Divide in real estate property types likely to narrow — report

By comparison, the average 20-year spread between the highest and lowest property types in the U.S. was 11.9 percentage points, the report shows.

In the UK, the best performing property type, industrial, returned 29.6% and the worst performing sector, office, returned 2.3%, a range of 27.3 percentage points.

The difference between the top and bottom performing property types in the US and the UK has averaged around 10 percentage points over the past 20 years, the report shows.

Its widespread adoption in 2021 was caused by changes in tenant preferences and behavior accelerated by the COVID-19 pandemic, including more people working from home and shopping online, the newspaper said. Industrial and residential property types benefited from this development, while hotels, office and retail properties suffered.

In addition, lower relative transaction volumes for office and retail properties, which have historically been the two largest property sectors, have pushed investors into specific types of property like single-family home rentals, the report said.

While high-yielding asset types like apartment buildings and industrial properties are expected to continue to attract capital from investors, unfavorable property types like hotels, offices and retail should gradually rebound between 2022 and 2024 as these sectors regain some of the market share lost during the lockdown said Richard Kleinman, Chicago-based head of LaSalle’s US research and strategy group and co-CIO for America.

“We’re seeing signs of renewed interest among investors in retail,” Kleinman said in an interview.

Coveted retail properties, such as grocery centers, are on the radar of institutional investors as they deliver stable returns and are well positioned for recovery, he said.