NCREIF Property Index Released

Commercial Real Estate Returns End the Year on a High Note

CHICAGO, IL, January 24, 2020 – The National Council of Real Estate Investment Fiduciaries (NCREIF) has released fourth quarter 2019 results for the NCREIF Property Index (NPI). The NPI reflects investment performance for 8,263 commercial properties, totaling $659 billion of market value. The returns are detailed in the attached Snapshot Report.

The total return was 1.55% in the fourth quarter which was an increase from the 1.41% return for the prior quarter.  The return was also higher than the fourth quarter of 2018 which was 1.37%.  This is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the US. 

NPI Total Returns

The total return of 1.55% consisted of an income return of 1.10% from net operating income (NOI) and a capital return (change in value net of capital expenditures) of 0.45%. 

Market Value Index Reaches Another New High

Market values reached another new high as indicated by the NCREIF Market Value Index (MVI).  The MVI tracks how estimated sale prices are changing over time for properties in the NCREIF Property Index.  Market values have been rising steadily since the recovery from the Great Recession began in 2010. 

Mixed Results by Property Type

Results for the total return were mixed when viewed by property type.  Apartment returns had the strongest increase to 1.46% this quarter, up from 1.18% last quarter. This was followed by office returns which increased to 1.70% this quarter from 1.45% last quarter.  Industrial properties continued to have the highest return this quarter with the return virtually unchanged at 3.15% this quarter versus 3.16% last quarter.  Retail returns eked out a positive return of 0.05% for the quarter, down from 0.22% last quarter.  Hotel returns dropped the most this quarter, declining from 1.77% last quarter to 0.17% this quarter. 

NPI Total Returns by Property Type

Cap Rates Continue at Historic Lows While Occupancy Remains High

Equal weighted cap rates edged down slightly for the quarter from 4.73% to 4.67%.  More relevant to the pricing of the NPI properties, the value weighted cap rate dropped from 4.32% to 4.29% this quarter which helped with the increase in market values.  Occupancy was 94.12% which is not significantly different from the 94.25% occupancy last quarter.  This level continues to be near all-time highs for the history of the NPI.

Press Release