Soaring industrial gains were a major contributor to a 12 per cent improvement in investment performance for the Canada Annual Property Index last year. Newly released results from the index producer, MSCI, peg the 2021 total return across 2,367 directly held real estate assets in 46 institutional portfolios at 7.9 per cent, rebounding from negative 4.1 per cent in 2020.

That breaks down to 3.6 per cent capital growth and 4.25 per cent income return, after 2020 saw a 7.8 per cent loss of capital value and a continued downward trajectory that nudged income return to a record low 3.9 per cent. In contrast, 2021 brought the best average total return since 2015.

“I think we can say this was a pretty strong recovery,” Simon Fairchild, executive director with MSCI, observed during the online results presentation earlier today.

Nevertheless, the overarching numbers hide some dramatic divergences among property types. While industrial and multifamily assets continue an established trend as the best performing assets, industrial’s 31.6 per cent total return propelled it far out in front. Multifamily retained a solid grip on second with a 7 per cent total return, as office and retail delivered matching total returns of 2.8 per cent.

Drilling down farther, capital growth is the clear differentiator. Industrial basked in a 24.6 per cent upsurge compared to a 3.8 per cent gain for multifamily. However, income returns were roughly equivalent at 4.3 per cent for industrial and 4.2 per cent for multifamily. Office and retail both sustained losses in capital value — 1.8 per cent and 1.5 per cent respectively — relying on income to pull them into positive return territory.

Toronto and Vancouver are in close step as the leading markets with respective total returns of 10.8 and 10.4 per cent, followed by Montreal at 8.2 per cent. Calgary was alone among the eight analyzed markets to suffer a drop from 2020, registering a total return of negative 1.2 per cent, including negative 6.8 per cent capital growth. In addition, Ottawa, Winnipeg and Edmonton experienced slippage in capital value of 1 to 2.4 per cent.

“Even in Alberta, there is some measure of improvement. So there are some encouraging signs throughout the country, although maybe more encouraging in certain markets and certain sectors,” Fairchild mused. “The 26.4 per cent growth in values for industrial as a whole is obviously just an extraordinary amount of capital appreciation. As you can probably guess from the distribution of the cities, a lot of that was coming through from Toronto.”