U.S. Properties Return Negative 9.2% in First Quarter, New Index Finds

U.S. properties saw an overall return of minus 7.4 percent last year and minus 9.2 percent in the first quarter of 2009. Those were the findings of Investment Property Databank, the United Kingdom-based real estate performance analysis company, which launched a U.S. version of its property index yesterday and plans to launch a global index next Thursday at its European Property Investment Conference in Barcelona. The office sector was the worst performer last year, with capital growth of minus 12.8 percent, compared to minus 12.2 percent overall, minus 12.2 percent for residential, minus 11.7 percent for industrial and minus 11.4 percent for retail. Geographic performance pegged the Western states at the bottom, with minus 13 percent capital growth, versus minus 12.3 percent in the East, minus 11.1 percent in the South and minus 11 percent in the Midwest. The findings represent an expansion of available data on U.S. properties but are just the beginning, according to Ian Cullen, co-founding director & head of systems and information standards at IPD, who envisions a growing interest in benchmarking, especially among U.S. REITs, which have lacked the pressure to revalue quarterly that REITs in other countries experience. He anticipates such interest to result in both more frequent reporting of data and a greater number of contributors, which will in turn improve still further the ability to pinpoint performance metrics. Even with about 15 investment managers contributing data on 45 portfolios, though, the index already represents an expansion beyond the NCREIF Property Index, which tracks member tax-exempt funds and their managers. Until now, IPD had used NCREIF data as a comparison point against other countries, but Cullen noted that IPD’s ability to track a broader array of property owners will provide a better representation of the U.S. real estate market. It will also allow greater consistency with other markets included in the global index, providing global investors with a better data set against which to evaluate country performance. “Global is a very logical extension of the national and is a composite of it,” Cullen observed. “It’s much more important and there are a lot more clients becoming global in their perspective.” Data contributors also benefit from more specific benchmarking information against which to evaluate their properties, while the indexes are becoming attractive tools for derivatives trading, which has been popular in Europe and is catching on in the United States, Cullen said. IPD was founded in 1985, launching with data on U.K. properties and then expanding to 15 other European countries. It has produced a Pan-European index for about five years and now also tracks property performance in Japan, Korea, Australia, New Zealand, South Africa and Canada.