Canada stands out in newly released global investment performance data for outsized returns on industrial assets during the first quarter of 2022. MSCI pegs the annualized total return at 35.7 per cent — a surge from the two-year annualized total return of 22 per cent recorded in the fourth quarter of 2021. Only the United Kingdom and the United States saw higher Q1 returns on industrial property, at 40.5 and 50 per cent respectively.

Meanwhile, Canada’s all-property annualized total return was 12.3 per cent for the quarter. That’s well back of the UK (19.3 per cent) and US (22.9 per cent) benchmarks, but a significant improvement from the previous quarter’s two-year annualized return of 5.6 per cent. Notably, Canadian retail assets delivered a 7 per cent annualized total return for Q1, up from the negative 3.3 per cent two-year annualized total return as of Q4 2021.

That’s the same general pattern seen across the MSCI global quarterly property index, which tracks property-level performance of more than 20,000 quarterly valued assets in 26 countries. The index all-property total return was 4.4 per cent for Q1 2022, down from 5 per cent in the previous quarter, but surpassing the 4.1 per cent return of Q3 2021.

Sectoral returns ranged from 7.7 per cent for industrial to 1.75 per cent for office. Residential was the second strongest performer, delivering a 4.4 per cent return, followed by alternative real estate asset classes grouped in the “other” category, which recorded a 3.5 per cent return. Hotels are the only sector to follow a consistent upward trajectory over the five quarters since the beginning of 2021, climbing from a 0.65 per cent return in Q1 2021 to 2.35 per cent in Q1 2022.

Other accompanying MSCI data highlights the increasing weight of industrial assets and diminishing status of retail holdings within the index. That follows five consecutive quarters in which industrial has outperformed all other property sectors, while retail now has the lowest weighting — representing 15.3 of the capital value of the index — of the four major property sectors.

As of Q1 2022, the industrial sector accounted for 31.5 per cent of the capital weight of the index, up from 21.6 per cent in Q1 2020, and marking the first time industrial captured the largest share of capital value among the four major sectors. Office slipped to second with 28.3 per cent of the capital value, down from 33.8 per cent in Q1 2020.

Retail last topped the capital weighting hierarchy in Q3 2013 when it represented 33.5 per cent of index value — slightly edging office at 33.2 per cent — and its peak weight of 37.5 per cent was attained in Q4 2010. However, it was solidly lodged in the second ranking, behind office, for 24 quarters until it was first surpassed by industrial in Q1 2020.

Residential initially eclipsed retail in Q1 2021. As of Q1 2022, residential accounted for 20.4 per cent of the capital weight of the index — up from 12.1 per cent at Q1 2012 and 16.3 per cent at Q1 2017.

Looking at the complement of assets within the index, office properties continue dominate the makeup of participants’ portfolios. In 2021, office accounted for 37.3 per cent of the index, down from 40 per cent in 2019. Residential and industrial have an essentially equal presence, equating to 19.4 and 19.3 per cent of the index as of 2021 and both have gained prominence since 2019. Retail has shrunk as a proportion of the index, down to 16.6 per cent in 2021 from 21.2 per cent in 2019.