Estimated $26.8 T U.S. CRE investable universe

- Institutional-quality represents $11.7 T (44%).

- Residential sectors control.

- Alternative sectors represent over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The goal of this analysis is to offer financiers with a standard for the size and scale of the U.S. business real estate (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the market. As much as this point, published estimates on the size of the commercial realty investable universe primarily focus on country-level global comparisons, taking a top-down method to approximate the size of the total industrial realty market in each area. Existing literature does little to estimate the value of specific residential or commercial property types, let alone alternative residential or commercial property sectors. This report intends to fill this space in the business property information landscape. Focusing exclusively on the United States, this report takes a bottom-up method, aggregating price quotes for the size of individual business real estate residential or commercial property types to get to a worth for the overall commercial real estate market. This technique allows for division between conventional and alternative residential or commercial property types, along with the ability to approximate the share of "institutional" realty by sector.

Just how big is the U.S. business property market? Although an apparently straightforward question, estimating the size of the market is challenging for a number of factors: absence of data and transparency (especially for smaller, less-liquid and historically tracked residential or commercial property sectors), the widely varied nature of the variety of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis attempts to respond to the concern through a two-step procedure: initially, estimating the gross possession value of each residential or commercial property sector despite ownership, tenancy, period, size, location, and quality. After getting to an estimate for the general size of each sector, the second action is to apply filters based upon presumptions for developing class, vintage, size and/or market to more narrow the investable universe to only consist of institutional properties - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the typical requirements of institutional financiers.

Sector sizes are estimated utilizing the most reliable personal and public data sources for industrial property offered, while likewise leveraging the understanding and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For a lot of sectors, the technique to calculating the total value includes approximating the physical size of the sector, be it square footage, units, spaces, or beds; and integrating this with an estimated worth based upon recent deal information. Less traditionally tracked residential or commercial property sectors need more presumptions to estimate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or unit counts were not readily available, overall value was estimated utilizing information from third-party data sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

We approximate the total size of the U.S. CRE investable universe to be $26.8 trillion.

However, from an institutional financier's viewpoint, this is an overestimate, as it consists of residential or commercial properties that fall listed below typical institutional standards for building size and quality. Similarly, this broad procedure of the CRE universe consists of a full variety of geographies, consisting of markets that are typically too small or insufficiently liquid for institutional investors. As such, we filtered our investable universe value utilizing a meticulous series of presumptions to generate an "institutional" universe estimate. These filters vary by residential or commercial property sector and consist of developing area, quality, age and size. Through this approach, the overall size of the institutional universe is approximated to be $11.7 trillion. Note, that this is over 10 times the size of the biggest business real estate index, the NCREIF Residential Or Commercial Property Index, (NPI).

We sector the investable universe into 2 broad categories: Traditional and Alternative residential or commercial property types.

TRADITIONAL RESIDENTIAL OR COMMERCIAL PROPERTY TYPES MAINTAIN A DOMINANT SHARE

" Traditional" residential or commercial property sectors, that include commercial, multifamily, workplace, retail, and hotels are valued at $16.9 trillion, representing 63% of the investable market. Of this total, 48%, or $8.2 trillion, is approximated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then account for near 70% of the overall. With a value of $2.6 trillion, apartments are the largest standard sector, accounting for more than one-fifth of the institutional universe.

ALTERNATIVE RESIDENTIAL OR COMMERCIAL PROPERTY TYPES ARE A CONSIDERABLE AND RISING COMPONENT

" Alternative" sectors, that include residential or commercial property types that have actually historically not been the primary focus of institutional financiers, represent the staying 37% ($ 9.9 trillion) of the investable universe and $3.6 trillion, or 31%, of the institutional universe. The alternative subsegment of the CRE universe consists of the residential or commercial property types shown listed below. Many noted REITs have actually been long-time gamers in the alternative sectors, but non-REIT investment has actually traditionally been restricted. However, alternatives are an increasing share of institutional-investor portfolios.

There are 3 recognizable groupings within the options subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The property options grouping (inclusive of single-family rentals, student housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the biggest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next biggest housing sector within the group, consisted of 2.4 million beds with an appraisal of $277B, followed by age-restricted housing at $251B and produced housing at $165B. Combining the residential options grouping with standard homes leads to the combined evaluation of $4.7 trillion, making housing in a more comprehensive sense account for the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted of commercial outdoor storage (IOS) and cold storage warehousing, the industrial-adjacent group is valued at $187B, totaling up to 1.6% of the institutional universe. Combining this group with the standard industrial market leads to a worth of $1.5 trillion, or 13.1%, of the institutional universe.

HEALTHCARE SECTOR

The healthcare residential or commercial property types: life sciences, medical office, and seniors housing, have a combined estimated institutional worth of $839B, relating to 7.2% of the institutional universe. With a value of $413B, medical workplace accounts for close to half of the value of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is developing quickly. Certain traditional sectors, such as workplace and retail, have actually faced structural obstacles in the last decade, lowering their general share of the investable universe by worth; on the other hand, many alternative sectors have seen worths increase considerably due to strong renter and financier hunger. As a result, the share of capital streaming into the alternative sectors has actually increased significantly. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the past 4 quarters, representing 16% of overall CRE volume, well above the share given that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor interest in the alternative sectors has actually grown as well. The alternative sector share of the NCREIF Open-End Diversified Core Equity Index (ODCE) has actually increased from around 4% in 2017 to 12.9% since 2024 Q2, led by investments in self-storage and life sciences - the biggest alternative residential or commercial property sectors in the ODCE portfolio.