The National Council of Real Estate Investment Fiduciaries (NCREIF) is the trade association that basically consists of tax-exempt real estate typically held by pension funds. NCREIF generates several total property returns indices. This highly transparent dataset included 7,353 properties with an estimated market value of $505.3 billion as of the end of Q2 2016. These are up from $471.7 billion across 7,225 properties as of the end of 2015, a gain of 7.12 percent and 1.74 percent, respectively. NCREIF reports the data for five separate property types plus an All Properties return including:
Hotels
Apartments
Industrial
Office
Retail
Returns are calculated quarterly and include both the net-cash flow from the property and the change in the property value. Specifically, total return is the net operating income from the property, less property management fees, plus the change in value. The annual returns referenced in this blog are the simple sum of the prior four quarters.
The following table contains the latest Quarterly Return Indices for the apartment properties held in tax exempt investments.
These excellent returns are not always recurring, as shown in the following graph detailing the return for the trailing 12-months quarterly. As they always say, past performance does not guaranty future returns. While the latest TTM return of 9.40 percent is greater than 8.86 percent average since 2001, it has declined three consecutive quarters, as shown in the following graph.
To view or download the data click http://www.ncreif.org/property-index-returns.aspx?region=A
The following graph shows total U.S. building permits. 2016 is the latest 12 months of data.
In the latest 12 months ending June 2016, the U.S. has issued 429,095 multifamily residential permits (these are buildings with 2 or more units per structure). 639,607 single family permits were issued for a total 1,068,702 dwelling units. In that same period, the U.S. added 2,469,000 net new jobs. This equates to 2.31 net new jobs per new dwelling unit. I consider 1.25 to 1.50 net new jobs to be normal, so in aggregate, we continue to build too few new owner and renter occupied properties. This portends rising rents and home values. However, some local markets are being overbuilt in specific property types and price ranges.
Ted