Equity REITs have outperformed unlisted real estate investments over more than two decades, delivering higher returns for pension funds, according to to research released on Monday.

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REITs outperformed private real estate by almost 2.7 percentage points per year on average and also provided better risk-adjusted returns.

The new study, sponsored by Nareit and conducted by research firm CEM Benchmarking, had access to a 21-year-old dataset (1998 – 2018). He has analyzed asset allocation and performance in more than 200 public and private sector pension plans with nearly $3.9 trillion in combined assets under management.

“The CEM Benchmarking study shows the stark disparities between REIT and private real estate returns,” said Nareit’s executive vice president of research and investor outreach. John Worth said in a statement.

Main findings

CEM compared the returns, correlations and volatilities of four main styles of private real estate ownership with varying risk profiles and costs – direct internal management, value added/opportunistic, basic funds and funds of funds – and concluded that REITs outperformed private real estate, regardless of ownership style.

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At the same time, the analysis showed that REITs had the lowest allocation of all assets in the study. Over the 21-year period, pension fund allocations to REITs have remained stable, while those to private real estate have increased, particularly value-add/opportunistic funds.


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