fourth quarter 2017 ncreif indices review · ncreif overview fourth quarter 2017 index composition...
TRANSCRIPT
Fourth Quarter 2017
NCREIF Indices ReviewFebruary 9, 2018
Panelist Overview
Jeff Fisher
NCREIF Data & Research Consultant
Doug Herzbrun
Global Head of Research
CBRE Global Investors
Disclaimer
Today we will be presenting what we see in the
NCREIF data, trends and changes; all comments
about future expectations are the personal
views of the speakers (and could be wrong!) and
not a reflection of a NCREIF opinion or forecast.
Overview
Steady as She Goes
• NPI ends year on an uptick
• Volatility of total returns continue at a historic low
• Industrial remains by far the top performer
• Net NFI-ODCE fund flows remain negative for the year
• Occupancy holding at its 15-year high
• Rental income growth mixed by property type as retail and
apartment struggle while industrial and office remains strong
4
NCREIF OverviewFourth Quarter 2017 Index Composition
5
NPINPI - Leveraged
Properties OnlyNFI-ODCE
Farmland
Properties
Timberland
Properties
Contributors 66 63 24 7 11
Properties 7,527 3,692 2,556 727 464
Market Value $559.8 B $360.1 B $225.9 B $8.5 B $25.5 B
Inception Date 1978 Q4 1983 Q1 1978 Q4 1990 Q4 1987 Q1
Sold Properties 228 107 48 5 12
Leverage Unlevered 41.3% 21.4% Unlevered Unlevered
Quarterly Return 1.80% 2.28% 2.07% 2.93% 1.52%
1 Year Return 6.96% 8.93% 7.62% 6.19% 3.63%
Note: NFI-ODCE returns are gross of fees.
Total Return Trends by Asset Class
6
Comparison as of December 31, 2017
1.8%2.3%
2.9%
1.5%2.1% 2.5%
6.6%7.0%
8.9%
6.2%
3.6%
7.6%
8.7%
21.8%
6.1%
7.3%
12.1%
4.4%5.0%
7.8%8.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
NPI Leveraged NPI NCREIF Farmland NCREIF
Timberland
NFI-ODCE - gross
of fees
NAREIT Equity
REIT Index
S&P 500 Index
4Q 2017 1-Year 10-Year
7
Note: The Market Value Index (MVI) is an equal-weighted index and excludes expansion capital expenditures.
50
100
150
200
250
300
350
400
19
78
1
19
79
1
19
80
1
19
81
1
19
82
1
19
83
1
19
84
1
19
85
1
19
86
1
19
87
1
19
88
1
19
89
1
19
90
1
19
91
1
19
92
1
19
93
1
19
94
1
19
95
1
19
96
1
19
97
1
19
98
1
19
99
1
20
00
1
20
01
1
20
02
1
20
03
1
20
04
1
20
05
1
20
06
1
20
07
1
20
08
1
20
09
1
20
10
1
20
11
1
20
12
1
20
13
1
20
14
1
20
15
1
20
16
1
20
17
1
Ma
rke
t V
alu
e I
nd
ex
Prices Still Rising and Well Above Long-Term Trend and Prior Peak
Commercial real estate prices are now “quite
high relative to rents,” Yellen said. “Now, is
that a bubble or is it too high? And there it’s
very hard to tell. But it is a source of some
concern that asset valuations are so high.”
