Average total returns in the U.S. commercial real estate market are likely to hit 6.2% across all property types in 2018 before dropping to 5.0% in 2019 and 4.4% in 2020, according to the Pension Real Estate Association's second-quarter Consensus Forecast survey.
The survey, conducted in May, was based on the National Council of Real Estate Investment Fiduciaries' Property Index, which tracks institutional real estate returns on an unlevered basis and gross of management fees. PREA surveyed 24 participating firms representing U.S. property investment managers, advisers and researchers.
In 2018, survey participants predict that the industrial sector will have the largest average total return, at 9.5%. The office and apartment sectors are both expected to see returns of 5.8%, while the retail sector is forecast to deliver returns of 4.6%.
In 2019, total returns are expected to fall to 6.6% for the industrial sector and 4.9% for the apartment sector. The office and retail sectors are predicted to have total returns of 4.3% and 4.2% for the year, respectively.
