European non-listed real estate funds notched up a record performance of 8.0% in 2014 – the highest level since before the financial crisis and more than double the 3.2% total return achieved in 2013, according to the recently published INREV Annual Index 2015.

European non-listed real estate funds notched up a record performance of 8.0% in 2014 – the highest level since before the financial crisis and more than double the 3.2% total return achieved in 2013, according to the recently published INREV Annual Index 2015.

Capital growth accounted for the lion’s share of improved total performance at 4.5% versus -0.3% in 2013, while income returns remained stable at 3.5%.

The UK significantly outperformed other markets, driving overall gains with an annual total return of 16.7% in 2014 – nearly twice the 8.6% figure recorded for the previous year.

But the index reveals a marked general uplift across continental Europe, which rose from 0.7% in 2013 to 3.7% in 2014. Southern European funds rose from -6.7% in 2013 to -1.1% in 2014, while funds in Western Europe hit their highest level since 2006 with a total return of 11.2%.

Investors’ increased appetite for risk was reflected in performance figures for value-added funds, which reached 8.9% in 2014 versus 7.9% for core funds. The best performing sector was industrial/logistics, which posted a total return of 17.9% for the period against 9.6% for retail, 7.5% for offices and 4.6% for residential.

“These impressive data justify investors’ continuing belief in, and commitment to, the benefits of non-listed real estate funds, especially in the face of low bond yields and the continuing ‘lower for longer’ interest rate environment,' said Henri Vuong, INREV’s director of research and market information.

She added: 'The mood is clearly upbeat. But while there’s no sign of a bubble, the consistent rise in capital values and dwindling supply of quality real estate assets across core markets in Europe may yet raise questions about the prospects for sustained outperformance over the longer term.'