Twenty Years of the NCREIF Property Index

Abstract

This study overviews the performance of the NCREIF Property Index, by property type, over the twenty‐year period ended in 1998. More exactly, performance is analyzed from the perspective of the fundamental sources of return: initial earnings yield, dividend payout ratios, earnings growth, shifts in capitalization rates and other (less significant) effects. (While this approach is here applied to private real estate equities, nothing precludes its application to a variety of other investment classes.) Our results indicate the fundamental sources that have contributed to the Index’s considerable cross‐sectional variation as well as its time‐series variation. Therefore, this study should be viewed as a useful historical account for those interested in understanding the ex post return‐generating process of the Index and its property‐type components as well as those who wish to model the ex ante return‐generating process for a variety of applications in both the equity and debt markets—regardless of whether the securities are publicly or privately traded.