The asset pricing models affirm that the expected returns of securities are related not only to the risk premiums associated with the macroeconomic factors but also to their sensitivities to those macroeconomic factors that can also vary over time (Karolyi and Sanders, 1998). This paper employs a multiple-beta asset pricing model to explain the variation in Turkish REIT returns. The legal framework for the Turkish REITs was introduced in 1995 by the Capital Market Board. This date is much earlier than those for France, UK, Japan, and several other developed countries. Turkish REITs do not have to pay out dividends, yet enjoy the exemption from paying corporate taxes. This notable structural difference has considerable impacts on the performance of REIT industry in Turkey. Empirical evidence shows that Turkish REITsí inflation-hedging characteristics and systematic risk (time-varying beta) behaviour have been significantly different from other common stocks listed in Istanbul Stock Exchange. The purpose of this paper is to identify the fundamental macroeconomic drivers or risk factors that systematically affect real estate returns in Turkey. The results show that inflation risk premium explains a significant proportion of the total variation in REIT returns. On the contrary, both the stock and bond market risk premiums capture only smaller portion of the variations in real estate returns.