REITs are often assumed to be defensive assets having a low correlation with market returns. This correlation is not constant across the return distribution. US REITs exhibit an asymmetric dependence with a higher correlation in the lower-tail, which implies that the benefits of diversification are low in times when investors need it the most, when market is down. We find that investors price this asymmetric dependence in the cross section of US REITs returns. In particular, we show that stocks with lower-tail asymmetric dependence attract a risk premium averaging 1.3% per annum and stocks exhibiting upper-tail asymmetric dependence are traded at discount averaging 5.8% per annum independent of the premium attached to the CAPM beta.