Estimated $26.8 T U.S. CRE investable universe

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

- Residential sectors dominate.

- Alternative sectors account for over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The objective of this analysis is to supply financiers with a standard for the size and scale of the U.S. business real estate (CRE) market, individual residential or commercial property sectors and the "institutional" quality part of the market. Up to this point, published estimates on the size of the commercial property investable universe mostly focus on country-level international comparisons, taking a top-down method to approximate the size of the total industrial realty market in each region. Existing literature does little to approximate the worth 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 specifically on the United States, this report takes a bottom-up technique, aggregating quotes for the size of individual industrial realty residential or commercial property types to get to a worth for the overall commercial realty market. This method permits division between traditional and alternative residential or commercial property types, along with the ability to estimate the share of "institutional" property by sector.

Just how big is the U.S. commercial real estate market? Although a relatively uncomplicated question, estimating the size of the marketplace is challenging for several factors: lack of information and openness (especially for smaller, less-liquid and traditionally tracked residential or commercial property sectors), the commonly varied nature of the series of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis attempts to respond to the concern through a two-step process: initially, estimating the gross property worth of each residential or commercial property sector no matter ownership, tenancy, period, size, location, and quality. After showing up at an estimate for the total size of each sector, the 2nd action is to apply filters based upon assumptions for constructing class, vintage, size and/or market to more narrow the investable universe to only consist of institutional assets - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the normal criteria of institutional investors.

Sector sizes are estimated using the most reliable private and public data sources for commercial realty offered, while likewise leveraging the knowledge and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the technique to determining the overall worth includes approximating the physical size of the sector, be it square footage, units, rooms, or beds; and integrating this with an estimated value 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 system counts were not available, overall value was estimated using info from third-party data sources or insights from market participants.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

We estimate the overall 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 includes residential or commercial properties that fall below typical institutional requirements for constructing size and quality. Similarly, this broad measure of the CRE universe includes a full variety of locations, including markets that are generally too little or insufficiently liquid for institutional investors. As such, we filtered our investable universe value utilizing a precise series of assumptions to generate an "institutional" universe price quote. These filters differ by residential or commercial property sector and include constructing 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 ten times the size of the biggest commercial real estate index, the NCREIF Residential Or Commercial Property Index, (NPI).

We section 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 industrial, 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, standard sectors then account for close to 70% of the overall. With a worth of $2.6 trillion, homes are the biggest conventional sector, representing 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 predominant focus of institutional investors, 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 consists of the residential or commercial property types shown listed below. Many listed REITs have been long-time players in the alternative sectors, however non-REIT financial investment has traditionally been restricted. However, alternatives are an increasing share of institutional-investor portfolios.

There are 3 identifiable groupings within the alternatives subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The residential options organizing (inclusive of single-family leasings, student housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has the biggest approximated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next biggest housing sector within the group, made up of 2.4 million beds with a valuation of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the property options organizing with standard apartment or condos leads to the combined assessment 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

Consisted 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 conventional 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 workplace, and seniors housing, have a combined estimated institutional value of $839B, relating to 7.2% of the institutional universe. With a value of $413B, medical office accounts for near half of the worth of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is developing rapidly. Certain standard sectors, such as office and retail, have actually dealt with structural difficulties in the last years, lowering their general share of the investable universe by worth; on the other hand, numerous alternative sectors have seen values increase considerably due to strong tenant and financier cravings. As an outcome, the share of capital flowing into the alternative sectors has actually increased substantially. Investments in alternative CRE sectors totaled up to $14.2 B in transaction volume over the previous four quarters, accounting for 16% of overall 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 too. 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% as of 2024 Q2, led by investments in self-storage and life sciences - the biggest alternative residential or commercial property sectors in the ODCE portfolio.