Close

Public vs. Private Real Estate Investments: Risk and Return

November 03, 2016

The S&P Dow Jones Indices and MSCI Inc. announced the creation of a new real estate sector, formerly included in the financial sector, within the GICS system which became effective August 31, 2016. The new real estate sector marks the 11th GICS sector and the first time a new sector has been added to the GICS classification since its inception in 1999. The creation of a separate real estate sector recognizes the growth in both size and complexity of the asset class. Real estate, which began as two sub-sectors, has grown over time to now contain a total of 13 sub-sectors.

These sub-sectors are an area of differentiation when it comes to public REITs vs. private real estate investments.1 Private real estate investments typically fall into one of four main sub-sectors: industrial, retail, office, and multifamily. REITs, on the other hand, often carry significant exposures to “alternative” real estate which includes sub-sectors such as self-storage, hotel, and healthcare. Additionally, the risk and return profiles of the same sub-sectors between public (REITs) and private real estate can vary significantly — particularly from a risk perspective, as measured by standard deviation. The chart above not only shows the annual returns of each REIT sector — note the dispersion of returns between sectors each year as well as the annual volatility of each sub-sector — but the level of standard deviation over the nine years of sub-sector returns in the table. Critically, the private real estate risk (industrial: 6.3%; retail: 5.1%; office: 6.8%; multifamily: 6.6%) is materially lower than the equivalent sub-sectors from REITs (respectively: 44%, 31%, 28%, and 26% (residential)). So while both public and private real estate investments may appear to invest in similar assets, their respective risk profiles can vary significantly.

___________________

1Private real estate is measured by the NCREIF Property Index (“NPI”), a composite of real estate investment performance from a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

Three-line chart comparing cumulative returns for MSCI EM Latin America Index, MSCI EAFE Index, and S&P 500 Index, Jan 1, 2026 through April 24, 2026. Dashed line at February 28 demarcates U.S. strikes on Iran. While all three indices dipped after war began, Latin America Index was higher to begin with and remains high. Most recent data point (4/24) for Latin America is 20.36%, EAFE is 5.7%, and S&P 500 is 5.06%. For full dataset, please email marquettemarketing@marquetteassociates.com.

04.27.2026

Let’s Hear It for Latin America

Latin American equity markets have shown remarkable strength in 2026. After a strong start to the year, the MSCI Emerging…

Read article
Two-line chart showing unemployment rate for All U.S. Workers and Recent College Graduates (Ages 22–27), 12/31/05 to 12/31/25. Up to 2020 period, Recent College Graduates generally had a lower unemployment rate than all U.S. workers category, but since then, the opposite has been true. Lines begin at ~3% to ~5% range in 2005, rose during Global Financial Crisis of '07-'09 to near 10% for All, ~7% for Grads, then both lines declined fairly steadily up to COVID. Peak for both series was 6/30/20, with All at 12.8% and Grads at 13.4%. Most recent data for 12/31/25 is ~4% for All and ~5.5% for Grads. For full dataset, please email marquettemarketing@marquetteassociates.com.

04.20.2026

The Sorrows of Young Workers

Entry-level jobs have traditionally served as the primary bridge between education and stable employment, offering young workers a foothold from…

Read article
Combination column and line chart showing Net Duties Received (columns, left-hand axis, ranging $0 to $35 billion) and Effective Tariff Rate (line, right-hand axis, ranging 0 to 12%) monthly, from April 2024 through February 2025. Up to March 2025, both data series held relatively steady, averaging around $7B for net duties received, and 2% for effective tariff rate, but both series have quadrupled since then. Most recent (Feb-26) is $26B and 8%. Please contact us for the full data set at marquettemarketing@marquetteassociates.com.

04.13.2026

Liberation Day: One Year Later

On April 2, 2025, President Donald Trump announced a sweeping set of tariffs on imports into the United States. Dubbed…

Read article
Line chart showing commercial & industrial loans as percent of total bank credit since 1980. Peak of line is September 1982 at 38%; since then there has been a steady decrease, with several peaks following global crises, with February 2026 datapoint at 21%. Basel I labeled at 1988, Basel II labeled at 2004, Basel III labeled at 2010. For full dataset, please contact marquettemarketing@marquetteassociates.com.

04.06.2026

Regulation Abdication?

The Basel capital framework was created to ensure that banks maintain sufficient capital to absorb losses and reduce the risk…

Read article

04.02.2026

1Q 2026 Market Insights Webinar

This video is a recording of a live webinar held April 16 by Marquette’s research team analyzing the first quarter…

Watch Video
Stacked column chart comparing contribution to total value creation broken out by revenue growth, margin expansion, and multiple expansion for private equity managers, by exit year, 2017 to 2024. 2017 column 45% revenue growth, 26% margin expansion, 29% multiple expansion. 2018 column 56% revenue growth, 4% margin expansion, 40% multiple expansion. 2019 column 43% revenue growth, 10% margin expansion, 47% multiple expansion. 2020 column 42% revenue growth, 19% margin expansion, 39% multiple expansion. 2021 column 46% revenue growth, 13% margin expansion, 42% multiple expansion. 2022 column 53% revenue growth, 20% margin expansion, 27% multiple expansion. 2023 column 64% revenue growth, 19% margin expansion, 17% multiple expansion. 2024 column 71% revenue growth, 12% margin expansion, 17% multiple expansion.

03.30.2026

Pulling the Right Value Creation Levers

In the period between 2009 and 2022, private equity managers thrived amid an environment of low interest rates and rising…

Read article
More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >