The latest NFI-ODCE Market Update brought together Accordant Investments’ CIO and Portfolio Manager, Garrett Zdolshek, and Geoffrey Dohrmann, CEO of Institutional Real Estate, Inc. (IREI), for a review of the forces shaping core private real estate in early 2026.
The Q1 2026 discussion focused on whether the market has entered a new cycle, what is driving the recovery, and how performance, valuations, liquidity, and capital flows are evolving across the NFI-ODCE Index, the benchmark index for private real estate.
Watch the full Q1 2026 NFI-ODCE Market Update Webinar or continue below for key themes and takeaways.
Why it matters: The Q1 results suggest the recovery is underway, with returns beginning to move back toward more normalized levels as fundamentals continue to improve.
Q1 2026 offered further evidence that private real estate returns are beginning to improve. Net total return exceeded 1% for the first time in four years, while performance broadened across funds within the index.
What stood out:
What it means: Private real estate appears to be transitioning into a positive return cycle. Downside pressure is moderating, but returns have not yet fully normalized.
In prior cycles, falling interest rates and cap rate compression often helped drive valuation gains. Today, that setup appears less likely. Cap rates have largely stabilized in the 4.5% to 4.7% range, making income growth a more important part of the return outlook.
Cap rate compression means cap rates go down, which can increase property values even if income does not change. In this cycle, future returns may rely more on actual income growth.
What matters now:
Bottom line: The next phase of performance may be more income-led than valuation-led.
New supply is down approximately 54% from peak levels, and current market economics continue to make new construction difficult in many areas. Over time, that may support stronger occupancy, better rent growth, and improved income performance
Why it matters: When fewer new properties are being built, existing inventory has more time to be absorbed.
Bottom line: A slower supply environment may help support rent growth and income performance over time.
Sector dispersion has been a defining feature of this cycle. Earlier in the downturn, what investors owned by property type had a major impact on relative performance.
For example, portfolios with more industrial exposure and less office exposure generally performed better than portfolios positioned the other way around.
In Q1, dispersion across major property types continued to narrow, meaning performance became more consistent across the main sectors.
What stood out:
Bottom line: As performance across major property types becomes more consistent, property-level factors such as leasing, NOI growth, tenant demand, and occupancy may play a larger role in differentiating returns.
Financing conditions remain important, but leverage within the NFI-ODCE Index appears manageable.
Current debt metrics include:
Debt is not yet broadly accretive to returns, meaning borrowing costs are not currently adding much to performance. However, the index’s moderate leverage, fixed-rate debt exposure, and staggered maturity schedule may help limit pressure compared with more highly levered strategies.
Bottom line: Debt is not driving returns today, but the index’s financing profile appears relatively stable.
Existing assets are estimated to be approximately 17% below replacement cost, meaning certain properties may be valued below what it would cost to build comparable assets today.
Why it matters: When it costs more to build than to buy, new construction becomes harder to justify. That can limit future supply and may support existing assets over time.
One caveat: This replacement cost signal may be most relevant for newer, modern assets rather than older or potentially obsolete properties.
Bottom line: Valuations appear more constructive, but asset quality remains important.
Liquidity pressures are easing but not fully resolved. Redemption queues declined, and fund-level payments improved relative to the more constrained 2023 and 2024 period.
What stood out:
Bottom line: Liquidity is improving.
Q1 2026 marked the first time in a while that the index saw more acquisitions than dispositions. That shift suggests buyers are beginning to re-engage as pricing becomes clearer.
Why it matters: Transaction activity is picking up, which can help improve price visibility. As more assets trade, investors gain a clearer view of current market values.
The Q1 2026 NFI-ODCE Index results suggest private real estate is moving further into recovery.
At the same time, this cycle may look different from prior recoveries. Future performance may depend less on broad valuation gains and more on NOI growth, rent growth, leasing, occupancy, asset quality, and disciplined capital allocation.
For advisers, understanding where returns are likely to come from—and how sector exposure, liquidity, and property-level fundamentals are evolving—can help shape portfolio positioning for what comes next.
IMPORTANT DISCLOSURES
Accordant Investments LLC (“Accordant”) is an SEC registered investment adviser. For more information about our services and disclosures, please visit our website at www.accordantinvestments.com. This content does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service managed by Accordant.
The NCREIF Fund Index – Open-End Diversified Core Equity ("NFI-ODCE") is a capitalization-weighted, gross-of-fees, time-weighted return index of open-end core real estate funds with at least 95% of their assets invested in U.S. operating properties and no more than 40% leverage. The ODCE Index is compiled by the National Council of Real Estate Investment Fiduciaries (NCREIF) and is reported quarterly. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.
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