8
NPI Total Return End Year with an uptick
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
NP
I To
tal R
etu
rn
9
Annual NPI Return History
10
-30%
-20%
-10%
0%
10%
20%
30%
19
79
Q1
19
80
Q1
19
81
Q1
19
82
Q1
19
83
Q1
19
84
Q1
19
85
Q1
19
86
Q1
19
87
Q1
19
88
Q1
19
89
Q1
19
90
Q1
19
91
Q1
19
92
Q1
19
93
Q1
19
94
Q1
19
95
Q1
19
96
Q1
19
97
Q1
19
98
Q1
19
99
Q1
20
00
Q1
20
01
Q1
20
02
Q1
20
03
Q1
20
04
Q1
20
05
Q1
20
06
Q1
20
07
Q1
20
08
Q1
20
09
Q1
20
10
Q1
20
11
Q1
20
12
Q1
20
13
Q1
20
14
Q1
20
15
Q1
20
16
Q1
20
17
Q1
Total Return Income Return Capital Return
Property Leverage Ratio for All NPI with Implied Interest Rate
0%
2%
4%
6%
8%
10%
12%
14%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
19
83
1
19
84
1
19
85
1
19
86
1
19
87
1
19
88
1
19
89
1
19
90
1
19
91
1
19
92
1
19
93
1
19
94
1
19
95
1
19
96
1
19
97
1
19
98
1
19
99
1
20
00
1
20
01
1
20
02
1
20
03
1
20
04
1
20
05
1
20
06
1
20
07
1
20
08
1
20
09
1
20
10
1
20
11
1
20
12
1
20
13
1
20
14
1
20
15
1
20
16
1
20
17
1
Imp
lie
d I
nte
rest
Ra
te
Loa
n-t
o-V
alu
e R
ati
o
Property LTV - All NPI Implied Interest Rate
11
Question
• What will be the best performing asset class in
2018?
– A. NCREIF Leveraged Returns
– B. S&P 500 Stocks
– C. Corporate Bonds
– D. NAREIT Index
12
Annual Real GDP Growth and NPI Total Return
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
19
91
41
99
22
19
92
41
99
32
19
93
41
99
42
19
94
41
99
52
19
95
41
99
62
19
96
41
99
72
19
97
41
99
82
19
98
41
99
92
19
99
42
00
02
20
00
42
00
12
20
01
42
00
22
20
02
42
00
32
20
03
42
00
42
20
04
42
00
52
20
05
42
00
62
20
06
42
00
72
20
07
42
00
82
20
08
42
00
92
20
09
42
01
02
20
10
42
01
12
20
11
42
01
22
20
12
42
01
32
20
13
42
01
42
20
14
42
01
52
20
15
42
01
62
20
16
42
01
72
20
17
4
NP
I To
tal
Re
turn
Re
al
GD
P G
row
th
Annual GDP Growth Annual NPI Total Return
13
Source: U.S. Bureau of Labor Statistics, NCREIF.
Quarterly Real GDP: Contributions to Growth by Major Component
14
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017
Qu
art
erl
y G
row
th,
SAA
R
Personal Consumption Business Investment Residential Investment Inventories
Exports Imports Government GDP Growth
Source: U.S. Bureau of Economic Analysis, NCREIF.
Annual Office Employment Growth and NPI Total Returns
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
19
91
41
99
22
19
92
41
99
32
19
93
41
99
42
19
94
41
99
52
19
95
41
99
62
19
96
41
99
72
19
97
41
99
82
19
98
41
99
92
19
99
42
00
02
20
00
42
00
12
20
01
42
00
22
20
02
42
00
32
20
03
42
00
42
20
04
42
00
52
20
05
42
00
62
20
06
42
00
72
20
07
42
00
82
20
08
42
00
92
20
09
42
01
02
20
10
42
01
12
20
11
42
01
22
20
12
42
01
32
20
13
42
01
42
20
14
42
01
52
20
15
42
01
62
20
16
42
01
72
20
17
4
NP
I To
tal
Re
turn
Off
ice
Em
plo
ym
en
t G
row
th
Annual Office Job Growth Annual NPI Total Return
15
Source: U.S. Bureau of Labor Statistics, NCREIF.
Annual Job Growth: Key Real Estate Segments
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
19
91
41
99
22
19
92
41
99
32
19
93
41
99
42
19
94
41
99
52
19
95
41
99
62
19
96
41
99
72
19
97
41
99
82
19
98
41
99
92
19
99
42
00
02
20
00
42
00
12
20
01
42
00
22
20
02
42
00
32
20
03
42
00
42
20
04
42
00
52
20
05
42
00
62
20
06
42
00
72
20
07
42
00
82
20
08
42
00
92
20
09
42
01
02
20
10
42
01
12
20
11
42
01
22
20
12
42
01
32
20
13
42
01
42
20
14
42
01
52
20
15
42
01
62
20
16
42
01
72
20
17
4
An
nu
al J
ob
Gro
wth
Office Transp/Warehousing Retail
16
Source: U.S. Bureau of Labor Statistics, NCREIF.
