office at 7.9%. Annual retail and apartment NOI growth trailed the overall NPI, at 3.8% and 0.8%, respectively.

Transaction volume for NPI properties totaled $11.8 billion in the third quarter 2017 with 193 properties sold, compared to $9.7 billion for 216 properties during the same quarter a year ago. The implied valuation cap rate was 4.38% in the third quarter, down marginally from 4.47% last quarter. All property types experienced modest cap rate compression over the quarter and range from 4.16% for apartment to 4.79% for industrial.

About the NCREIF Property Index

The NPI consists of 7,165 investment-grade income-producing properties with a market value of $543.5 billion. The market value breakdown by property type is 36.8% office, 24.1% apartment, 23.7% retail, 14.6% industrial and 0.8% hotel properties.

The NPI includes property data covering over 100 CBSAs. In addition, within in each property type, data are further stratified by sub-type. These data enhance the ability of institutional investors to evaluate the risk and return of commercial real estate across the United States.


NCREIF will hold a webinar on Tuesday, November 7, at 4:30 pm Central Time to discuss an overview of the NCREIF Property Index (NPI) and the NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE), the Farmland and Timberland Indices, as well as a detailed discussion of the results and interesting data from the NCREIF Property Value Trends report. The conference call is being webcast live and can be accessed here.  An online replay of the webcast will be available on NCREIF’s website at

The National Council of Real Estate Investment Fiduciaries (NCREIF) is an association of professionals with significant involvement and interest in pension fund real estate investments who come together to address vital industry issues and to promote research on the asset class.

Press Release

NPI 3q2017 Snapshot