US private real estate has long been a core allocation for institutional investors 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.
1. Competitive long-term return potential
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.
2. Competitive long-term risk-adjusted return potential
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.
3. Diversification
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.
4. Private market exposure
As an alternative to US stocks ($69 trillion market capitalization at year-end 2025) and US fixed income ($67 trillion), US private real estate ($19 trillion) provides the potential for meaningful exposure to private markets.
5. Potential inflation hedge
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.
6. Durable income potential
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%).
7. Tax advantages
Investing in real estate may provide tax benefits for investors.7 For example, a real estate investment trust (REIT) can potentially offer these benefits:
Deductions and depreciation
Investors may benefit from a REIT’s ability to deduct certain expenses, such as mortgage interest, property repairs, and depreciation.
Capital gains taxes instead of income taxes
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.
Taxes
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. 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.
Consider US private real estate
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.