NFI-ODCE Fund Flows
4Q Rolling Total as of December 31, 2017
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.04
Q 2
00
0
2Q
20
01
4Q
20
01
2Q
20
02
4Q
20
02
2Q
20
03
4Q
20
03
2Q
20
04
4Q
20
04
2Q
20
05
4Q
20
05
2Q
20
06
4Q
20
06
2Q
20
07
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
OD
CE
Ne
t Fu
nd
Flo
ws
($B
il)
Contributions Distributions/Redemptions
17
NFI-ODCE Fund Flows as Share of Net Real Estate Assets
4Q Rolling Total as of December 31, 2017
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%4
Q 2
00
0
2Q
20
01
4Q
20
01
2Q
20
02
4Q
20
02
2Q
20
03
4Q
20
03
2Q
20
04
4Q
20
04
2Q
20
05
4Q
20
05
2Q
20
06
4Q
20
06
2Q
20
07
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
NFI
-OD
CE
Fu
nd
Flo
ws
(% N
et
RE
Ass
ets
)
Net Flows Contributions Distributions/Redemptions
18
NFI-ODCE Net Fund Flows as Share of Net Real Estate Assets with Total Returns
4Q Rolling Fund Flows Share/Annual Returns as of December 31, 2017
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%4
Q 2
00
0
2Q
20
01
4Q
20
01
2Q
20
02
4Q
20
02
2Q
20
03
4Q
20
03
2Q
20
04
4Q
20
04
2Q
20
05
4Q
20
05
2Q
20
06
4Q
20
06
2Q
20
07
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
An
nu
al T
ota
l R
etu
rn
NFI
-OD
CE
Ne
t Fu
nd
Flo
ws
(% N
et
RE
Ass
ets
)
Net Flows NFI-ODCE Annual Total Return NPI Annual Total Return
19
20
NPI Sale Transactions
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
0
100
200
300
400
500
600
700
800
900
1,000
19
90
Q4
19
91
Q4
19
92
Q4
19
93
Q4
19
94
Q4
19
95
Q4
19
96
Q4
19
97
Q4
19
98
Q4
19
99
Q4
20
00
Q4
20
01
Q4
20
02
Q4
20
03
Q4
20
04
Q4
20
05
Q4
20
06
Q4
20
07
Q4
20
08
Q4
20
09
Q4
20
10
Q4
20
11
Q4
20
12
Q4
20
13
Q4
20
14
Q4
20
15
Q4
20
16
Q4
20
17
Q4
Sale
s V
olu
me
($
Bil)
Sold
Pro
pe
rtie
s
4Q Rolling Sold Properties 4Q Rolling Sales Volume
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
19
90
Q4
19
91
Q4
19
92
Q4
19
93
Q4
19
94
Q4
19
95
Q4
19
96
Q4
19
97
Q4
19
98
Q4
19
99
Q4
20
00
Q4
20
01
Q4
20
02
Q4
20
03
Q4
20
04
Q4
20
05
Q4
20
06
Q4
20
07
Q4
20
08
Q4
20
09
Q4
20
10
Q4
20
11
Q4
20
12
Q4
20
13
Q4
20
14
Q4
20
15
Q4
20
16
Q4
20
17
Q4
Pe
rce
nt
Sold
Ca
pit
al R
etu
rn
Capital Return Percent Sold
Annual NPI Sales Transactions and Volume
Annual Capital Return and Share of NPI Properties Sold
Long-Term NPI Implied Appraisal Capitalization Rate Trend
21
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%1
97
84
19
79
4
19
80
4
19
81
4
19
82
4
19
83
4
19
84
4
19
85
4
19
86
4
19
87
4
19
88
4
19
89
4
19
90
4
19
91
4
19
92
4
19
93
4
19
94
4
19
95
4
19
96
4
19
97
4
19
98
4
19
99
4
20
00
4
20
01
4
20
02
4
20
03
4
20
04
4
20
05
4
20
06
4
20
07
4
20
08
4
20
09
4
20
10
4
20
11
4
20
12
4
20
13
4
20
14
4
20
15
4
20
16
4
20
17
4
4Q
MA
Va
lue
We
igh
ted
Ca
p R
ate
Cap Rate 20Y Avg SI Avg
Note: Implied Cap Rate Equals Current Quarter NOI Divided by Current Quarter Market Value Multiplied by 4.
