The U.S. commercial real estate market is expected to log an aggregate average return of 7.1% on the National Council of Real Estate Investment Fiduciaries Property Index across all property types in 2018, according to the Pension Real Estate Association's fourth-quarter consensus forecast survey.
Survey participants expect the industrial sector to record the highest average total return in 2018, hitting 12.4% on the NCREIF Property Index. The office and apartment sectors are expected to see total returns of 6.7% and 6.3%, respectively, while the retail sector is projected to deliver a 4.2% total return.
Participants expected income returns of 4.6% and appreciation returns of 2.4% across all sectors in 2018, with only the retail sector expected to yield negative appreciation returns, at -0.5%.
Survey respondents expect total returns to decrease to 5.7% in 2019 and to 4.4% in 2020. Over the same two years, the industrial sector is projected to fall to 8.2% and 5.7%, respectively, while the apartment sector is expected to drop to 5.8% and 4.8%. The office and retail sectors are forecast to have total returns of 5.3% and 4.3%, respectively, in 2019, and 4.0% and 3.8%, respectively, in 2020.
The survey was based on the responses of 27 participating firms representing U.S. property investment managers, advisers and researchers.