Capital growth from non-listed real estate funds in continental Europe increased to 1.0% in local currency in the first quarter of 2011, according to the latest INREV Quarterly Index. This marks a turnaround on the last four quarters, when performance in continental European markets was driven by income returns and capital growth rates stagnated. Total returns were 1.6%, virtually unchanged from the fourth quarter of 2010 (1.9%). Income returns were typically lower due to higher year-end dividends paid out by continental European funds in the last quarter of 2010.

'The resurgence of capital values in continental Europe reflects the broader economic recovery in many of these markets. Our Quarterly Index suggests some encouraging news for investors but it is too early to confirm this as an upward trend for the remainder of 2011,' said Casper Hesp, Senior Research Manager at INREV.

'The strengthening capital growth shown in the Inrev Quarterly Index for the first quarter of 2011 mirrors what we are seeing in the non-listed Pan-European funds we have invested in on behalf of our clients,' commented Catriona Allen, co-chair of the INREV Performance Measurement and Benchmarking Committee and Fund Manager at Aviva Investors Real Estate Multi Manager.

Germany and France both demonstrated strong performances in the first quarter of 2011 with each hitting capital growth of 1.9%, and total returns of 2.7% and 2.2% respectively. The results echo the positive sentiment toward these markets expressed by investors in the Inrev Investment Intentions Survey 2011 published at the beginning of the year when German retail and French office investments were cited as preferred options.

Multi-country funds, which account for 41% of the INREV Index by number of funds, also made a significant contribution to overall performance figures for the first quarter of 2011 with capital growth of 1% and total returns of 1.6%. In the UK returns for the first quarter of 2011 were slightly lower (1.6%) than in the last quarter of 2010 (2.4%) and are now comparable with continental Europe.