We use sector level REIT and transaction-based direct real estate data for the period 1994-2010 to provide a clearer understanding of the dynamic relations between public and private real estate returns. We add leverage to private returns to make the private data more comparable with the REIT data. We also include economic fundamentals in the analysis to take account of the influence of fundamentals on real estate market dynamics. Moreover, we consider the influence of the 'escrow lag' in the recording of private market prices. The estimated vector error-correction and vector autoregressive models, Granger causality tests, impulse response functions and variance decompositions all provide evidence of REIT returns leading private returns in the office, retail, and apartment sectors. These lead-lag relations appear to be due to the slow reaction of private market returns to shocks in REIT returns and in some economic fundamentals. In the industrial sector, such lead-lag relation cannot be observed, however.