The REIT Time to Access an Alternate Universe
9 OCT, 2025
By CenterSquare
By Steve Carroll, Managing Director and Head of International Capital Markets at CenterSquare
With global markets having experienced significant volatility through July, and many economists believing tariffs will result in stickier inflation, real assets are already in the spotlight for their inflation-hedging and defensive qualities. Additionally, continued geopolitical risks will continue to create economic uncertainty, driving capital to investments whose performance is less dependent on economic growth. At CenterSquare, we expect this will accelerate investor interest in alternative real estate property types underpinned by structural, rather than cyclical, growth drivers. Here we see REITs as offering the best entry point to these sectors.
For investors seeking exposure to the real estate asset class, REITs offer a meaningful value proposition today. Not only do REITs trade at discounted valuations compared to core private real estate, but they also offer investors a much more liquid investment vehicle with exposure to these alternative property types poised to capture secular growth.
From a valuation perspective, we believe core private real estate faces further repricing. Both public and private real estate investors have wrestled with the repricing of real estate due to the shifting interest rate regime. This repricing, however, occurred much more swiftly across the public markets and has yet to be fully realised across private markets, especially in the U.S. We believe core private real estate is not priced appropriately for a higher interest rate environment, and we expect additional correction ahead, whereas REITs have already corrected appropriately. The result is a much more attractive valuation for real estate investors in the public market versus the private market.
Furthermore, as private real estate continues to process resetting valuations alongside mounting debt maturities, we believe REITs are positioned for strong external growth in the coming years. With lowly levered balance sheets and unparalleled access to capital across public equity markets and the unsecured bond market, REITs have a material cost of capital advantage versus private equity real estate investors today. REITs have historically capitalised on such market dislocation to acquire assets in periods that have proven to be strong vintage years for real estate investments.
Additionally, REITs offer meaningful access to alternative property types. In fact, 60% of U.S. REITs, by market capitalisation, are focused on sectors such as data centres, healthcare, and storage, whereas these non-traditional real estate sectors represent less than 10% of private core funds according to the NFI-ODCE Index. These sectors can be challenging to access in the private markets thanks to higher, and longer-term, capital requirements and niche operational prowess. Further, the daily-traded nature of listed real estate securities, combined with lower capital requirements, provides a more liquid method of investing in alternative real estate property types. We see this liquidity as being a key attraction in a period of volatility where institutional investors will need to quickly execute tactical adjustments to their allocations.
Even before the most recent market volatility, we had been witnessing a reorganisation of institutional real estate portfolios, as institutional investors are increasingly viewing listed real estate as a complementary component to private real estate within a completed real estate allocation that balances liquidity, volatility, and property type exposures to enhance overall returns.
