Defined Benefit
Insurance Assets
Nonprofit

Strong Quarter for Real Estate, Both Public and Private

Strong Quarter for Real Estate, Both Public and Private
clock
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.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
Defined Benefit

The Role of Real Estate and Infrastructure Debt in a Portfolio

Munir Iman
Jan Mende and Munir Iman discuss real estate and infrastructure debt and their potential roles in institutional portfolios.
Defined Benefit

Second Verse, Same as the First for Private Equity

Gary Robertson
Gary Robertson analyzes fundraising, investments, exits, and returns for all private equity categories for 2Q21 amid markets affected by COVID-19.
Defined Benefit

Hedge Funds Thrive amid Surging Recovery

Jim McKee
Jim McKee assesses hedge fund and MAC performance in 2Q21 and analyzes the outlook for these asset classes.
Defined Benefit

GPs Take ‘Credit’ for Higher IRRs

Jonathan Farr
Jonathan Farr explains subscription credit facilities and how they impact private markets returns.
Defined Benefit

Three Potential Paths to a China A-Shares Allocation

Ho Hwang
Ho Hwang discusses three paths to implementing a China A-shares allocation.
Defined Benefit

PCE and CPI: What’s the Difference?

Fanglue Zhou
Fanglue Zhou explains how CPI and PCE differ and why the Fed prefers the PCE.
Defined Benefit

Gains for Just About Every Asset Class in 2Q21

Kristin Bradbury
Kristin Bradbury assesses how U.S. and global stock, fixed income, and real assets markets performed in 2Q21.
Defined Benefit

Wall Street Bets on Transitory Bumps in Inflation

Kristin Bradbury
Kristin Bradbury analyzes how the U.S. and global economies and global markets performed in 2Q21, and assesses the outlook coming out of the pandemic...
Defined Benefit

Putting Values into Action: A Practical Guide for Institutional Investors

Brad Penter
Lauren Mathias and Brad Penter discuss how investors can incorporate racial equity into their investment programs.
Defined Benefit

A JOLT of Inflation from the Labor Market?

James W. Van Heuit
Jim Van Heuit discusses recent changes to the labor market and what impact they may have on inflation.