Estimated $26.8 T U.S. CRE investable universe

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

- Residential sectors dominate.

- 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. industrial real estate (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the market. As much as this point, released quotes on the size of the commercial property investable universe mostly concentrate on country-level global comparisons, taking a top-down method to estimate the size of the overall business genuine estate market in each area. Existing literature does little to estimate the value of particular residential or commercial property types, let alone alternative residential or commercial property sectors. This report aims to fill this gap in the commercial property info landscape. Focusing solely on the United States, this report takes a bottom-up approach, aggregating price quotes for the size of private commercial property residential or commercial property types to come to a value for the general industrial genuine estate market. This approach permits division in between standard and alternative residential or commercial property types, along with the capability to estimate the share of "institutional" real estate by sector.

Just how big is the U.S. commercial property market? Although a seemingly simple concern, approximating the size of the marketplace is challenging for several factors: absence of data and openness (specifically for smaller sized, less-liquid and traditionally tracked residential or commercial property sectors), the commonly varied nature of the range of investible residential or commercial property types, and inconsistent market definitions/classifications.

This analysis attempts to address the question through a two-step procedure: initially, estimating the gross asset value of each residential or commercial property sector no matter ownership, tenancy, period, size, area, and quality. After arriving at a quote for the total size of each sector, the 2nd step is to apply filters based upon assumptions for building class, vintage, size and/or market to more narrow the investable universe to only include institutional properties - a subsegment of the investable universe that is limited to residential or commercial properties that fit the common criteria of institutional financiers.

Sector sizes are estimated using the most dependable personal and public information sources for commercial property available, while likewise leveraging the understanding and insights created by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For most sectors, the technique to computing the general value involves approximating the physical size of the sector, be it square footage, systems, rooms, or beds; and combining this with an approximated value based on recent deal data. Less traditionally tracked residential or commercial property sectors need more assumptions to approximate market-level and still-fluid market definitions. For residential or commercial property sectors where square footage or system counts were not available, overall value was estimated using details from third-party data 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 financier's viewpoint, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional standards for constructing size and quality. Similarly, this broad measure of the CRE universe includes a full variety of geographies, including markets that are normally too small or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value using a precise series of presumptions to create an "institutional" universe quote. These filters vary by residential or commercial property sector and consist of building location, 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 largest business realty 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, which include commercial, multifamily, workplace, 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, conventional sectors then represent close to 70% of the overall. With a value of $2.6 trillion, apartments are the largest standard 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 traditionally not been the predominant focus of institutional financiers, 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 revealed listed below. Many listed REITs have been long-time gamers in the alternative sectors, however non-REIT investment has actually historically 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 domestic options organizing (inclusive of single-family leasings, student housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the biggest estimated value ($ 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 options grouping with traditional apartment or condos results in 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 outside 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 commercial 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 office, and senior citizens housing, have a combined projected institutional worth of $839B, equating to 7.2% of the institutional universe. With a worth of $413B, medical office represent near to half of the value of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is developing rapidly. Certain standard sectors, such as workplace and retail, have actually dealt with structural difficulties in the last years, decreasing their overall share of the investable universe by value; meanwhile, lots of alternative sectors have actually seen worths increase significantly due to strong tenant and investor appetite. As a result, the share of capital streaming into the alternative sectors has actually increased significantly. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the past four quarters, representing 16% of total CRE volume, well above the share since 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor interest in the alternative sectors has actually grown too. The alternative sector share of the NCREIF Open-End Diversified Core Equity Index (ODCE) has 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.