22
NPI Cap Rate Spreads: 10Y U.S. Treasury and Corporate BBB Effective Yield
23
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
19
97
Q1
19
97
Q3
19
98
Q1
19
98
Q3
19
99
Q1
19
99
Q3
20
00
Q1
20
00
Q3
20
01
Q1
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
20
09
Q3
20
10
Q1
20
10
Q3
20
11
Q1
20
11
Q3
20
12
Q1
20
12
Q3
20
13
Q1
20
13
Q3
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
NP
I C
ap
Ra
te S
pre
ad
Spread to Corp BBB 20Y Avg - BBB Spread to 10Y UST 20Y Avg - UST
Source: Federal Reserve Bank of St. Louis (FRED), NCREIF.
Question
• What will cap rates be for the nation by the
end of 2018?
– A. Below 4%
– B. 4% to 5%
– C. 5% to 6%
– D. Above 6%
24
NPI Capitalization Rates: Trend by Property Type
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
19
97
4
19
98
2
19
98
4
19
99
2
19
99
4
20
00
2
20
00
4
20
01
2
20
01
4
20
02
2
20
02
4
20
03
2
20
03
4
20
04
2
20
04
4
20
05
2
20
05
4
20
06
2
20
06
4
20
07
2
20
07
4
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
4Q
MA
Ca
p R
ate
Apartment Industrial Office Retail
25
NFI-ODCE Fund Discount Rates: Trend by Property Type
10-Year Holding Period
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
20
11
-Q1
20
11
-Q2
20
11
-Q3
20
11
-Q4
20
12
-Q1
20
12
-Q2
20
12
-Q3
20
12
-Q4
20
13
-Q1
20
13
-Q2
20
13
-Q3
20
13
-Q4
20
14
-Q1
20
14
-Q2
20
14
-Q3
20
14
-Q4
20
15
-Q1
20
15
-Q2
20
15
-Q3
20
15
-Q4
20
16
-Q1
20
16
-Q2
20
16
-Q3
20
16
-Q4
20
17
-Q1
20
17
-Q2
20
17
-Q3
20
17
-Q4
Dis
cou
nt
Ra
te
Apartment Industrial Office Retail
26
Note: Data excludes two NFI-ODCE funds. Source: Altus, NCREIF.
NCREIF Analytics: Market Performance Report5-Yr. Risk v. Return
San Francisco
Chicago
Washington DC
New York
Los Angeles
Seattle
Boston
28
Note: The Market Value Index (MVI) is an equal-weighted index and excludes expansion capital expenditures.
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
50
100
150
200
250
300
350
400
19
79
1
19
80
1
19
81
1
19
82
1
19
83
1
19
84
1
19
85
1
19
86
1
19
87
1
19
88
1
19
89
1
19
90
1
19
91
1
19
92
1
19
93
1
19
94
1
19
95
1
19
96
1
19
97
1
19
98
1
19
99
1
20
00
1
20
01
1
20
02
1
20
03
1
20
04
1
20
05
1
20
06
1
20
07
1
20
08
1
20
09
1
20
10
1
20
11
1
20
12
1
20
13
1
20
14
1
20
15
1
20
16
1
20
17
1
Level Annual Change
NCREIF Indicators: Market Value Index (MVI) MVI
60
70
80
90
100
110
120
130
140
2Q
20
08
3Q
20
08
4Q
20
08
1Q
20
09
2Q
20
09
3Q
20
09
4Q
20
09
1Q
20
10
2Q
20
10
3Q
20
10
4Q
20
10
1Q
20
11
2Q
20
11
3Q
20
11
4Q
20
11
1Q
20
12
2Q
20
12
3Q
20
12
4Q
20
12
1Q
20
13
2Q
20
13
3Q
20
13
4Q
20
13
1Q
20
14
2Q
20
14
3Q
20
14
4Q
20
14
1Q
20
15
2Q
20
15
3Q
20
15
4Q
20
15
1Q
20
16
2Q
20
16
3Q
20
16
4Q
20
16
1Q
20
17
2Q
20
17
3Q
20
17
4Q
20
17
Apartment Industrial Office Retail
MVI by Property Type
Question
• When will the Market Value Index (MVI) peak
for this cycle?
