Private real estate in retirement plans

Including private real estate in defined contribution plans, such as 401(k)s, can offer individual savers added diversification and enhance retirement outcomes.
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"Private real estate has been part of 401(k) retirement plans for years, with over $45 billion invested today. At Clarion Partners, we're focused on making these opportunities even more accessible — by bringing the benefits of institutional real estate investing to everyday retirement savers."

— Tripp Braillard, Senior Vice President & Head of Defined Contribution Distribution

FAQs

WHAT ARE DEFINED CONTRIBUTION PLANS?

Defined contribution (DC) plans, such as 401(k) and 403(b) plans, are retirement savings plans where contributions from the employee and/or employer are invested in an individual account, with the final retirement amount depending on contributions and investment performance. 

how is a dc plan different from a defined benefit plan?

A defined benefit (DB) plan, or traditional pension, provides a guaranteed lifetime retirement income based on a formula.

What are the benefits of private real estate compared to public real estate?

• Low correlation with traditional asset classes
• Lower historical volatility relative to publicly-traded real estate investment trusts (REITs)
• Durable income
• Inflation protection

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WHAT is institutional-quality real estate? 

"Institutional-Quality" Real Estate includes properties that are of sufficient size, stature, and quality to attract investment from the world's largest pension funds, insurance companies, endowments, and foundations.

Watch this video to learn more

how can i invest in private real estate through my retirement plan such as a 401(k)?

Most private real estate is included in multi-asset funds like a target date fund, balanced fund, or inflation protection fund. 

WHAT DOES THE PRESIDENT'S "DEMOCRATIZING ACCESS TO ALTERNATIVE ASSETS FOR 401(K) INVESTORS" EXECUTIVE ORDER MEAN FOR RETIREMENT SAVERS?

The Executive Order opens the door for 401(k) plans and other defined contribution plans to offer alternative investments like private real estate - not just stocks, bond, and mutual funds. 

 
 

Case study


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Why commercial real estate in a multi-asset portfolio?

Real estate is the third largest asset class in the U.S. with over $12.8 trillion in total assets and the majority of commercial real estate is privately held.1 Investors who access real estate using publicly traded REITs are missing 89% of the market opportunity. While the diversification benefits of private real estate are well known, DC plans only allocate ~0.3% of their portfolio to private real estate compared to DB plans which allocate ~9%.1
Clarion believes that private real estate could offer the same benefits to DC plans as it has offered DB plans over the years.

Chart showing real estate is the third-largest asset class in the U.S.  

 

Chart showing U.S. commercial real estate is 89% privately held and 11% owned by publicly listed REITs 

 
 

1 Prequin, CAIA Association (2023) and Callan DC Index (2025).
2 U.S. Real Estate includes Private and Public Equity Investments.
3 Private Real Estate includes the estimated value of all privately held real estate.

Source: Securities Industry and Financial Markets Association, CBRE, NAREIT, Clarion Partners Global Research, annual data, and estimates as of 2Q 2025. U.S. Bonds includes corporate securities, ABS, treasury debt, Federal agency debt including MBS, money market funds, and muni bonds. U.S. Equity includes the NAREIT All Equity REITs Index. Past performance is not indicative of future results. Please see important disclosures at the bottom of this webpage. 

The benefits of private real estate

Magnifying glass 

ATTRACTIVE HISTORICAL RETURNS

Has demonstrated the ability to improve risk-adjusted returns when added to a stock/bond portfolio1

Correlation arrows 

LOW VOLATILITY & CORRELATION

Has provided more stable returns and has a lower correlation to stocks and bonds than publicly traded REITs2

Shield 

INFLATION HEDGE

Has historically performed well in periods of inflation3

Income 

DURABLE INCOME

Has demonstrated the ability to provide consistent income, an important component of real estate total returns

Table showing the addition of 10% in private real estate to a 60/40 stock/bond portfolio improves risk adjusted return by 12%  
1 25-year historical observations are as of 2Q 2025.
2 Morningstar Direct as of March 2025. 25-year historical observations are as of 2Q 2025.
3 5-year historical observations are as of 2Q 2025.

Source: Clarion Partners Global Research, NCREIF, Bloomberg, REIT.com, 2Q 2025. Without Real Estate = 60% Stocks, 40% Bonds. With Real Estate: 10% Real Estate, 55% Stocks, 35% Bonds. Note: Private Real Estate Index = NFI-ODCE is used as a performance benchmark for core real estate (stabilized institutional-quality assets). S&P is used as a reference for stock performance. Bloomberg U.S. Aggregate Bond Index is used to represent investment-grade bonds. Risk is measured using standard deviation of annual total returns. Past performance is not indicative of future results, and a risk of loss exists. Index returns do not include management fees or related fees. 



  • Corner of a multi-story industrial building with an empty parking lot
    Prioritizing Defined Contribution Plan Participant Outcomes with Private Real Estate
    Prioritizing Defined Contribution Plan Participant Outcomes with Private Real Estate
    Research
    ;#Home;#DC 1;#
    09.09.2025
    Clarion Partners believes there is compelling data for defined contribution (DC) plan sponsors to consider including private real estate as an investment option in a multi-asset retirement plan.
    /insights/prioritizing-dc-plan-participant-outcomes-with-private-real-estate

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Investment in real estate is speculative and involves significant risk. For more information about certain of the material risks and limitations associated with Clarion Partners’ investment advisory products, strategies and services, please see Clarion’s current Form ADV Part 2A brochure, which is available on the SEC’s Investment Adviser Public Disclosure website at https://adviserinfo.sec.gov/firm/summary/108803. Investors should consider their investment objectives, and it is strongly suggested that the reader seek his or her own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory risks and evaluate their own risk tolerance before investing.

This material does not constitute investment advice, nor does it constitute an offer in any product or strategy offered by Clarion Partners LLC or Clarion Partners Europe, and should not be viewed as a current or past recommendation to buy or sell any securities. Any specific investment referenced may or may not be held in a Clarion Partners client account. It should not be assumed that any investment, in any property or other asset, was or will be profitable.

All Clarion Partners LLC and Clarion Partners Europe statistics, data and charts, including but not limited to assets under management (AUM), ESG data, sector data and property data, as well as data related to our investors, tenants and employees, are as of June 30, 2025 unless otherwise noted.

Photos used in this website were selected based on visual appearance, are used for illustrative purposes only, and are not necessarily reflective of all the investments in a Clarion fund or portfolio or the investments a Clarion fund or portfolio will make in the future.

Investment in real estate is speculative and involves significant risk. For more information about certain of the material risks and limitations associated with Clarion Partners’ investment advisory products, strategies and services, please see Clarion’s current Form ADV Part 2A brochure, which is available on the SEC’s Investment Adviser Public Disclosure website at https://adviserinfo.sec.gov/firm/summary/108803.

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