RealNex CEO Jeff Finn hosted head of research Jeffrey Fisher Ph.D. on May 30, 2018 or an informative webinar where Dr. Fisher discussed his recent findings and analysis on behalf of the National Council of Real Estate Investment Fiduciaries (NCREIF). NCREIF polls its members quarterly to create their NCREIF Property Index (NPI). The NPI reflects investment performance for 7,553 commercial properties, totaling $567 billion of market value held by large institutional investors in the US.
While the video and deck of the webinar are posted with this article, key findings and take-aways include:
- The spread between industrial and retail returns is a “tale of two sectors” with online shopping creating increased demand for last mile warehouse space and hurting many traditional retailers.
- That spread was negative 1.25% in 2010 and is now a positive 2% (rounded).
- Of the larger markets, LA had the highest return this past quarter followed by San Francisco. DC and New York at the lowest returns.
- Although returns have been dropping, price appreciation remains positive and price levels have continued to reach new highs.
- Vacancy rates vary somewhat among property types. Industrial properties have the lowest vacancy rate which us under 5% nationally whereas office has the highest vacancy rate of about 12%.
- Cap rates remain at historic lows despite concerns that interest rates will rise.
- The flow of funds is in balance and volatility is at a historic low
Download the deck here.