It’s not surprising that real estate investment trusts (REITs) have endured a brutal bear market given the combination of rising rates and recent bank failures which have led to tighter credit conditions. In a recent Benzinga article, Kevin Vandenboss discusses why private real estate has performed much better.

As a result, the Real Estate Select SPDR Fund (NYSE: XLRE) is down 28.7% from its 2021 high, while the S&P 500 is down 19.6%. This underperformance has intensified in the past month with the Real Estate Select SPDR Fund down 5.2%, while the S&P 500 is up 1.4%.

Interestingly, private real estate has performed substantially better with many investments continuing to deliver positive returns. One factor is the reduced use of leverage which leads to more resilience during downturns. Another is being removed from the pressures of public markets and quarterly results often leads to better decision making.

Therefore, investors, who are interested in real estate, should consider this asset class as it can generate positive returns even during periods of poor stock market performance unlike REITs. Private real estate funds are able to focus on particular segments which remain in growth mode even amid adverse economic and financial conditions.

Finsum: REITs are mired in a bear market and their performance has worsened amid recent bank failures and the Fed’s hawkish policy. Yet, private real estate has outperformed and continues to deliver positive returns.