As published in PREA Quarterly, Winter 2025
REITs are real estate with attractive performance attributes. In research sponsored by Nareit, CEM Benchmarking took a comprehensive look at investment allocations and realized investment performance across 12 asset classes over a 25-year period (1998–2022) using a dataset covering more than 200 U.S public- and private-sector pensions with $4.1 trillion in combined assets under management (AUM).
Among its findings , CEM showed that, on average, REITs outperformed private real estate by 2.08% on an annual net total return basis. Yet CEM data as of 2022 showed that REITs, on average, accounted for just 0.6% of U.S. defined benefit pension fund investment portfolios; the private real estate allocation was 5.9%.
REITs can help investors achieve their real estate investment objectives by offering relative value opportunities, complementing existing portfolio allocations through broader diversification and sustainability enhancement, and improving overall portfolio performance. With this in mind, institutional investors should further explore how REITs can play greater tactical and strategic roles in their investment portfolios.
To read the full story visit PREA Quarterly (pdf).