Global

While retail had the lowest premium across the sectors in 2018, it was in line with its 20-year average, as were the office and residential sectors.

As interest rates have fallen, the discount rates on real estate cash flows have followed, helping to drive up asset values.

The highest total return was achieved by the industrial sector at 13.3 percent and the weakest total return was for retail at 2.9 percent.

The MSCI Global Annual Property Index found that commercial real estate achieved a total return of 7.4 percent in 2018.

Capital growth was positive in all the markets though in the U.K. it was just 0.6 percent.

Foreign currency denominated returns in the MSCI UK Monthly Property Index made during the post-event troughs significantly outperformed a GBP-denominated investment over similar periods.

As of the end of the third quarter 2018, asset values were 25 percent higher than their pre-recession peak, according to the MSCI U.S. Quarterly Property Index.

The downturn for commercial real estate did not set in until later than for residential real estate but once it did, the shock to commercial markets was much more pronounced.

This chart compares the return performance of seven countries where MSCI has quarterly property indexes for the 12 months ending September 2018.

The exhibit compares unlevered asset performance from core open-ended funds in the MSCI database with opportunistic fund performance from Preqin Ltd.

Core open-end funds are one of the most popular avenues for institutional investment into real estate.

Halfway through 2018, the separation between industrial performance and the returns level of the other core sectors continues to be evident.