Europe was the worst performer in 2013 at a time when the non-listed real estate sector globally experienced a 'dramatic uptick ' in total returns, new research shows.
Europe was the worst performer in 2013 at a time when the non-listed real estate sector globally experienced a 'dramatic uptick ' in total returns, new research shows.
Globally, non-listed real estate funds delivered overall returns of 8.08%, according to the Global Real Estate Fund Index, which combines indices published by the European, Asian and US property fund organisations, INREV, ANREV and NCREIF.
The global gains were driven largely by positive performances in Asia at 9.22% and the US at 13.23%.
Returns for Europe as a whole, measured by the INREV Quarterly Index, averaged 3.5%, compared with minus 0.50% in 2012. But the positive 2013 result was largely generated by a jump in the UK (8.77% compared with 0.28% the year before).
For Continental Europe, returns were 0.99%, pulled down by the negative Southern Europe returns of minus 11.86%. Central and Eastern European funds saw returns of 1.98%.
‘The main story is about outperformance in the UK, but Southern Europe is still struggling. If real estate is in any way a proxy for economic recovery, these results underline the view that we’re witnessing a two-speed momentum,' said Casper Hesp, INREV director of research.
Much of the improved performance in Europe was the result of capital appreciation, which increased from minus 3.62% to minus 0.04% in 2013. But there was also a strong contribution from income returns, which increased from 3.20% to 3.58%.
In general, returns in Europe also benefitted from the significant inflow of capital from Asia and the US during 2012/2013. This is reflected in the INREV Quarterly Index for Q3 and Q4 2013, which posted consecutive improvements in returns that correlated to an uplift in capital inflows.
In Europe, the industrial and logistics sector stood out as a star performer delivering returns of 5.62% on the back of growing awareness from investors of its long-term income-producing benefits. Returns in the retail sector followed on at 2.83%.
Core funds in Europe have outperformed value-added funds since 2008. However, the INREV Quarterly Index showed that the predominance of core is waning with value-added funds starting to outperform core at 3.87% and 3.46% respectively in 2013.
'This is an interesting narrative. The INREV Quarterly Index shows value added funds rapidly gaining ground and starting to overtake core. It suggests a measure of increased confidence and risk appetite that could be re-calibrating investors’ default setting. Time will tell,' concluded Hesp.