Real estate has underperformed for approximately two years due to soaring interest rates, high inflation, and a significant housing supply shortage. But now that real estate is back on top again, managers like Harrison Street Asset Management and Cohen & Steers see new opportunities — particularly student and senior housing and publicly listed securities.
“This is the time when you need hard assets in good and bad times,” Christopher Merrill, co-founder and global CEO of the student and senior housing specialist Harrison Street, told Institutional Investor. “If you’re worried about inflation these assets reprice. If inflation accelerates, stocks and bonds tend to perform worse than real assets.”
Returns have rallied, with the NCREIF Property Index reaching a 4.94 percent annual return in 2025 after being flat the year before and losing 7.9 percent in 2023.
“Interest is coming back for private real estate since the market seems to have stabilized and forecasts I have seen are for returns to increase,” said Jeffrey Fisher, a senior consultant at the National Council of Real Estate Investment Fiduciaries (NCREIF), caveating that there’s “a lot of uncertainty now as to how the war and tariffs and a new Fed chair will impact real estate.”
Fisher added that while interest “depends a lot on the property sector,” senior housing outperformed all property types last year, beating the index by 10.6 percent. Growing demographics have led to an increased demand for these assets.
“You’re not trying to time markets. It gets down to education. It gets down to healthcare,” Merrill said, pointing to the fact that students can’t afford on-campus housing and a growing aging populace requiring care late in life.
The $108 billion HSAM is one of the largest private owners of student housing in the world, having invested over $24 billion across 427 properties within the student housing sector.
A Safer and More Liquid Alternative
Real asset managers also see a renewed opportunity on the public side. While the U.S. Department of Labor recently issued guidelines for allowing assets like cryptocurrencies and other private assets into retirement plans, managers like Cohen & Steers suggest there are far better, more liquid, alternatives.
Jeffrey Palma, head of multi-asset at the $90 billion real asset manager Cohen & Steers, argues listed real estate “might do similar sorts of things” as private assets. “I’m not sure that adding private assets to 401(k)s is necessarily all that beneficial for retirees,” Palma added.
As Palma explained it, the conventional wisdom is that private assets could provide higher returns, lower volatility and/or lower correlations. But that’s not necessarily what investors have been getting: the data on returns is mixed. Palma noted that allocations to listed real assets can potentially provide the same benefits that private-market investments offer — strong returns and a hedge against inflation — but without sacrificing illiquidity.
The other issue is the volatility: “In private markets you’re getting smoother returns because of the way valuations are made,” he explained. “In equities and bonds, we can look at the price go up and down every day. So, returns are artificially smoothed in private assets.”
Palma admits that the obvious downside case for this strategy is a possible recession. “If current events and high oil prices create the conditions for a recession, real assets would not likely be immune to a downturn in growth,” he said.
