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This chart shows the components of total return over the last full real estate market cycle for five ways of investing in real estate: unlevered core properties (NCREIF Property Index), core private equity funds (NCREIF ODCE Index), value add and opportunistic private equity funds (NCREIF/Townsend Fund Indices), and listed equity REITs (FTSE NAREIT All Equity REIT Index). Core investments on the private side have provided very little capital growth--in fact, with CPI inflation averaging 2.8% over the cycle, they actually lost value.
The REIT index represents a passive investment in the universe of investable listed U.S. equity REITs, but this analysis assumes fees typical of actively managed portfolios. The private indices represent returns reported by active managers selected by large institutional investors, so likely overstate the universe of private real estate investments. Returns are not adjusted for leverage: value add and opportunistic funds typically use much greater leverage than listed equity REITs, while core funds use less.