Skip to main content

You are here

Blog Listing Page

Global real estate powered ahead in 2015 – but for US investors, currency matters

Global real estate powered ahead in 2015 – but for US investors, currency matters

By: Mary Fjelstad, Sr. Research Analyst

Anyone whose home currency is the Euro would have benefited handsomely from exposure to global listed real estate in 2015.

The FTSE EPRA/NAREIT Global Index returned 10.9% (EUR), outperforming the FTSE All World Index (measuring the global equity market) which returned 9.6% (EUR) over the same period. The US dollar’s strength, however, meant that those index returns for dollar-based market participants were considerably more muted, but still outpaced the FTSE All World Index.

It was the developed countries—comprising 90% of the global listed real estate market—which contributed most positively to real estate performance, as the FTSE EPRA/NAREIT Developed Index posted a 2015 return of 11.5% (EUR) versus 6.1% (EUR) for the Emerging Markets index.[1] Drilling down into the regional sub-indexes, we note that Europe—17% of the Developed Market—led the pack of developed regions with a return of 18.8% (EUR). North America produced a 13.4 % (EUR) return, with the majority of that return coming from US markets which clocked in at 14.8 % (EUR). Developed Asian real estate markets came in third among regional developed markets with a return of 3.3% (EUR).

Source: FTSE EPRA/NAREIT Monthly Statistical Bulletin December 31, 2015. Past performance is no guarantee of future results. Please see the final disclaimer for important legal disclosures.


Currency fluctuations can and do impact investment outcomes, however, and that was true in 2015 for the US investor. The US dollar strengthened against most major currencies last year: the FTSE EPRA/NAREIT Global Index fell 0.4% in USD terms, although this is a better result than for the FTSE All World Index which declined 1.7% (USD). Even so, developed European public real estate ended 2015 at a higher level despite the currency drag: a 6.7% (USD) improvement over the year. The domestic US listed real estate market also contributed a 3% return for the year, which compares favorably to the relatively flat performance of 0.5% for the domestic US equity market as represented by the Russell 3000 Index.

Source: FTSE EPRA/NAREIT, data as of December 31, 2015. Past performance is no guarantee of future results. Please see the final disclaimer for important legal disclosures.


Turning our attention to the country indexes, within developed  Europe—the highest performing regional market in 2015 for both Euro and USD-based investors—Spain, Sweden and Italy produced the largest increase over the 2015 calendar year, and Norway suffered the most, falling 20% USD and 11.3% EUR. The weaker performance of developed Asia public real estate markets is explained primarily by Japan which fell 5.9% in USD terms. In the emerging world, China’s strong return of 13.5% (USD) could not offset the huge decreases in countries such as Brazil (-50.4% USD), Egypt (-44.4% USD) and South Africa (-22% USD).

Academic as well as practitioners have found evidence that listed real estate can provide diversification benefits to a multi-asset investor.[2] In 2015, analysis of the performance of the FTSE EPRA/NAREIT Index Series suggests that Euro-based equity investors would have experienced improved total portfolio performance had they included exposure to public real estate markets. While the increasing purchasing power of the US Dollar diminished the overall level of returns for the US-based investor, outcomes from developed Europe as well as domestic US listed real estate support a role for real estate as a valuable diversifying asset class.

--------------------------

[1] Throughout this report we use FTSE EPRA/NAREIT Indexes to measure and represent  global listed real estate markets.

[2] See, for example, Moss, A., and A. Baum (2013), “The use of listed real estate securities in asset management: a literature review and summary of current practical applications,” EPRA Research, European Public Real Estate Association.

 

© 2016 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell indexes or the fitness or suitability of the indexes for any particular purpose to which they  might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this communication  should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a license from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

 

 

 

Blog Listing Page