This paper presents new evidence of the benefits of international real estate diversification using a rational, sentiment-based model of private and public equity securities. A sizable literature does exist on international real estate diversification. Our paper complements this literature by measuring the benefits of international real estate diversification in an equilibrium framework in which an immediate shock in one market may not cause an immediate effect in the other market. Yet, over time, the two markets will move back into equilibrium with one another, but not until capital flows from one market to the other. These capital flows impart a large local component into public and private real estate returns, thus suggesting international diversification benefits for property investors. Yet these benefits do not matter much to defined-benefit pension plans unless they are positively and significantly correlated with the plan's liabilities, and then only if the plan's liabilities are indexed to the cost of living either before or after retirement, or both. Our findings suggest that the sensitivity of real estate to national factors is large, while sensitivities to international influences are small.