NCREIF index gains 1.41% as seniors housing leads

The NCREIF Property Index returned 1.41% in the third quarter, up from 1.29% in the second and its ninth consecutive quarter of positive total return, NCREIF reported.

Seniors housing returned 5.98% for the quarter, up from 3.91% in the second, with appreciation of 4.60% accounting for most of the gain. That was the index's strongest sector result by a wide margin and more than four times the index's total return. Retail returned 2.04%, up from 1.80%, and self-storage returned 1.83%, up from 1.67%. Both improved for a second consecutive quarter. Industrial, the largest sector at a third of the index, edged to 1.52% from 1.49%. Office returned 1.18%, up from 0.70%. The decline in office values slowed to 0.27% from 0.72%, leaving office the only major property type with a negative capital return.

For allocators, the 1.41% is the number open-end fund NAVs and redemption prices get measured against, and four quarters at that pace would compound to roughly 5.8%. A fund concentrated in office would likely mark below that figure while its capital return stays negative. Seniors housing's 4.60 percentage points of appreciation accounted for most of its 5.98% return, the part that rests on appraisals rather than income.

The index covers 13,200 properties with a combined market value of $939 billion, NCREIF reported. DC plans hold $51.6 billion in private real estate, $8.8 billion of it in open-end funds, as Private Wealth Daily previously reported, so a slice of that capital is marked against the same quarterly print.