GLOBAL - IPD, the provider of real estate performance analysis and benchmarking, had added US coverage to its range of country coverage with the launch of its first annual commercial real estate index and quarterly indicator for the United States.
The IPD global property index will now include the US on a fully comparable basis and "the US index will be fully consistent with the other 22 indices in our range, so we can make comparisons on a like-for-like basis," said Simon Fairchild, managing director at IPD US.
Despite the fanfare launch, the new US index started its history with a total return for 2008 of -7.4%, as capital growth of -12.2% was offset by a 5.4% income return.
The quarterly index is said to show the extent of the bad news confronting investors in US real estate as for the first quarter of 2009, total returns stood at -9.2%, following a 8.7% loss for the fourth quarter of 2008.
While returns were negative across sectors and across geography, office fared worst, as the sector saw capital growth of -12.8%, compared to the best performer, retail, albeit this also suffered a loss of 11.4%.
The only property type to offer positive returns in 2008 was super-regional shopping malls.
Similarly, the western US states in aggregate showed the highest declines, with capital growth for 2008 of -13%, compared to -12.3% in the East and around -11% in the South and Midwest.
Admitting that the US real estate investment market has seen its worst performance for the past 30 years, Ian Cullen, co-founding director and head of systems and information standards said: "We believe that the worst times are those when you need the best information."
Speaking at the launch, Peter Hobbs, head of global research at RREEF, argued the index is a key development for the US real estate investment market.
"This kind of index is crucial for understanding market risk," said Hobbs. "For the next five years, the industry will be driven by risk managers who will perceive the sector as very risky. They will treat those markets where there isn't a long time series with greater caution," he added.
Phil McAndrews, managing director at TIAA-CREF, also claimed: "This index creates an opportunity to present a higher level of sophistication in managing risk. Historical performance gives a context for the future."
The IPD US Property Index will measure, from launch, returns to direct investment in US commercial property and will be based on more than 2,800 properties from over 40 funds, worth $121bn (€85bn) in assets under management.
That said, this base is expected to grow once US managers recognise the benefits of the index and the benchmarks that can be derived from it.
Cullen also suggested that slotting US data into the IPD global database reveals a pattern of "extremely sharp synchronisation," and argued 2008 was the only year in which all 23 markets followed by IPD showed poorer returns than the previous year.
The IPD Global Annual Property Index results will be announced in Barcelona on 4 June but sources predict with the US now amounting to 44% of global weighted capital, the results are unlikely to make investors happy.