Press Releases

By Jeffrey D. Fisher, Ph.D.

Although returns for commercial real estate have been somewhat modest this past year, returns for the fourth quarter of 2017 were the highest quarter for the year according to the NCREIF Property Index (NPI). The NPI reflects investment performance for 7,527 commercial properties, totaling $559.8 billion of market value owned and managed by the nation’s largest institutional investors and pension funds.

The quarterly total return was 1.80% in the fourth quarter, up from 1.70% last quarter, and higher than the 1.73% return for the fourth quarter of 2016. For the year of 2017, the return was just slightly under 7%. This is an unleveraged return for what is primarily “core” real estate held by institutional investors throughout the US.

After dropping each quarter during 2015 and 2016, rates of return for commercial real estate held by the nations large institutional investors has leveled off over the past three quarters. Furthermore, the lower returns have only meant that returns are just back to or at slightly lower returns than a long term average.  

Although the rate of price appreciation has moderated the past two years, it has still been positive and values have continued to reach new highs for commercial real estate as measured by the NCREIF Market Value Index (MVI).  NCREIF tracks the performance of over $500 billion in commercial real estate owned by institutional investors in the US and includes all the major property types (apartment, office, industrial, retail and hotel).  The following graph shows the quarterly value indexed at 100 in the first quarter of 1978.  The value is also above a long-term trend line shown in the graph.

Jeffrey D. Fisher, Ph.D.