NCREIF: Maturing Cycle Yields Lower Returns

Headquartered at Chicago’s Aon Center, NCREIF says occupancy rates continue at a 15-year high.

CHICAGO—The moderating trend seen in property returns as the cycle has matured over the past two years continued in the fourth quarter, the National Council of Real Estate Investment Fiduciaries said Wednesday. The Q4 2016 NCREIF Property Index, reflecting investment performance for 7,364 commercial properties valued at a combined $525.3 billion, reflected a total return of 1.73%, down from 1.77% in Q3 and 2.91% a year ago.

NCREIF says the income return has trended lower through most of the current cycle, with property values rising faster than income as the recovery began, followed by slower quarterly income gains as fundamentals stabilized. Appreciation experienced a steeper downward trend last year, with three consecutive quarters of sub-1% appreciation and a Q4 capital return at one-third of the rate returned in the same quarter a year ago.