Whoosh!

The MSCI Monthly Index starts the reporting season of property returns and showed that it was not only Downing Street partying in December.

Overall, December 2021 recorded the highest total return, 3.9%, in the history of the Monthly Index (start = Dec 1986). Previous total return highs were hit at the end of 1993 / start of 1994, which marked the recovery from the late 1980s development boom-and-bust, and then again in late 2009 after Prime Minister Gordon Brown rescued the financial system by cutting interest rates to 0.5%.

However, whilst retail property did enjoy a top-10 month, office returns were decidedly mid-table. It was the industrial sector therefore that generated the truly exceptional returns, with a sector record 7.1% for the month, beating the previous sector best of 5.1%, also achieved by industrial property in the booming late 80s. Industrial rental value growth was also a non-too shabby 1.9%, beating all previous rates since the 1980s.

Without being a party-pooper, I would point out the fall in the Industrial Net Initial Yield, which began the previous decade in the 7s, slid below 6% in 2014, below 5% in 2018, is now below 4%. This is a record 79 bps below the all-property initial yield; in horse-racing parlance, the sector is ‘shooting up the weights.’