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Peer Intelligence | Summer 2024

Bps and Bites

Discover five strategies to navigate the REIT market

Our latest research for NAREIT reveals the surprising performance differences between listed and unlisted real estate investments over a 24-year period. The study shows which strategies deliver the best returns, net of costs. See which key findings and strategies have been shown to enhance returns in the real estate market.

By Chris Flynn, Head of Product Development 

In a recent study we did for NAREIT, CEM Benchmarking examined the performance of institutional investor portfolios within the real estate market, highlighting the distinctions between listed and unlisted real estate investments. This extensive research covers a period of 24 years (1998-2021), offering significant insights into how these portfolios perform relative to benchmarks, taking into account factors such as investment expenses and market efficiency. 


Below are five insights that provide a compelling comparison between listed and unlisted real estate investments: 


1. Listed REITs: Efficient Performers

Listed REITs have demonstrated impressive efficiency, adding 84 basis points of value before costs. Even after expenses, they deliver a solid 32 basis points to investors. This performance underscores the effectiveness of listed REITs in the current market landscape. 

2. Unlisted Real Estate: Challenges with Costs 

While unlisted real estate generates value, the higher associated costs significantly impact returns. On average, these investments show a -68 basis point return after expenses, highlighting the importance of cost management in this sector. 


3. Cost Impact Analysis

The study reveals that listed REITs, with their lower cost structures, consistently outperform benchmarks. Over 55% beat their benchmarks after costs. In contrast, only 44% of unlisted real estate investments outperform, primarily due to higher expenses. 

4. Variations in Unlisted Real Estate


It's important to note that not all unlisted real estate strategies perform equally. Direct ownership and in-house management approaches show positive returns, similar to listed REITs. However, externally managed portfolios, particularly in core and opportunistic funds, face more significant challenges in delivering consistent value. 


5. Performance Persistence


An intriguing aspect of our findings is the persistence of performance in unlisted real estate. Top-performing managers tend to maintain their status, but underperformers also consistently lag. This pattern suggests that while some managers consistently add value, others struggle to overcome the high costs associated with unlisted real estate investments. 


In listed real estate, performance shows more variability year-over-year, indicating less persistence in returns. 




Our research highlights the critical role of investment costs and efficiency in real estate portfolio performance. For institutional investors, listed real estate and internally managed unlisted portfolios offer promising avenues, delivering better returns net of costs.


By focusing on these efficient investment strategies, investors can navigate the complexities of the real estate market more effectively and achieve more consistent value. 


For a comprehensive analysis and detailed data, please refer to the full NAREIT paper here.


Peer Intelligence | Summer 2024