Private Real Estate Outlook: Quarterly NFI-ODCE Index Insights

Written by The Accordant Team on Mar 27, 2026

The NFI-ODCE Index remains one of the most widely followed benchmarks for institutional private real estate. By tracking 25 of the largest open-end core funds, it provides a real-time view into how valuations, income, and capital flows are evolving across the market. Each quarter, it offers a snapshot of where the market stands—and where it may be heading next.

Accordant Investments’ CIO Garrett Zdolshek joined Geoffrey Dohrmann, CEO of Institutional Real Estate Inc. (IREI), to discuss the latest Q4 2025 results and what they may signal for the year ahead. The conversation focused on where the market stands today, how performance drivers are evolving, and why 2026 may mark a turning point for private real estate.

Watch the full Q4 2025 NFI-ODCE Market Update Webinar or continue below for key themes and takeaways.

The Q4 2025 NFI-ODCE Index results point to a market that is no longer declining, but still building momentum. Valuations appear to have stabilized, income growth is beginning to re-emerge, and capital is slowly returning. The result is a market at an inflection point—transitioning from reset to recovery. What’s changing is not just the direction of returns, but what’s driving them.

Benchmark Performance: Stabilizing, But Still Muted

After a challenging period of valuation declines, the Q4 results show that private real estate has begun to stabilize. Total returns turned positive, but remain below long-term averages, reflecting a market that is improving—just not rapidly.

Total return for the year was approximately 2.9%, driven primarily by income rather than appreciation
Appreciation remains muted, though negative valuation pressure has largely subsided
Income growth has been relatively flat but is beginning to show early signs of improvement

The key takeaway is that the market is no longer in a correction phase. However, it has not yet transitioned into a strong growth environment.

Why it matters: This “positive but muted” performance is typical of early-cycle recoveries. It often signals that the bottom has been reached, even if the rebound is not yet fully visible.

A Shift in Performance Drivers: Income Takes the Lead

One of the most important shifts highlighted in the discussion is how returns are being generated. In prior cycles, falling interest rates and cap rate compression often drove valuation gains. Today, that dynamic is changing.

Future returns are expected to be driven more by NOI growth and rent growth
Cap rates have largely stabilized rather than compressing further
Income is becoming the primary contributor to total return

NOI growth, which had lagged inflation for much of the past two years, turned positive again in Q4—a meaningful signal that property-level fundamentals are beginning to improve.

Why it matters: The recovery in private real estate is likely to be income-led rather than valuation-led, placing greater importance on asset quality, leasing fundamentals, and operational execution.

Market Fundamentals: Early Signs of Recovery

Beneath the surface, core fundamentals are beginning to strengthen, though the improvement is gradual.

NOI growth has turned positive, following a period of stagnation
Occupancy remains broadly stable, with sector-specific variation
Cap rates are stabilizing, with limited expansion or compression

A key dynamic shaping the outlook is supply. Over the past several years, new development added meaningful inventory to the market. That wave is now receding.

New construction has declined significantly, as elevated costs make development difficult to justify
This slowdown is expected to lead to reduced future supply, particularly in residential and industrial sectors

Why it matters: As excess supply is absorbed and new development slows, conditions are being set for stronger rent growth and improved income performance over time.

Sector Performance: Dispersion Remains, but is Narrowing

While sector divergence has been a defining feature of this cycle, the Q4 update suggests that the gap between winners and losers may be beginning to narrow.

Data centers continue to be the standout performer, delivering strong double-digit unlevered returns
Multifamily and industrial remain key contributors, though growth has normalized from prior highs
Retail is showing signs of improvement, particularly in high-quality, necessity-based formats
Office remains challenged, though the pace of declines has slowed
Life sciences continues to face headwinds, with limited near-term visibility for recovery

Importantly, sector dispersion—which reached elevated levels earlier in the cycle— is beginning to compress.

Why it matters: The market may be transitioning from a period dominated by sector-driven outcomes to one where asset-level performance and execution become more important again.

