U.S. commercial real estate (CRE) investment performance for 2010 delivered its third-strongest annual returns over the last decade, at 14.2%, as measured by the IPD U.S. Annual Property Index issued by London-based IPD.
According to IPD, the performance spread across the four principal CRE market sectors was 9.2 percentage points, with residential being the year's star performer, delivering 19.2%, while the industrial sector recorded the weakest performance, although still in double-digit territory, at 10.4%. Residential apartment markets benefited from the continued decline of homeownership, but the market values in the industrial sector were less vibrant due to continuing problems in major U.S. industries.
The retail sector has managed to outperform the national average by 70 basis points, at 14.9%, driven by strong performance among large regional malls, which was the only segment outside of residential to deliver double-digit capital appreciation, at 11.4% (total returns were 19.3%).
IPD added that the office sector delivered a total return of 12.6%, although this includes substantial performance variation in key markets: New York and Washington, D.C., brought in returns of 21.4% and 19.6%, respectively, while the Atlanta and Chicago office markets brought total returns of just 2.3% and 3.1%, respectively.
‘This strong return was surprising, given the magnitude of the distortion in the capital markets in 2008 and 2009,’ says Jim Valente, director of performance and risk analytics at IPD. ‘In 2010, large core open-ended funds were net sellers of real estate. The trend turned positive in the second half of the year, as managers were clearly making buy-sell decisions to reposition funds for the next cycle. Primary markets in the coastal cities, as well as the multifamily and retail sectors, appear to be the favorites for fund managers, while secondary and tertiary assets and secondary locations in primary markets attracted less attention.’
SOURCE: IPD [/
