The Real Estate Reel: The listed REIT selloff, valuations, and the private CRE correction

Rich Hill

Rich Hill

Head of Real Estate Strategy & Research

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4 minute read

November 2023


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We see a regime change in what’s driving the recent listed REIT selloff. REIT valuations appear cheap. And the pattern in the decline in private real estate is reminiscent to what occurred in the wake of the 1990s S&L crisis, indicating the selloff and recovery could be a slow grind.

Watch this month’s Real Estate Reel to find out what these data points mean for real estate investing.


  • Data is suggesting potential for a rally in listed REITs once rates stabilize because listed REIT returns, which have declined for three months straight, have become correlated to real rates.
  • Listed REIT valuations are around 10-year lows, which we view as another indication of a strong potential entry point for listed REITs.
  • The selloff and recovery in private real estate could be a slow grind, as the pattern in the decline in valuations appears to be reminiscent of the 1990s S&L crisis. 


  1. Drivers of the listed REIT selloff
  2. Listed REIT valuations
  3. The private CRE correction relative to history

That’s what I am watching this month.

Welcome to The Real Estate Reel from Cohen & Steers where we provide three insights on real estate investing in three minutes each month.

First, we are witnessing a regime shift in listed REIT returns, which have now declined for three months in a row and are down more than 30% peak to trough.

Tightening REIT debt spreads had been the primary driver of listed REIT returns for most of the last year, but real rates have now become much more highly correlated since the beginning of August.

Specifically, cumulative total returns from October 2022 to July 2023 had an R-squared of 60% to REIT debt spreads And just 2% to real rates.

However, since the beginning of August, real rates now have a R-squared of 90% while correlations to REIT debt spreads have declined slightly to 56%.

We appreciate that the 92-basis point rise in real rates and the 97-basis point rise in nominal rates since the end of July are a headwind to listed REIT valuations.

However, we think the market may be too focused on this factor alone and be dismissing the relative stability of REIT debt spreads and solid fundamentals we see in REITs, including same-store net operating income growth that remains above historical averages This suggests potential for a rally when rates eventually stabilize.

Finally, we reiterate that August, September, and October are historically weak periods for listed real estate. However, as you can see in this chart, returns have rebounded in November and December, when average monthly returns have been approximately 1.0% and 3.0%, respectively (with median returns of approximately 2% for both November and December) This is from 1995 through October of 2023. Rebounds in the past two years have been even more pronounced. Returns over the final three months were 4% in 2022 and 16% in 2021.

The second data point we are watching is listed REIT valuations now that REITs have sold off.

U.S. listed REITs trade at an approximate 6.3% implied cap rate, as of October 31, versus the historical average since 2010 of 5.7%. As a result, we believe U.S. listed REITs look cheap to themselves. Unlevered IRRs of 8.6% and levered IRRs of 10.4%, again at the end of October, further support this view. This is before considering potential for alpha generation through active management.

The “funds available for distribution” (FAD) multiple has declined to 17.5x. As shown in this chart alongside historically high cap rates just mentioned, this is the lowest level since at least the beginning of 2011, and it compares favorably to a quarterly average over this time period of 20.6x (ranging from 17.5x to 28.6x). This is another key signpost we’re watching that indicates a potential strong entry point for listed REITs.

Finally, I’m watching the magnitude of current correction in private real estate, as measured by the NCREIF ODCE index, compared to what occurred during the global financial crisis and the early 1990s post the Savings & Loan crisis.

As you can see in this chart, cumulative declines in total returns since the peak in 3Q22 now stand at -12% driven primarily by capital returns at -15.4%. This is more severe than what was experienced during the S&L crisis and not as severe as what happened in the global financial crisis.

The NCREIF ODCE index dropped more in 4Q22 than it at the outset of both the global financial crisis and the S&L crisis. The quarterly declines now appear to be normalizing toward what was experienced during the S&L crisis.

We think declines in private CRE prices may be a slow grind, with a path similar to what occurred in the early 1990s post the S&L crisis. We do not expect a V-shaped recovery like what played out during the GFC and, to a lesser extent the S&L crisis in the absence of government intervention.

This means that investors in core private real estate may need to be patient to find investment opportunities that begin to emerge as the bottom nears.

Subscribe to the Real Estate Reel via the link on screen and tune in next month to see what we’re watching next.

Watch October’s The Real Estate Reel: We’re watching institutional allocations, CRE debt and property price disconnects

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Rich Hill, Senior Vice President, is Head of Real Estate Strategy & Research, responsible for identifying allocation opportunities in both listed and private real estate and related thematic and strategic research.


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