Are private Reits 'hotel California' for US asset owners?
Many US asset owners are crowding into sectors which have seen strong demand: medical offices, self-storage and care homes and are wary of traditional office space (Reuters/Kevin Coombs)
Private Reits — especially non-listed or semi-liquid structures — are drawing US institutions back after a rough few years as confidence returns.
The appeal is familiar: stable income, diversification across property types and access to large, professionally managed real estate that most funds can’t reach on their own.
The $374.2bn California State Teachers’ Retirement System recently committed $200mn to Starwood Credit Real Estate Income Trust, even though SREIT still had $999mn in pending redemptions as of August.
But the same forces driving this renewed interest are also creating unintended consequences.
Many asset owners are crowding into sectors which have seen strong demand: medical offices, self-storage and care homes. They are wary of traditional office space.
Munir Iman, senior vice president in Callan’s real assets consulting group, told AOX: “Many investors are deliberately underweight to office space… There are concerns about evaluation risk there.”
Liquidity misconceptions are another key issue.
“There’s this belief that if something offers monthly or quarterly liquidity, that means liquidity is actually there,” Iman said. “But that’s not how real estate works.”
One Detroit pension spokesperson called private Reits the “Hotel California of investing” — investors can check in easily, but leaving is another matter.
The valuation lag between public and private markets adds a further layer of complexity, creating inflated Navs, reduces transaction activity, and introduces pricing risk.
These risks are shaping allocation decisions.
Some have opted to look elsewhere: the $150mn Town of Ridgefield Pension Fund cut its 8 per cent US Reit allocation entirely.
North American Securities Administration Association - a group of state regulators across the US, Canada and Mexico - adopted a 10 per cent cap on semi-liquid alts, effective in 2026.
But nonetheless the trend is global: China’s private Reit market — only two years old — raised nearly $6bn in 2025.
Despite the challenges, institutions aren’t backing away. They’re simply getting more deliberate.
As Iman explained, investors who position carefully now could benefit from a reset in values and changing demographics: “We’re on the precipice of a new cycle…I think that’s reason for some optimism.”