Estimated $26.8 T U.S. CRE investable universe

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

- Residential sectors control.

- Alternative sectors account for over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The objective of this analysis is to offer financiers with a standard for the size and scale of the U.S. commercial realty (CRE) market, specific residential or commercial property sectors and the "institutional" quality portion of the market. Approximately this point, published quotes on the size of the industrial genuine estate investable universe primarily focus on country-level worldwide contrasts, taking a top-down technique to estimate the size of the overall business property market in each region. Existing literature does little to estimate the value of particular residential or commercial property types, not to mention alternative residential or commercial property sectors. This report intends to fill this space in the industrial property information landscape. Focusing solely on the United States, this report takes a bottom-up approach, aggregating price quotes for the size of private industrial property residential or commercial property types to come to a worth for the overall business realty market. This approach permits division between standard and alternative residential or commercial property types, as well as the capability to approximate the share of "institutional" genuine estate by sector.

Just how huge is the U.S. business realty market? Although a relatively simple question, estimating the size of the marketplace is challenging for several factors: absence of data and openness (particularly for smaller sized, less-liquid and traditionally tracked residential or commercial property sectors), the extensively diverse nature of the variety of investible residential or commercial property types, and irregular industry definitions/classifications.

This analysis tries to respond to the question through a two-step procedure: first, estimating the gross property worth of each residential or commercial property sector regardless of ownership, occupancy, tenure, size, location, and quality. After showing up at a quote for the general size of each sector, the second step is to use filters based on assumptions for building class, vintage, size and/or market to further narrow the investable universe to just consist of institutional possessions - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the normal requirements of institutional financiers.

Sector sizes are approximated using the most trusted private and public data sources for industrial property available, while likewise leveraging the knowledge and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the method to determining the total value involves estimating the physical size of the sector, be it square video footage, systems, rooms, or beds; and integrating this with an estimated worth based on current transaction information. Less historically tracked residential or commercial property sectors need more assumptions to approximate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or system counts were not offered, overall worth was estimated utilizing info from third-party data sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

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

However, from an institutional financier's point of view, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional requirements for building size and quality. Similarly, this broad step of the CRE universe consists of a full variety of geographies, consisting of markets that are usually too small or insufficiently liquid for institutional financiers. As such, we filtered our investable universe worth using a precise series of assumptions to produce an "institutional" universe price quote. These filters vary by residential or commercial property sector and include building location, quality, age and size. Through this technique, the overall size of the institutional universe is estimated to be $11.7 trillion. Note, that this is over ten times the size of the biggest business realty index, the NCREIF Residential Or Commercial Property Index, (NPI).

We segment the investable universe into two 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, office, retail, and hotels are valued at $16.9 trillion, accounting for 63% of the investable market. Of this overall, 48%, or $8.2 trillion, is approximated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then represent close to 70% of the overall. With a value of $2.6 trillion, homes are the biggest 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, which consist of residential or commercial property types that have actually traditionally not been the primary focus of institutional financiers, represent the remaining 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 includes the residential or commercial property types shown below. Many noted REITs have actually been veteran players in the alternative sectors, however non-REIT investment has actually traditionally been restricted. However, options are an increasing share of institutional-investor portfolios.

There are three identifiable 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 produced housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the largest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next largest housing sector within the group, consisted of 2.4 million beds with an appraisal of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the domestic options grouping with conventional apartments leads to the combined valuation of $4.7 trillion, making housing in a broader sense account for the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Comprised of commercial outside storage (IOS) and cold storage warehousing, the industrial-adjacent group is valued at $187B, amounting to 1.6% of the institutional universe. Combining this group with the traditional industrial market results in 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 senior citizens housing, have a combined projected institutional worth of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical office represent near to half of the worth of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is evolving rapidly. Certain traditional sectors, such as workplace and retail, have actually faced structural obstacles in the last decade, reducing their overall share of the investable universe by value; on the other hand, lots of alternative sectors have actually seen worths increase significantly due to strong renter and investor appetite. As an outcome, the share of capital flowing into the alternative sectors has actually increased substantially. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the previous 4 quarters, representing 16% of total CRE volume, well above the share since 2014 of 13%, according to MSCI Real Capital Analytics.

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