The valuation gap between public REITs and private markets remained steady between the second and third quarters, according to CenterSquare Investment Management in its third quarter 2023 cap rate report.
However, core sectors such as office and retail reversed some of their underperformance in public markets, resulting in a tightening spread between public and private real estate valuations for the REIT ODCE Proxy. The ODCE Proxy cap rate gap dropped from 119 basis points in the second quarter to 86 basis points in third quarter, resulting in a 13 percent valuation gap between public and private for the core sectors.
The largest discount in public markets relative to private currently exists in the life science sector at a valuation gap of –30 percent. In contrast, the largest premium is within data centers at +15 percent. Finally, the largest movement in public valuations over a 12-month period is with life sciences at –26 percent.
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