Senior Director, UK Research
Long Income Index | Q4 2017
- In the 12 months to December 2017, the CBRE Long Income Index delivered a total return of 13.5%.
- This compares with a figure of 11.8% for the CBRE Monthly Index, which tracks the mainstream commercial real estate market.
- Long Income performance was underpinned by capital growth of 8.3%, as net initial yields declined by
29bps.Lee Bruce commented“Investors have long been attracted to the Long Income market as a source of strong returns combined with low volatility, that can be used to match liabilities with indexation built in. The investment universe has expanded significantly in recent years, beyond the ‘traditional’ sale and leaseback and into structures including Ground Rents and Income Strips. All three areas of the market delivered extremely strong returns in 2017, as investors continued to be attracted to the significant premium to comparable fixed income investments. With consensus expectations for income growth muted in the mainstream commercial property market, and with the gap to corporate and Government bonds still very favourable, we expect 2018 to be another rewarding year for Long Income investors, who should enjoy positive income growth via indexation and the potential for further yield compression.”