Defined Benefit
Defined Contribution
Insurance Assets
Nonprofit

Private, Public Real Estate Indices Fall on Rate Concerns

Private, Public Real Estate Indices Fall on Rate Concerns
clock
1 min 55 sec
1Q24 real estate performance summary

Private real estate indices saw gains from income, but negative appreciation returns set them back. Office continued to be hindered and was the worst-performing sector in the quarter.

The FTSE EPRA Nareit Developed REIT Index, a measure of global real estate securities, declined 1.1% during 1Q24. U.S. REITs, as measured by the FTSE Nareit Equity REITs Index, fell 0.2%. The FTSE EPRA Nareit Asia Index (USD), representing the Asia/Pacific region, declined 0.2%. European REITs, as measured by the FTSE EPRA Nareit Europe Index (USD), dropped 5.0%.

Appreciation returns drive NPI lower
  • The NCREIF Property Index, a measure of unlevered U.S. institutional real estate assets, fell 1.0% during 1Q24.
  • The income return was 1.2% while the appreciation return was -2.1%.
  • Hotels, which represent a small portion of the index, led property sector performance with a gain of 0.8%. Office finished last with a loss of 3.8%.
  • Regionally, the South led with a gain of 0.1%, while the West was the worst performer with a drop of 1.4%.
  • The NCREIF Open-End Diversified Core Equity (ODCE) Index, representing equity ownership positions in U.S. core real estate, fell 2.6% during 1Q.
real estate
U.S. real estate securities
  • U.S. REITs (-0.2%) underperformed the S&P 500 (+10.6%). The underperformance was driven by optimism about the broader economy and excitement about artificial intelligence, which drew capital flows away from REITs.
  • Earnings growth for U.S. REITs is expected to be in the low single digits due to conservatism and elevated interest rates.
  • Cyclical sectors including malls and lodging led U.S. REITs in 1Q, while net lease and storage trailed due to higher interest rate sensitivity and weak pricing power, respectively.
  • Dampening inflation, coupled with more dovish Federal Reserve sentiment, sparked a rally to close the year.
Asia/Pacific real estate securities
  • The FTSE EPRA Nareit Developed Asia Index (USD) fell 0.2% during the quarter. Strength in higher beta, growth-sensitive Japanese developers was a driver of the region’s relative outperformance.
  • Hong Kong was the primary underperformer due to concerns over a sustainable pickup in China growth momentum.
European real estate securities
  • The FTSE EPRA Nareit Developed Europe Index (USD) dropped by 5.0% during the quarter.
  • Europe was the lowest-performing region, driven by signs of stickier inflation driving a repricing of rate cut expectations.
  • The less-indebted U.K. outperformed continental Europe.
real estate

Disclosures

The Callan Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to any affiliate firms, or post on internal websites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients only have the right to utilize such material internally in their business.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Private Markets

Commercial Real Estate Capital Markets: Insights for Institutional Investors

Christine Mays
A blog post on the state of the commercial real estate capital markets.
Private Markets

Implementation Considerations for Institutional Investors in Rental Housing

Aaron Quach
A look at how to handle implementation issues with allocations to rental housing.
Private Markets

Senior Housing: Specialized Operating Expertise Required

Aaron Quach
A look at senior housing and issues for institutional investors.
Private Markets

Student Housing: A Resilient Sector but Facing Declining Demographics

Aaron Quach
A look at student housing and the issues for institutional investors.
Private Markets

Single-Family Rental Homes: Responding to Changing Lifestyles

Aaron Quach
A look at single-family rental homes and the issues for institutional investors.
Private Markets

Manufactured Housing: More Than Mobile Homes

Aaron Quach
A look at manufactured housing and issues for institutional investors.
Public Markets

Stocks Continue Rally; Bond Returns Fall Amid Rate Cut Uncertainty

Kristin Bradbury
Callan expert analyzes the performance of global markets in 1Q24 and the outlook for the year.
Private Markets

Affordable Housing: Opportunity for Both Social Impact and Financial Returns

Aaron Quach
Key issues that institutional investors should know about investing in affordable housing.
Private Markets

Multi-Family Apartments: The Biggest Kid on the Rental Housing Block

Aaron Quach
Key issues that institutional investors should know about investing in multi-family apartments.
Private Markets

Private Real Estate Falls but REITs Outpace Stocks

Munir Iman
An update on real estate and real assets performance in 4Q23.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.