IPD Global Quarterly Property Fund Index results remain strong in the quarter to March 2014, but they are showing signs of a slowdown.
Fund-level returns stood at 2.3 per cent, down from 2.9 per cent in the quarter to December 2013. The 12-month return kept its momentum, reaching a two-year high of 11.1 per cent, outperforming property equities and bonds but lagging behind equities.
There are marked variations in returns across regions. The top two performing markets in December 2013 showed a slowdown in March 2014. UK returns fell from 4.0 per cent in December 2013 to 3.1 per cent in March 2014, while North American performance slowed from 3.1 per cent to 2.1 per cent. On the other hand, Continental Europe returns accelerated from 1.1 per cent at the end of 2013 to 1.8 per cent in March 2014, the best quarterly performance since March 2011. Asian returns were stable at 2.1 per cent.
The underlying assets included in the IPD Global Quarterly Property Fund Index produced a direct asset-level total return of 2.5 per cent for the quarter ending March 2014. This is in slight decline compared with the previous quarter (2.7 per cent) but it brought the 12-month return to a 2-year high of 10.8 per cent. The drivers of returns were different across regions. In the UK and North America, which both recorded double-digit performance over the last 12 months, capital appreciation was the main return driver, while income return was the driving component in Asia Pacific and Continental Europe (the latter still recording negative capital return).
The standout sector remained the industrial sector, which outperformed on a quarter-on-quarter and year-on-year basis. Residential or multi-family continued to lag commercial real estate over the last three and 12 months, but still outperformed all other sectors on a three- and five-year basis.