– A. Peaked in 2017
– B. 2018
– C. 2019
– D. 2020 or later
29
NPI Total Returns: Current Quarter Detail
Property Size Total Returns Fund Type Total Returns
Appraisal Type Total Returns Ownership Returns
30
1.57%
2.17%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
> $100 million <= $100 million
1.86%1.63% 1.59%
2.84%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
ODCE Open End Separate
Account
Closed
1.83% 1.75%
0.0%
0.5%
1.0%
1.5%
2.0%
External Internal
1.76% 1.82%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
Joint Venture Wholly Owned
Top 10 Markets versus All Others
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Sea
ttle
De
nve
r
Wa
shin
gto
n D
C
Da
llas
San
Fra
nci
sco
NP
I
Ch
ica
go
Los
An
ge
les
Ne
w Y
ork
Cit
y
Ho
ust
on
Bo
sto
n
Quarterly Total Return: Top 10 and NPI
Top 10 Markets MV ($Bil)
New York City $ 66.74
Los Angeles $ 42.74
Washington DC $ 42.28
Chicago $ 33.26
San Francisco $ 25.78
Seattle $ 23.37
Dallas $ 23.05
Boston $ 21.75
Houston $ 21.01
Denver $ 15.48
1.63%2.00%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Top 10 Markets Other Markets
NPI Total Returns: Top 10 Markets by Market Value
31
Current Quarter Basis Point Total Return Impact by Metro
Apartment Industrial
Office Retail
32
-3.77
-1.73
1.17
-0.80 -0.59
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
New York Chicago Seattle Washington
DC
Dallas
4.26
3.19
1.92 1.651.29
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Los Angeles Inland
Empire
Chicago New York Tacoma
-4.55-3.60
-2.86
2.01
-1.65
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
New York Boston Washington
DC
Seattle Houston
-1.55
-1.18 -1.16-0.97
-0.69
-1.8
-1.6
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
New York Houston Portland Chicago Dallas
NPI Total Returns by Property Type: 4Q 2017
33
1.1%
1.9%
1.2% 1.2% 1.1%
0.6%
-1.0%
2.1%
0.5%
0.1%
1.6%
1.0%
3.3%
1.7%
1.3%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Apartment Hotel Industrial Office Retail
Income Capital Total
NPI Total Returns: Current Quarter Property Type Detail
Apartment by Subtype Industrial by Size/Type
Office by Location/Value Retail by Type
34
1.15%
2.05%2.45%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
High-rise Low-Rise Garden
3.16%3.49%
3.17%3.46%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Local Wh. (<=
250K SF)
Regional Wh.
(250K-500K SF)
National/Bulk
Wh. (500K+ SF)
Other Industrial
1.47%
2.00%1.73%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
CBD Suburban > $100M Suburban <= $100M
1.11%
1.50%1.38%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Super Reg./Reg. Neighborhood/Comm. Other Retail
NPI Total Returns by Property Type: Annual Returns Over Last Five Years
35
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Apartment Hotel Industrial Office Retail
4Q 2013 4Q 2014 4Q 2015 4Q 2016 4Q 2017
Question
• What will be the best performing property
sector in 2018?