Valuations and Replacement Cost: Approaching Equilibrium

Another important signal from the Q4 data is the relationship between asset values and replacement cost.

Property values have moved closer to construction cost levels
Real estate is now trading at a meaningful discount to replacement cost
Construction costs remain elevated and unlikely to decline significantly

This dynamic suggests that the market is approaching a more sustainable valuation floor.

Why it matters: When existing assets trade near or below replacement cost, it becomes increasingly difficult to justify new supply—reinforcing long-term value support for existing properties.

Capital Markets: From Headwind to Stabilizing Tailwind

Financing conditions, which had been a major headwind, are becoming more stable.

Average debt costs remain manageable, with most exposure fixed-rate
Floating-rate debt has declined from recent peaks
Debt maturities are staggered, reducing near-term refinancing pressure

While interest rate uncertainty remains, the overall impact of financing conditions is becoming more supportive.

Why it matters: A stabilizing capital markets environment removes one of the largest constraints on recovery and supports improved return potential going forward.

Capital Flows and Liquidity: Improving, But Still Evolving

Liquidity remains a key topic, but the data suggests that conditions are improving.

Redemption queues have declined from peak levels (~19%) to approximately 11% of NAV
Some funds have fully cleared their queues, while others continue to work through backlogs
Capital flows remain net negative, though new capital is still entering the market
The secondary market is active, providing additional liquidity pathways

Importantly, redemption activity remains dynamic—with new requests offsetting some of the progress made.

Why it matters: Liquidity pressures are easing, but not fully resolved. The experience is also reshaping investor expectations around “semi-liquid” structures and will likely influence due diligence going forward.

Transaction Activity: Signs of a Reopening Market

Transaction activity is beginning to pick up, signaling that buyers and sellers are finding alignment on pricing.

Increased acquisition and disposition activity compared to earlier periods
Strong buyer interest returning, particularly in residential and industrial
Capital continues to rotate away from challenged sectors and toward areas of strength

Why it matters: Rising transaction activity is often one of the clearest indicators that markets are functioning more normally—and that confidence is returning.

Key Takeaways:

The market appears to be at or near the bottom: valuations have stabilized and returns have turned positive
Recovery is underway, but gradual: this is a slow-moving, early-cycle environment
Income is driving returns: NOI and rent growth are becoming the primary performance drivers
Supply dynamics are improving: slowing development supports future rent growth
Sector dispersion is narrowing: asset-level execution is becoming more important
Liquidity is improving: redemption queues are declining, though still present
Capital is returning selectively: transaction activity and investor interest are increasing

Final Thought: A Market Moving from Reset to Recovery

The Q4 2025 NFI-ODCE Index results suggest that private real estate is entering a new phase. The sharp repricing of the past two years appears largely behind us, while several forward-looking tailwinds are beginning to take shape: stabilizing valuations, improving income, reduced supply, and more functional capital markets.

While macro uncertainty remains, the overall setup for private real estate today is more constructive than it has been through much of this cycle.

For advisers, the takeaway is clear: understanding where we are in the cycle—and how return drivers are evolving—will be critical in positioning portfolios 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.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. Accordant is not adopting, making a recommendation for or endorsing any investment strategy or particular security or property mentioned in this article. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. All investing is subject to risk, including the possible loss of principal. Accordant Investments, LLC (“Accordant”) cannot guarantee that the information herein is accurate, complete or timely.

Past Performance does not guarantee future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to corresponding past performance levels. Inherent in any investment is the potential for loss. It should not be assumed that any investments in securities, companies, sectors, or markets identified and described in this content were or will be profitable. Diversification strategies do not ensure a profit and do not protect against losses in declining markets.

Accordant has not made any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including but not limited to information obtained from third parties), and they expressly disclaim any responsibility or liability, therefore Accordant does not have any responsibility to update or correct any of the information provided in this article.

All real estate investments have the potential for value loss during the life of the investment and the sponsor can make no assurances that any investment will achieve its objectives, goals, generate positive returns, or avoid losses.

Related Articles