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.
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.