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. business real estate (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the marketplace. Approximately this point, released price quotes on the size of the business real estate investable universe primarily focus on country-level worldwide contrasts, taking a top-down approach to approximate the size of the total industrial property 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 aims to fill this gap in the industrial real estate information landscape. Focusing solely on the United States, this report takes a bottom-up approach, aggregating price quotes for the size of specific industrial real estate residential or commercial property types to get to a worth for the general commercial real estate market. This technique permits segmentation between standard and alternative residential or commercial property types, as well as the ability to estimate the share of "institutional" realty by sector.

Just how big is the U.S. commercial real estate market? Although an apparently straightforward question, approximating the size of the marketplace is challenging for numerous factors: lack of data and openness (especially for smaller sized, less-liquid and historically tracked residential or commercial property sectors), the widely diverse nature of the series of investible residential or commercial property types, and inconsistent industry definitions/classifications.

This analysis tries to answer the question through a two-step process: first, approximating the gross asset value of each residential or commercial property sector no matter ownership, occupancy, period, size, place, and quality. After coming to a quote for the total size of each sector, the second action is to use filters based on assumptions for building class, vintage, size and/or market to further narrow the investable universe to only 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 estimated using the most dependable private and public information sources for business realty readily available, while also leveraging the understanding and insights generated by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the method to determining the total value includes approximating the physical size of the sector, be it square video footage, units, rooms, or beds; and combining this with an approximated worth based upon current deal data. Less traditionally tracked residential or commercial property sectors require more assumptions to estimate market-level and still-fluid industry meanings. For residential or commercial property sectors where square footage or system counts were not offered, overall value was approximated using info from third-party information sources or insights from market participants.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

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

However, from an institutional investor's point of view, this is an overestimate, as it includes residential or commercial properties that fall below common institutional requirements for building size and quality. Similarly, this broad procedure of the CRE universe consists of a complete series of locations, consisting of markets that are generally too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value using a careful series of assumptions to create an "institutional" universe estimate. These filters vary by residential or commercial property sector and consist of building place, quality, age and size. Through this method, the total size of the institutional universe is estimated to be $11.7 trillion. Note, that this is over 10 times the size of the biggest commercial genuine estate index, the NCREIF Residential Or Commercial Property Index, (NPI).

We section 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 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, conventional sectors then represent near to 70% of the overall. With a worth of $2.6 trillion, apartment or condos are the biggest traditional 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 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 below. Many noted REITs have been long-time gamers in the alternative sectors, but non-REIT investment has traditionally been limited. However, alternatives 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 domestic options organizing (inclusive of single-family leasings, trainee housing, age-restricted housing, and produced housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the largest approximated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next largest housing sector within the group, made up of 2.4 million beds with an assessment of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the residential alternatives grouping with standard apartments leads to the combined appraisal of $4.7 trillion, making housing in a wider sense represent the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

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

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is evolving rapidly. Certain conventional sectors, such as workplace and retail, have actually dealt with structural challenges in the last years, decreasing their total share of the investable universe by worth; meanwhile, lots of alternative sectors have actually seen values increase substantially due to strong renter and investor hunger. As an outcome, the share of capital flowing into the alternative sectors has actually increased considerably. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the past four quarters, accounting for 16% of total CRE volume, well above the share because 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor interest in the alternative sectors has actually grown also. 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 financial investments in self-storage and life sciences - the largest alternative residential or commercial property sectors in the ODCE portfolio.