AQR, a global investment management firm know for their research, states that - due to its illiquid nature - private real estate should offer a return premium relative to public REITs. However, they conclude private real estate offers zero excess return relative to public REITs.
Oddly enough, in North America, REITs have outperformed RE by 1-3% since inception, suggesting an inverse illiquidity premium
REITs carry substantially lower leverage than most real estate private holdings. Below is an analysis of REIT and private real estate returns after adjusting for leverage.
If you would like to review the white paper in detail, it can be found below: