According to the National Council of Real Estate Investment Fiduciaries (NCREIF), the NCREIF Property Index (NPI) reported a decrease in overall market value for the eighth consecutive quarter and negative returns for the seventh straight quarter in Q2. While all property sectors saw positive returns, office properties were an exception and caused a decline in overall returns.
Since its peak in Q2 2022, the market value index has dropped by approximately 16.5%. However, NCREIF pointed out that this is still significantly less than what was experienced during the financial crisis of 2008-2009 when values plummeted by nearly 30%. The total return for Q2 was -0.22%, although it has improved over two quarters after reaching -2.95% in Q4 of 2023.
The negative quarterly return consisted of a positive income contribution of 1.18% and a negative property appreciation impact of -1.40%, according to NCREIF’s report. As per their data at quarter-end, out of a total universe consistingof12,789 properties includedintheNPI,index there were4 ,611 leveragedpropertieswitha weighted average loan-to-value ratioof50%-the highest since2012.This increasein LTV canbe attributedto decliningpropertyvalues.
