GLOBAL - The US National Council of Real Estate Investment Fiduciaries (NCREIF) has reported improved returns for the NCREIF Property index (NPI) for the third straight quarter.

The NPI total return for the third quarter was 3.9%, up from the second quarter total return of 3.31%. The latest quarter returns consist of 1.6% from income and 2.2% from capital appreciation.

Apartments led all property sectors with a total return for the quarter of 6%. All property sectors showed positive total returns for the quarter, with the lowest being industrial properties, which returned 2.8%.

Cap rates based on appraisals for properties in the NPI dropped to 6.5% for the current quarter from 6.8% for the second. The cap rates are the ratio of current net operating income to the property value.

On a regional basis, the US East continued the strong performance recorded last quarter, with a 4.2% total return. 

This was led by returns for New York City and Washington, DC, whose properties returned 4.5% and 5%, respectively.

Cate Polleys, NCREIF chair and a principal at Hewitt Ennis Knupp, said: "The change in cap rates is reflective of the low interest-rate environment and improving capital market for high-quality commercial real estate, despite continued decline in net operating income."

Roy Rendino, chief executive at NCREIF, added: "We continue to see a bifurcation whereby highly leased properties in recovering cities and the apartment sector significantly outperform the rest of the market."

The NPI consists of 6,057 investment-grade, income-producing properties consisting of apartments, office, retail, industrial and hotels.

The total value of the properties in the NPI is $238bn (€172bn). 

The breakdown of the portfolio is 34.8% office, 25.1% apartments, 23.9% retail, 14.3% industrial and 1.9% hotels.

From a geographical perspective, the NPI has its portfolio 34.7% in the East, 32.9% in the West, 21.8% in the South and 10.6% in the Midwest.
 

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