MSCI/PREA U.S. ACOE Quarterly Property Index
While COVID-19 had an immediate impact on the return of US retail assets, its impact on residential returns was less severe according to the MSCI/PREA U.S. ACOE Quarterly Property Index. For the year to December 2020, the total return of retail property was -8.5 percent, while residential was still positive at +1.3 percent.
On a quarterly basis, retail’s return has yet to return to positive territory while the residential sector only experienced a negative return in Q2 2020. While residential property held up better at the aggregate, index level, the range of returns within the sector grew to a nine year high at December 2020 amid a dislocation in rental growth between inner city & outlying locations.
CBD and urban residential rentals declined by 14.0 percent and 12.3percent as increased Work-from-Home activity and a flight to more affordable suburban locations impacted demand. At the same time, residential rentals in suburban and secondary CBDs was only 3.3 percent and 1.1 percent off March 2020 levels.
The impact was even more pronounced in global and regional gateway cities (New York, Boston, San Francisco, Chicago & Los Angeles) where CBD & urban residential rentals slid 18.9 percent since March 2020. To what extent COVID-19 leads to longer term shifts in urban structure remains to be seen, but in 2020 the suburbs weathered the storm better.
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