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 goal of this analysis is to offer investors with a criteria for the size and scale of the U.S. business realty (CRE) market, individual residential or commercial property sectors and the "institutional" quality part of the marketplace. As much as this point, released quotes on the size of the industrial realty investable universe mostly concentrate on country-level international contrasts, taking a top-down method to approximate the size of the general industrial realty market in each region. Existing literature does little to approximate the value of particular residential or commercial property types, let alone alternative residential or commercial property sectors. This report aims to fill this space in the commercial property info landscape. Focusing solely on the United States, this report takes a bottom-up method, aggregating estimates for the size of specific business real estate residential or commercial property types to get to a worth for the total commercial realty market. This method permits division between standard and alternative residential or commercial property types, as well as the ability to estimate the share of "institutional" genuine estate by sector.

Just how big is the U.S. industrial realty market? Although an apparently straightforward concern, approximating the size of the market is challenging for several factors: lack of information and openness (especially 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 irregular industry definitions/classifications.

This analysis tries to answer the question through a two-step process: first, estimating the gross asset worth of each residential or commercial property sector despite ownership, occupancy, tenure, size, place, and quality. After coming to an estimate for the overall size of each sector, the second step is to apply filters based upon assumptions for constructing 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 restricted to residential or commercial properties that fit the typical criteria of institutional investors.

Sector sizes are estimated utilizing the most dependable private and public information sources for business genuine estate offered, while likewise leveraging the understanding and insights created by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the method to computing 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 approximated value based upon recent transaction information. Less historically tracked residential or commercial property sectors require more presumptions to estimate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video or unit counts were not available, overall worth was estimated 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 financier's point of view, this is an overestimate, as it includes residential or commercial properties that fall below common institutional standards for constructing size and quality. Similarly, this broad measure of the CRE universe consists of a complete variety of geographies, including markets that are normally too little or insufficiently liquid for institutional investors. As such, we filtered our investable universe worth utilizing a precise series of presumptions to create an "institutional" universe estimate. These filters differ by residential or commercial property sector and include developing place, quality, age and size. Through this approach, the overall size of the institutional universe is estimated 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 sector 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, which include industrial, multifamily, office, retail, and hotels are valued at $16.9 trillion, representing 63% of the investable market. Of this overall, 48%, or $8.2 trillion, is estimated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then represent close to 70% of the total. 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 SIGNIFICANT AND RISING COMPONENT

" Alternative" sectors, which include residential or commercial property types that have actually historically not been the primary 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 includes the residential or commercial property types revealed listed below. Many listed REITs have actually been veteran gamers in the alternative sectors, but non-REIT investment has traditionally been limited. However, options are an increasing share of institutional-investor portfolios.

There are three recognizable groupings within the alternatives subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The domestic options organizing (inclusive of single-family rentals, trainee housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the largest estimated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next largest housing sector within the group, consisted of 2.4 million beds with an evaluation of $277B, followed by age-restricted housing at $251B and produced housing at $165B. Combining the domestic alternatives organizing with standard houses leads to the combined assessment of $4.7 trillion, making housing in a more comprehensive sense account for 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, amounting to 1.6% of the institutional universe. Combining this group with the conventional industrial market results in a value of $1.5 trillion, or 13.1%, of the institutional universe.

HEALTHCARE SECTOR

The health care residential or commercial property types: life sciences, medical workplace, and senior citizens housing, have a combined estimated institutional worth 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

The CRE financial investment landscape is evolving quickly. Certain conventional sectors, such as workplace and retail, have actually dealt with structural obstacles in the last years, minimizing their overall share of the investable universe by value; meanwhile, numerous alternative sectors have seen values increase considerably due to strong tenant and financier appetite. As a result, the share of capital flowing into the alternative sectors has actually increased substantially. Investments in alternative CRE sectors amounted to $14.2 B in transaction volume over the past 4 quarters, representing 16% of total CRE volume, well above the share given that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional financier interest in the alternative sectors has actually grown also. 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 biggest alternative residential or commercial property sectors in the ODCE portfolio.