The NFI-ODCE Index appears to be turning a corner. After a prolonged period of volatility and correction, Q4 2024 delivered its second consecutive quarter of positive returns, reinforcing investor confidence that the market is stabilizing. While values remain below peak levels, capital is beginning to flow back into real estate, and institutional investors are recalibrating their portfolios to align with new market realities.
In the latest NFI-ODCE Index Fourth Quarter Update webinar, Geoffrey Dohrmann, Chairman and CEO of Institutional Real Estate, Inc., and Garrett Zdolshek, Chief Investment Officer of Accordant Investments and IDR Investment Management, provided a data-driven analysis of the index’s performance, sector-specific shifts, and the economic forces shaping 2025. With rising volatility, evolving capital flows, and increasing investor focus on resilient property types, the session outlined the key trends that will define the next phase of real estate investing.
The fourth-quarter performance suggests a market turnaround, with the NFI-ODCE Index delivering a 1.0% total return — its second consecutive positive quarter. While values remain approximately 25% below prior peaks, the current correction has been less severe than the 40% decline experienced during the Global Financial Crisis (GFC).
The outlook for 2025 is stronger, with a projected net total return of 7.5%.
Trailing performance as of Q4 2024:
Investor sentiment has shifted. A growing institutional investor consensus now views the worst of the cycle as behind us, with early signs of recovery underway.
The investment landscape has fundamentally shifted, with higher volatility, prolonged inflation, and a recalibration of asset allocations influencing investor strategy:
Against this backdrop, private real estate — particularly in sectors with strong fundamentals, continues to offer compelling relative value.
The real estate market remains highly sector-specific, with key performance themes emerging heading into 2025:
Office values are down approximately 43% unlevered from peak — making it the hardest-hit sector in the index. Gross valuations also declined by 16.4% in 2024, though recent occupancy gains suggest early signs of stabilization. However, medical office and life sciences remain more resilient within the broader office category.
Retail is positioned as a leading performer heading into 2025. With a going-in cap rate of 5.4%, the sector offers a meaningful income yield advantage over other property types.
Combined with renewed investor interest and relatively stable fundamentals, retail is emerging as one of the most attractively priced sectors in the current environment.
Data centers delivered 11.6% appreciation over the trailing year — the highest among the alternative property subtypes.
While the asset class currently comprises ~1% of the NFI-ODCE Index, fewer than half of the 25 funds report exposure. This reflects selective participation but growing interest. Supply constraints, infrastructure limitations, and surging demand continue to drive performance.
Signs of improved liquidity and investor confidence were evident in Q4:
Real estate is poised to offer stable, attractive returns in a higher-rate environment. The projected 7.5% net total return for ODCE investors underscores a more balanced market with improving fundamentals.
Accordant Investments continues to focus on strategic real estate allocations –committed to identifying resilient sectors, managing risk, and capitalizing on emerging opportunities in 2025 and beyond.
For investors looking for long-term value and income stability, ODCE funds appear well-positioned to deliver competitive risk-adjusted returns in 2025.
IMPORTANT DISCLOSURES
1. Sourced: IDR, as of Q2 2024.
2. As of April 2024
3. The fund will invest in the underlying component funds of the NFI-ODCE Index that comprise a material NAV of the overall index.
Accordant Investments LLC (“Accordant”) is an SEC registered investment adviser. For more information about our services and disclosures, please visit our website at www.accordantinvestments.com. This content does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service managed by Accordant.
NCREIF Fund Index – Open End Diversified Core Equity (the “NFI-ODCE Index”). Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.
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Past Performance does not guarantee future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to corresponding past performance levels. Inherent in any investment is the potential for loss. It should not be assumed that any investments in securities, companies, sectors, or markets identified and described in this content were or will be profitable. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.
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All real estate investments have the potential for value loss during the life of the investment and the sponsor can make no assurances that any investment will achieve its objectives, goals, generate positive returns, or avoid losses.
Investors should carefully consider the investment objectives, risks, charges, and expenses of the Accordant ODCE Index Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained online by visiting www.accordantinvestments.com. The prospectus should be read carefully before investing.
Past Performance is No Guarantee of Future Results.
Investing in the Fund involves risks, including the risk that you may receive little or no return on your investment or that you may lose part or all of your investment. The Fund’s investment objective is to employ an indexing investment approach that seeks to track the NCREIF Fund Index – Open End Diversified Core Equity (the “NFI-ODCE Index”) on a net-of-fee basis while minimizing tracking error. There can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns. It is not possible to invest in an index. You cannot invest directly in an index and unmanaged indices do not reflect fees, expenses, or sales charges.
The ability of the Fund to achieve its investment objective depends, in part, on the ability of the Adviser to allocate effectively the Fund’s assets across the various asset classes in which it invests and to select investments in each such asset class. There can be no assurance that the actual allocations will be effective in achieving the Fund’s investment objective or delivering positive returns. Limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers for no less than 5% of the Fund’s shares outstanding at net asset value. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer.
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