– A. Apartment
– B. Hotel
– C. Industrial
– D. Office
– E. Retail
36
NPI Net Operating Income Growth
Rolling Four Quarters
37
3.8%
7.1%
4.7%5.3% 5.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
4Q 2013 4Q 2014 4Q 2015 4Q 2016 4Q 2017
NPI Net Operating Income Growth Trends by Property Type
-10%
-5%
0%
5%
10%
15%2
00
74
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
4Q
Ro
llin
g N
OI
Gro
wth
Apartment Industrial Office Retail
38
NPI Rental Income Growth
Rolling Four Quarters
39
3.2%
5.8%
3.7%4.4%
3.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
4Q 2013 4Q 2014 4Q 2015 4Q 2016 4Q 2017
NPI Rental Income Growth Trends by Property Type
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%2
00
74
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
4Q
Ro
llin
g R
en
t G
row
th
Apartment Industrial Office Retail
40
NFI-ODCE Average Projected Market Rent Growth by Property Type
10-Year Holding Period
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%
3.2%
3.4%
3.6%
3.8%
20
11
-Q1
20
11
-Q2
20
11
-Q3
20
11
-Q4
20
12
-Q1
20
12
-Q2
20
12
-Q3
20
12
-Q4
20
13
-Q1
20
13
-Q2
20
13
-Q3
20
13
-Q4
20
14
-Q1
20
14
-Q2
20
14
-Q3
20
14
-Q4
20
15
-Q1
20
15
-Q2
20
15
-Q3
20
15
-Q4
20
16
-Q1
20
16
-Q2
20
16
-Q3
20
16
-Q4
20
17
-Q1
20
17
-Q2
20
17
-Q3
20
17
-Q4
Re
nt
Gro
wth
Apartment Industrial Office Retail
41
Note: Data excludes two NFI-ODCE funds. Source: Altus, NCREIF.
Question
• Which property type will have the highest NOI
growth in 2018?
– A. Apartment
– B. Industrial
– C. Office
– D. Retail
42
Occupancy Last Five Years
43
93.2%92.9%
93.2% 93.4% 93.6%
85%
86%
87%
88%
89%
90%
91%
92%
93%
94%
95%
4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017
Occupancy Last Five Quarters
Recent Occupancy Rate Trends
90.6%
91.9%92.9% 93.2%
93.6%
80%
85%
90%
95%
100%
4Q 2013 4Q 2014 4Q 2015 4Q 2016 4Q 2017
NPI
NPI Long-Term Occupancy Rate Trends
85.0%
86.0%
87.0%
88.0%
89.0%
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%1
Q 2
00
0
3Q
20
00
1Q
20
01
3Q
20
01
1Q
20
02
3Q
20
02
1Q
20
03
3Q
20
03
1Q
20
04
3Q
20
04
1Q
20
05
3Q
20
05
1Q
20
06
3Q
20
06
1Q
20
07
3Q
20
07
1Q
20
08
3Q
20
08
1Q
20
09
3Q
20
09
1Q
20
10
3Q
20
10
1Q
20
11
3Q
20
11
1Q
20
12
3Q
20
12
1Q
20
13
3Q
20
13
1Q
20
14
3Q
20
14
1Q
20
15
3Q
20
15
1Q
20
16
3Q
20
16
1Q
20
17
3Q
20
17
Occ
up
an
cy R
ate
44
Occupancy Rate Trends by Property Type
Apartment Industrial
Office Retail
45
90%
91%
92%
93%
94%
95%
96%
20
07
4
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
86%
87%
88%
89%
90%
91%
92%
93%
94%
95%
20
07
4
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
84%
86%
88%
90%
92%
94%
96%
98%
20
07
4
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
82%
83%
84%
85%
86%
87%
88%
89%
90%
20
07
4
20
08
2
20
08
4
20
09
2
20
09
4
20
10
2
20
10
4
20
11
2
20
11
4
20
12
2
20
12
4
20
13
2
20
13
4
20
14
2
20
14
4
20
15
2
20
15
4
20
16
2
20
16
4
20
17
2
20
17
4
NCREIF Indictors: Cap Ex Ratio (CXR) and Free Cash Flow Yield (FCFY)
46
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
19
78
41
97
94
19
80
41
98
14
19
82
41
98
34
19
84
41
98
54
19
86
41
98
