US private real estate has provided competitive long-term returns compared to US stocks and bonds.
The average income has been stronger in US private real estate than US bonds or stocks over the past 20 years.
US private real estate can be a diversifier and inflation hedge, have potential tax benefits, and provide exposure to private markets.
US private real estate has long been a core allocation for institutional investors1 and has historically offered a differentiated return profile compared with public US stocks and bonds. Over long periods, it has delivered competitive total returns with volatility closer to bonds than stocks, which resulted in attractive historical risk‑adjusted performance.
US Private real estate has also provided diversification benefits, durable income potential, possible inflation protection, exposure to private markets, and, depending on ownership structure, potential tax advantages.
These are all reasons why we believe US private real estate can potentially serve as a complementary allocation for private wealth investors seeking to broaden traditional stock and bond portfolios.
Here’s a look at seven historical benefits.
US private real estate has consistently emerged as either the highest or second-highest performing asset class compared to US stocks, bonds, and Treasury yields across every 10-year rolling period for the past 29 years.
Risk‑adjusted returns capture the relationship between long‑term return potential and the volatility experienced along the way. Historically, US private real estate has delivered long‑term returns that have been closer to US stocks than US bonds. At the same time, the volatility of US private real estate returns, measured by the standard deviation of annual total returns, has been closer to that of bonds than stocks. This combination has resulted in attractive long‑term risk‑adjusted returns for private real estate investors.
A key investing rule of thumb is diversification, which involves including a variety of investments that don’t move in lockstep in a portfolio. One way to measure an investment’s diversification is correlation. Over the past 30 years, US private real estate has historically shown a low correlation to US stocks (0.06) and US bonds (-0.12), which means it has provided greater portfolio diversification.2
As an alternative to US stocks ($69 trillion market capitalization at year-end 20253) and US fixed income ($67 trillion4), US private real estate ($19 trillion5) provides the potential for meaningful exposure to private markets.
A concern for investors is that inflation can erode the purchasing power of income from stock dividends or bonds. The income generated by private real estate is different — it’s tied to rents, which historically have increased when inflation has risen. Real estate income growth has kept pace with inflation over long-term historical periods. (See chart below.)
When yields are low and there’s economic uncertainty, investing in US private real estate may provide durable income potential. Over the past 20 years, average income returns have been stronger in US private real estate (5.12%) than in US bonds (3.26%) or US stocks (2.12%).6
Investing in real estate may provide tax benefits for investors.7 For example, a real estate investment trust (REIT) can potentially offer these benefits:
Investors may benefit from a REIT’s ability to deduct certain expenses, such as mortgage interest, property repairs, and depreciation.
REITs may realize any profits from a property sale as a capital gain, and the tax rates are typically lower than ordinary income tax rates.8
REITs aren’t subject to corporate income tax on earnings distributed to investors, and dividends are taxed at an investor’s individual tax rate. Certain investors benefit from a 20% deduction for REIT dividends that are characterized as ordinary income.9 Tax reporting is also more straightforward on a 1099-DIV (no K-1s).
Real estate can be owned through other structures besides REITs, so before investing in real estate, consult a tax advisor about your options.
The track record of US private real estate highlights why investors may want to consider adding an allocation to it in a traditional US stock and bond portfolio. Over time, US private real estate has exhibited competitive long-term and risk-adjusted return characteristics, low correlations with public stocks and bonds that can contribute to diversification, and features that may help mitigate inflation. US private real estate has also historically generated durable income potential, offered potential tax benefits, and provided exposure to private markets, positioning it as a meaningful consideration in broader portfolio construction.
Easing of lending standards is expected to boost commercial real estate (CRE) loan originations and broaden opportunities within CRE equity and credit.
As 2026 begins, listed real estate offers a compelling combination of improving fundamentals, attractive valuations, and sector-specific opportunities.
With stabilizing property values, rebounding transactions, and significant loan maturities, now may be the time to consider private real estate lending.
Get the latest information and insights from our portfolio managers, market strategists, and investment experts.
Important information
NA5257121
Image: georgeclerk / Getty
All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
Standard deviation establishes the average spread of individual values from the mean for a group.
Correlation measures the strength and direction of a linear relationship between two financial assets or variables.
US private real estate is represented by the NCREIF Property Index on the basis that the NPI is the broadest measure of private real estate index returns. The NPI is published by the National Council of Real Estate Investment Fiduciaries and is a quarterly, composite total return (based on appraisal values) for private commercial real estate properties held for investment purposes, including fund expenses but excluding leverage and management and advisory fees. All properties in the NPI have been acquired, at least in part, on behalf of tax-exempt institutional investors and held in a fiduciary environment. NCREIF data reflects the returns of a blended portfolio of institutional-quality real estate and does not reflect the use of leverage or the impact of management and advisory fees.
US stocks are represented by the S&P 500 Index, an unmanaged index of the 500 largest stocks, weighted by market capitalization and considered representative of the broader stock market. The S&P 500 Index is subject to market risk.
US bonds are represented by the Bloomberg US Aggregate Bond Index, an index of securities that covers the US investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities and asset-backed securities; and is subject to credit risk.
US Treasury or T-bills are represented by the Bloomberg 90-Day US. Treasury Bill Index, an unmanaged index designed to measure the performance of public obligations of the US Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months.
The S&P 500 Index, the Bloomberg US Aggregate Bond Index, and the Bloomberg 90-Day US. Treasury Bill Index are meant to illustrate general market performance; it is not possible to invest directly in an index.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations), and investors may not get back the full amount invested. Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer's opinion and may not be realized.
Generally, real estate assets are illiquid in nature. Although certain kinds of investments are expected to generate current income, the return of capital and the realization of gains, if any, from an investment will often occur upon the partial or complete disposition of such investment.
Investing in real estate typically involves a moderate to high degree of risk. The possibility of partial or total loss of capital will exist.
Real Estate Investment Trusts (REITs) are pooled investment vehicles that trade like stocks and invest substantially all of their assets in real estate and may qualify for special tax considerations. REITs are subject to risks inherent in the direct ownership of real estate. A company’s failure to qualify as a REIT under federal tax law may have adverse consequences to the REIT’s shareholders. REITs may have expenses, including advisory and administration, and REIT shareholders will incur a proportionate share of the underlying expenses.
Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. You should always consult your own legal or tax professional for information concerning your individual situation. The tax information presented is based on the current interpretation of federal income tax law. State and local income tax laws may differ from federal income tax law.
The opinions referenced above are those of the author as of December 31, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
This link takes you to a site not affiliated with Invesco. The site is for informational purposes only. Invesco does not guarantee nor take any responsibility for any of the content.
