European non-listed real estate funds notched up a performance of 8 percent in 2014 – the highest level since before the global financial crisis, said the European Association for Investors in Real Estate Vehicles’ (INREV) annual performance index.
The 8 percent return is more than double the 3.2 percent total return achieved in 2013. Capital growth accounted for the lion’s share of improved total performance at 4.5 percent versus -0.3 percent in 2013, while income returns remained stable at 3.5 percent.
The best performing funds were value-add strategies, which reached 8.9 percent in 2014 versus 7.9 percent for core funds. The best performing sector was industrial/logistics, which posted a total return of 17.9 percent for the period against 9.6 percent for retail, 7.5 percent for offices and 4.6 percent for residential.
“The mood is clearly upbeat. But while there’s no sign of a bubble, the consistent rise in capital values and dwindling supply of quality real estate assets across core markets in Europe may yet raise questions about the prospects for sustained outperformance over the longer-term,” commented Henri Vuong, INREV’s director of research and market information.
In terms of top performing countries the UK delivered significant outperformance driving overall gains with an annual total return of 16.7 percent in 2014 – nearly twice the 8.6 percent figure recorded for the previous year.
But, the Index revealed a general uplift across continental Europe too, which rose from 0.7 percent in 2013 to 3.7 percent in 2014. Southern European funds rose from -6.7 percent in 2013 to -1.1 percent in 2014, while funds in Western Europe hit their highest level since 2006 with a total return of 11.2 percent.