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Insurance Assets

Strong Quarter for Real Estate, Both Public and Private

Strong Quarter for Real Estate, Both Public and Private
1 min 10 sec

Best gain for ODCE in a decade

  • The recovery gained steam as the NCREIF ODCE Index posted its strongest quarterly return in 10 years; Industrial remains the best performer.
  • Income stayed positive except in the Hotel sector.
  • Niche sectors such as self-storage and life sciences continued to be accretive.
  • Vacancy rates kept compressing in Industrial and Multifamily as demand stayed strong.
  • Net operating income stayed negative for Office and Retail but a recovery continued.
  • Tenants were poised to return to work but the Delta variant may change that.
  • Pent-up demand is evident through foot traffic in retail centers.
  • 2Q21 rent collections showed relatively stable income throughout the quarter in the Industrial, Apartment, and Office sectors; the Retail sector remained challenged, with regional malls impacted most heavily.
  • Class A/B urban apartments were relatively strong, followed by Industrial and Office.
  • Demand outpaced supply as new construction of preleased Industrial and Multifamily occurred.
Sector Quarterly Returns by Property Type and Region, 2Q21

Global REITs outpace broader equity market recovery

  • Global REITs outperformed in 2Q21, gaining 9.2% compared to 7.7% for global equities (MSCI World).
  • U.S. REITs rose 12.0% in 2Q21, beating the S&P 500 Index, which gained 8.5%.
  • Globally, REITs are trading above NAV with the exception of those in Hong Kong, the United Kingdom, and Continental Europe.
  • Ongoing volatility in REIT share prices offers opportunities to purchase mispriced securities, individual assets from REIT owners, and discounted debt.
  • It also gives investors the potential to lend to companies and/or execute take-privates of public companies.

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