For Managers Like Harrison Street and Cohen & Steers, Real Estate’s Time Has Arrived

Real estate has emerged from a prolonged underperformance period as rising interest rates, elevated inflation, and supply constraints that weighed on the sector for approximately two years show signs of abating. The NCREIF Property Index, a benchmark tracking institutional real estate returns, reached 4.94% annually in 2025, marking a dramatic reversal from the prior year's flat performance and 2023's 7.9% decline. This performance recovery has reignited institutional investor interest in the asset class, particularly among specialized managers positioned to capitalize on emerging opportunities.

Harrison Street Asset Management and Cohen & Steers represent a cohort of real estate managers viewing current market conditions as an inflection point. Christopher Merrill, co-founder and global CEO of Harrison Street, articulated a thesis centered on real estate's defensive and inflation-protective characteristics across differing economic scenarios. "If you're worried about inflation these assets reprice. If inflation accelerates, stocks and bonds tend to perform worse than real assets," Merrill told Institutional Investor. This positioning aligns with traditional institutional asset allocation logic where hard assets provide diversification benefits and inflation hedges during both benign and stressed market environments.

Senior housing has emerged as the standout performer within the real estate sector, with returns exceeding the broader property index by 10.6 percentage points in 2025. This outperformance reflects demographic tailwinds—specifically an aging population requiring assisted living and healthcare services. Student housing has also attracted renewed manager interest, driven by structural supply constraints as college students face affordability challenges accessing on-campus housing. Merrill underscored these secular demand drivers: "It gets down to education. It gets down to healthcare."

However, Jeffrey Fisher, a senior consultant at NCREIF, cautioned that uncertainty persists. While interest in private real estate has returned as market stability improved and return forecasts expanded, Fisher noted that geopolitical tensions, tariff policies, and changes in Federal Reserve leadership could materially impact sector performance. This commentary reflects the complex macro backdrop currently influencing alternative asset allocation decisions among institutional investors.