Estimated $26.8 T U.S. CRE investable universe
- Institutional-quality $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 provide investors with a criteria for the size and scale of the U.S. business real estate (CRE) market, specific residential or commercial property sectors and the "institutional" quality part of the market. Up to this point, released estimates on the size of the industrial property investable universe mainly concentrate on country-level worldwide comparisons, taking a top-down technique to approximate the size of the total commercial property market in each region. Existing literature does little to approximate the value of specific residential or commercial property types, not to mention alternative residential or commercial property sectors. This report intends to fill this gap in the industrial realty details landscape. Focusing specifically on the United States, this report takes a bottom-up technique, aggregating price quotes for the size of specific commercial genuine estate residential or commercial property types to reach a value for the total commercial real estate market. This approach enables for segmentation between traditional and alternative residential or commercial property types, in addition to the capability to estimate the share of "institutional" genuine estate by sector.

Just how big is the U.S. commercial realty market? Although a relatively straightforward concern, estimating the size of the market is challenging for a number of reasons: lack of data and transparency (specifically for smaller sized, 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 inconsistent market definitions/classifications.

This analysis tries to answer the concern through a two-step procedure: first, approximating the gross asset worth of each residential or commercial property sector regardless of ownership, occupancy, tenure, size, location, and quality. After coming to a quote for the overall size of each sector, the 2nd step is to use filters based on presumptions for developing class, vintage, size and/or market to further narrow the investable universe to just consist of institutional properties - a subsegment of the investable universe that is limited to residential or commercial properties that fit the typical requirements of institutional financiers.

Sector sizes are approximated using the most dependable private and public information sources for business property available, while also leveraging the understanding and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For most sectors, the technique to determining the total value includes approximating the physical size of the sector, be it square footage, units, spaces, or beds; and combining this with an estimated value based on recent transaction information. Less historically tracked residential or commercial property sectors require more assumptions to approximate market-level and still-fluid market definitions. For residential or commercial property sectors where square video or system counts were not offered, overall worth was estimated using details from third-party information 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 includes residential or commercial properties that fall below typical institutional standards for building size and quality. Similarly, this broad procedure of the CRE universe consists of a full series of locations, consisting of markets that are generally too little or insufficiently liquid for institutional investors. As such, we filtered our investable universe worth utilizing a precise series of presumptions to generate an "institutional" universe estimate. These filters vary by residential or commercial property sector and include constructing location, quality, age and size. Through this method, 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 largest commercial property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We section the investable universe into two broad classifications: 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, workplace, retail, and hotels are valued at $16.9 trillion, representing 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 near to 70% of the overall. With a worth of $2.6 trillion, apartment or condos are the largest traditional sector, representing more than one-fifth of the institutional universe.

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

" Alternative" sectors, which consist of residential or commercial property types that have actually historically not been the predominant focus of institutional investors, account for 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 noted REITs have actually been long-time gamers in the alternative sectors, however non-REIT investment has actually historically 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 property options organizing (inclusive of single-family leasings, student housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the biggest approximated value ($ 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 a valuation of $277B, followed by age-restricted housing at $251B and produced housing at $165B. Combining the residential alternatives grouping with standard houses results in the combined valuation of $4.7 trillion, making housing in a wider sense account for the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted of industrial outside storage (IOS) and freezer 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 workplace, and seniors housing, have a combined estimated institutional value of $839B, equating to 7.2% of the institutional universe. With a value of $413B, medical workplace represent near half of the worth of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE
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The CRE investment landscape is developing rapidly. Certain conventional sectors, such as office and retail, have faced structural difficulties in the last decade, decreasing their general share of the investable universe by worth; meanwhile, numerous alternative sectors have actually seen values increase significantly due to strong occupant and investor cravings. As an outcome, the share of capital flowing into the alternative sectors has increased considerably. Investments in alternative CRE sectors amounted to $14.2 B in transaction volume over the previous 4 quarters, accounting for 16% of total CRE volume, well above the share considering that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor interest in the alternative sectors has 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.
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