The latest JLL Property Index states that the overall returns of the portfolio in the last three months are +1% and in the last 12 months total +3.5%, despite the challenges of the pandemic. It is projected that the underperforming sectors will bounce back with the easing of Covid-19 restrictions in H2 2021.

The JLL Property Index, which has been undertaken by JLL since 1969, measures returns to direct investment in property and represents a hypothetical portfolio typical of the market. The portfolio is weighted 55% offices, 20% retail and 12% industrial.

Capital values decline

Overall, capital values have declined slightly this quarter (-0.3%). Over the last 12 months, capital values have decreased by -1.6%. This year-on-year decline was predominantly led by the retail sector, which is down -3.5% on the quarter and -12.3% over the last 12 months. This has been compounded by the decrease in office values which is down -0.6% on the quarter and -1.1% over the last 12 months. Industrial and residential capital values increased by 3.2% and 2.8%, respectively, over the quarter, offsetting some of the overall decrease.

Retail office and residential rental values drop

Overall income has increased by +0.6% in the past three months and, over the past 12 months, 1.6%. Overall rental values across the entire Index portfolio remained static at 0.0% in the past three months, but in the past 12 months, it has decreased by -1.8%. Industrial had the greatest increase over the last 12 months (+5.5%). The remaining sectors were all down: offices (-0.5%), retail (-7.4%), and residential (-3.9%).

Real estate market resilient

Hannah Dwyer, Director and Head of Research, JLL, said: “Positively, the index continues to perform steadily, showing the resilience of real estate to the ongoing pandemic. The index results vary by sector, but as the nature of the asset-mix, which represents a stereotypical institutional portfolio, is spread across sectors, the strengths in some sectors are balancing out the temporary challenges in other sectors.

“While not at levels we have become accustomed to in recent years, returns are expected to remain positive, mirroring the broad stability across the real estate market. The performance of the index will continue to be sector-specific, with continued strength in industrial and residential. This reflects the solid performance of the occupier and investment markets for these sectors. Retail and offices are expected to improve in the next six months as offices and retail open up again post Covid-19 lockdown restrictions.”