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Estimated $26.8 T U.S. CRE investable universe
- Institutional-quality represents $11.7 T (44%).
- Residential sectors dominate.
- Alternative sectors represent over 30%
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WHY MEASURE THE INVESTABLE UNIVERSE?

The objective of this analysis is to provide financiers with a benchmark for the size and scale of the U.S. business property (CRE) market, specific residential or commercial property sectors and the "institutional" quality portion of the marketplace. Up to this point, published quotes on the size of the industrial genuine estate investable universe mostly focus on country-level worldwide comparisons, taking a top-down technique to estimate 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 aims to fill this gap in the commercial real estate details landscape. Focusing specifically on the United States, this report takes a bottom-up technique, aggregating quotes for the size of private industrial property residential or commercial property types to come to a value for the general business property market. This method enables division in between conventional and alternative residential or commercial property types, along with the ability to approximate the share of "institutional" realty by sector.

Just how big is the U.S. industrial real estate market? Although a seemingly uncomplicated question, approximating the size of the market is challenging for several factors: lack of information and transparency (especially for smaller sized, less-liquid and traditionally tracked residential or commercial property sectors), the commonly diverse nature of the range of investible residential or commercial property types, and inconsistent industry definitions/classifications.

This analysis attempts to answer the concern through a two-step procedure: initially, estimating the gross possession worth of each residential or commercial property sector despite ownership, occupancy, tenure, size, area, and quality. After arriving at an estimate for the general size of each sector, the 2nd step is to apply filters based on presumptions for constructing class, vintage, size and/or market to further narrow the investable universe to just consist of institutional possessions - a subsegment of the investable universe that is limited to residential or commercial properties that fit the typical criteria of institutional investors.

Sector sizes are estimated using the most reliable private and public information sources for industrial realty readily available, while likewise leveraging the understanding and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the approach to calculating the total value includes estimating the physical size of the sector, be it square footage, units, spaces, or beds; and combining this with an estimated worth based upon recent transaction information. Less traditionally tracked residential or commercial property sectors require more presumptions to approximate market-level and still-fluid market meanings. For residential or commercial property sectors where square video or system counts were not available, overall worth was approximated using info 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 investor's perspective, this is an overestimate, as it includes residential or commercial properties that fall below normal institutional requirements for constructing size and quality. Similarly, this broad step of the CRE universe consists of a full variety of geographies, including markets that are generally too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value using a precise series of presumptions to generate an "institutional" universe estimate. These filters differ by residential or commercial property sector and consist of developing place, quality, age and size. Through this technique, 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 largest commercial property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We sector 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, workplace, retail, and hotels are valued at $16.9 trillion, representing 63% of the investable market. Of this total, 48%, or $8.2 trillion, is estimated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then account for near to 70% of the total. With a value of $2.6 trillion, apartment or condos 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 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 universe. The alternative subsegment of the CRE universe includes the residential or commercial property types shown below. Many listed REITs have actually been veteran players in the alternative sectors, however non-REIT financial investment has actually historically been limited. However, options 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 alternatives organizing (inclusive of single-family leasings, trainee housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the largest estimated worth ($ 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 evaluation of $277B, followed by age-restricted housing at $251B and produced housing at $165B. Combining the residential alternatives grouping with conventional houses leads to the combined appraisal 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

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

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is progressing quickly. Certain standard sectors, such as workplace and retail, have actually faced structural obstacles in the last decade, decreasing their total share of the investable universe by value; on the other hand, numerous alternative sectors have seen worths increase significantly due to strong renter and financier appetite. As a result, the share of capital flowing into the alternative sectors has increased significantly. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the past 4 quarters, representing 16% of overall CRE volume, well above the share given that 2014 of 13%, according to MSCI Real Capital Analytics.

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