CBRE’s long income index has delivered a total return of 6.3% for the 12 months to March, down from 8.1% for the previous year.
CBRE said the sector had continued to show resilience against a “benign to weak mainstream market backdrop” and when compared with “mainstream” UK commercial property.
The total return was driven by capital growth of 1.7% and income return of 4.4%.
The index, which tracks the performance of assets held by specialist long income funds, reported that income strips performed the strongest over the year, delivering a total return of 8.3% due to capital growth of 4.4%. Ground rents provided a total return of 6.4% off the back of capital growth of 3.3%.
Sale and lease backs were the weakest performer for the fifth quarter in a row, with total returns of 5.6%.
As regards pricing these assets overall saw long income yields decline by 3bps, with income strips and ground rents decreasing by -13bps and -4bps respectively. Sale and leasebacks increased by 5bps, CBRE reported.
Meanwhile, the internal rate of return at the index level fell by -61bps with income strips and ground rents falling by -63bps -75bps respectively, and sale and lease backs declining by -55bps.
Lee Bruce, head of investment valuation at CBRE, said: “These results cover only a very short period of market disruption caused by Covid-19, and the impact of unprecedented policy response and economic shutdown will likely be seen more in next quarter’s figures.
“However, this initial glimpse at comparative data between long income and mainstream property shows that long income, while not immune to market stress, has once again offered investors greater protection in times of turmoil.”
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