I have a hard time finding RE opportunities with a ROE on my down payment better than the yield on a portfolio of diversified REITs. On that basis alone, the idea of higher SWRs makes me skeptical. The spreadsheet shared on this forum has demonstrated the difficulty of earning high returns, especially when you realistically account for a month or two of vacancy per year, remods every decade or so, liability insurance, managers, accountants, etc.
A better reason to think one could get by on a higher SWR is the idea that rents are less volatile than stock market total returns. That is, rents continue to be paid during market panics, recessions, and lost decade bear markets (note assumption), whereas people with paper asset portfolios are forced to liquidate an increasing number of assets during such events. It is the liquidation of assets that depletes a portfolio and leads to failure. So the thinking goes that by locking oneself into an illiquid but semi-reliable source of cash flows, one can ride out the bear markets without selling assets and that translates into less risk of portfolio depletion.
I would argue that a portfolio diversified with RE is less vulnerable to stock market SORR, but more vulnerable to idiosyncratic events such as broken pipes, hail storms, meth labs, depreciating neighborhoods, local tax hikes, vandalism, lawsuits, termites, mortgage rate hikes, demographic inflows/outflows, mold, squatters, and scented candles that burn the whole place down. As a landlord, one is trading market risks for these risks.
So overall, I wouldn’t say the portfolio containing RE is less risky or could support a higher WR. Yes, you are diversifying your risks but it doesn’t necessarily matter if the long term after tax ROE < WR.