74
19
88
41
98
94
19
90
41
99
14
19
92
41
99
34
19
94
41
99
54
19
96
41
99
74
19
98
41
99
94
20
00
42
00
14
20
02
42
00
34
20
04
42
00
54
20
06
42
00
74
20
08
42
00
94
20
10
42
01
14
20
12
42
01
34
20
14
42
01
54
20
16
42
01
74
CXR (4Q roll) 20Y Avg SI Avg
2%
3%
4%
5%
6%
7%
8%
9%
19
78
4
19
79
4
19
80
4
19
81
4
19
82
4
19
83
4
19
84
4
19
85
4
19
86
4
19
87
4
19
88
4
19
89
4
19
90
4
19
91
4
19
92
4
19
93
4
19
94
4
19
95
4
19
96
4
19
97
4
19
98
4
19
99
4
20
00
4
20
01
4
20
02
4
20
03
4
20
04
4
20
05
4
20
06
4
20
07
4
20
08
4
20
09
4
20
10
4
20
11
4
20
12
4
20
13
4
20
14
4
20
15
4
20
16
4
20
17
4
FCFY (4Q Roll) 20Y Avg SI Avg
Cap Ex Ratio, Rolling Four Quarters
Free Cash Flow Yield, Rolling Four Quarters
NCREIF Indicators: Total Capital Expenditures as Share of NOI by Property Type
5%
15%
25%
35%
45%
55%
65%
4Q
20
07
1Q
20
08
2Q
20
08
3Q
20
08
4Q
20
08
1Q
20
09
2Q
20
09
3Q
20
09
4Q
20
09
1Q
20
10
2Q
20
10
3Q
20
10
4Q
20
10
1Q
20
11
2Q
20
11
3Q
20
11
4Q
20
11
1Q
20
12
2Q
20
12
3Q
20
12
4Q
20
12
1Q
20
13
2Q
20
13
3Q
20
13
4Q
20
13
1Q
20
14
2Q
20
14
3Q
20
14
4Q
20
14
1Q
20
15
2Q
20
15
3Q
20
15
4Q
20
15
1Q
20
16
2Q
20
16
3Q
20
16
4Q
20
16
1Q
20
17
2Q
20
17
3Q
20
17
4Q
20
17
4Q
MA
Ca
pE
xa
s %
of
NO
I
Apartment Industrial Office Retail
47
NCREIF Indicators: Capital Expenditure Detail as Share of NOI by Property Type
Apartment Industrial
Office Retail
48
0%
5%
10%
15%
20%
25%
30%
35%
40%
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
Leasing Com. TI's Bldg Imp.
0%
5%
10%
15%
20%
25%
30%
35%
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
Leasing Com. TI's Bldg Imp.
0%
5%
10%
15%
20%
25%
30%
4Q
20
07
2Q
20
08
4Q
20
08
2Q
20
09
4Q
20
09
2Q
20
10
4Q
20
10
2Q
20
11
4Q
20
11
2Q
20
12
4Q
20
12
2Q
20
13
4Q
20
13
2Q
20
14
4Q
20
14
2Q
20
15
4Q
20
15
2Q
20
16
4Q
20
16
2Q
20
17
4Q
20
17
Leasing Com. TI's Bldg Imp.
0%
5%
10%
15%
20%
3Q
20
07
1Q
20
08
3Q
20
08
1Q
20
09
3Q
20
09
1Q
20
10
3Q
20
10
1Q
20
11
3Q
20
11
1Q
20
12
3Q
20
12
1Q
20
13
3Q
20
13
1Q
20
14
3Q
20
14
1Q
20
15
3Q
20
15
1Q
20
16
3Q
20
16
1Q
20
17
3Q
20
17
Leasing Com. TI's Bldg Imp.
Question
• What will the annual NPI total return be for
2018?
– A. Below 5%
– B. 5%-to-7%
– C. 7%-to-9%
– D. Above 9%
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Summary
• Fundamentals should support solid, although
below average real estate returns
• Cap rate spreads near long-term averages could
insulate values from rising interest rates
• Rental income and NOI growth are above average
overall, although retail and apartment slowing
• Overall occupancy at historic high driven by
industrial
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Upcoming NCREIF Events
NCREIF Winter Conference 2018Scottsdale, AZScottsdale Resort at McCormick RanchMarch 13–16(Two Certification Program Courses offered prior to start of conference)
NCREIF Summer Conference 2018Charlotte, NCJune 19–22
Professional Certificate Program in Institutional Real EstateDallas, TXSouthern Methodist UniversityJuly 16–19
Visit www.ncreif.org for more information
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