New INREV Index shows total return on European RE of 10.23%

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INREV’s newly launched asset-level index has recorded double-digit returns and capital growth from real estate assets across Europe.

The European real estate association said the annual Asset Level Index shows a total return of 10.23% in 2018, incorporating capital growth of 5.74% and an income return of 4.27%.

The index – which tracks the performance of the real estate assets across Europe on an annual basis – covered data from 6,038 assets with a total of combined managed assets of €151.6bn, covering around 20 countries and all key real estate sectors, INREV said.

According to INREV’s director of research and market information Henri Vuong, "This is an impressive set of returns that will no doubt reinforce investors’ current positive view of non-listed real estate, which is based on an underlying asset class in good health that’s built on strong foundations."

The Netherlands recorded the best national performance as it posted total return of 15.46%, due mainly to strong capital growth in the residential sector, while Germany and France posted total returns of 12.18% and 9.55%, respectively.

Pre-Brexit UK – which represented the largest percentage allocation of the whole index at 28.3% – ”demonstrated the weakest performance of the major European countries” with a total return of 5.89% in 2018, the figures revealed. Just 1.17% of the UK’s overall performance was attributed to capital growth.

Across the different sectors, residential recorded a total return of 16.36%, closely followed by industrial/logistics at 15.51%. The office sector achieved a total return of 9.48% with retail coming in with a total return of 4.15%.

INREV chose its annual conference earlier this month in Venice to announce the new Asset Level Index. The index is based on five years of historical quarterly data. As INREV explained it, the index delivers data sets of pure real estate performance, stripped of leverage and financial structuring, and is designed to provide investors and managers with a deeper understanding of the drivers of real estate performance and risk.

The goal is improved transparency and decision-making help in portfolio allocation and risk management, said INREV.