GitLab

comcepta.com
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 supply investors with a benchmark for the size and scale of the U.S. industrial realty (CRE) market, private residential or commercial property sectors and the "institutional" quality portion of the market. Approximately this point, published quotes on the size of the commercial property investable universe mainly concentrate on country-level international comparisons, taking a top-down approach to estimate the size of the general commercial real estate market in each area. Existing literature does little to estimate the worth of specific residential or commercial property types, not to mention alternative residential or commercial property sectors. This report aims to fill this gap in the commercial realty info landscape. Focusing solely on the United States, this report takes a bottom-up method, aggregating quotes for the size of private business property residential or commercial property types to get to a worth for the overall industrial real estate market. This method enables division in between standard and alternative residential or commercial property types, along with the capability to approximate the share of "institutional" genuine estate by sector.

Just how big is the U.S. commercial real estate market? Although a relatively uncomplicated question, estimating the size of the marketplace is challenging for a number of reasons: lack of information and openness (particularly for smaller sized, less-liquid and historically tracked residential or commercial property sectors), the commonly varied nature of the variety of investible residential or commercial property types, and inconsistent market definitions/classifications.

This analysis attempts to respond to the question through a two-step procedure: initially, approximating the gross property value of each residential or commercial property sector no matter ownership, occupancy, tenure, size, place, and quality. After reaching a quote for the total size of each sector, the 2nd action is to apply filters based on assumptions for developing class, vintage, size and/or market to more narrow the investable universe to just include institutional properties - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the common requirements of institutional investors.

Sector sizes are approximated utilizing the most trustworthy personal and public information sources for business property available, while likewise leveraging the knowledge and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For most sectors, the technique to determining the general worth involves estimating the physical size of the sector, be it square video, systems, rooms, or beds; and combining this with an estimated worth based upon current transaction information. Less historically tracked residential or commercial property sectors require more assumptions to approximate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or system counts were not available, total worth was approximated using details from third-party information sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

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

However, from an institutional investor's viewpoint, this is an overestimate, as it includes residential or commercial properties that fall listed below typical institutional requirements for developing size and quality. Similarly, this broad procedure of the CRE universe consists of a full variety of locations, 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 generate an "institutional" universe price quote. These filters vary by residential or commercial property sector and include developing area, 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 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, that include industrial, multifamily, office, 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, traditional sectors then account for near 70% of the total. With a worth of $2.6 trillion, homes are the biggest traditional sector, accounting for more than one-fifth of the institutional universe.

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

" Alternative" sectors, that include residential or commercial property types that have actually historically not been the predominant focus of institutional investors, account for the staying 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 noted REITs have actually been veteran gamers in the alternative sectors, but non-REIT financial investment has historically been restricted. However, options are an increasing share of institutional-investor portfolios.

There are 3 identifiable groupings within the options subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The residential options grouping (inclusive of single-family leasings, trainee housing, age-restricted housing, and produced housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has the largest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next biggest housing sector within the group, comprised of 2.4 million beds with an evaluation of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the domestic alternatives organizing with conventional houses leads to the combined evaluation 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, amounting to 1.6% of the institutional universe. Combining this group with the standard industrial market results in a worth of $1.5 trillion, or 13.1%, of the institutional universe.

HEALTHCARE SECTOR

The health care residential or commercial property types: life sciences, medical office, and elders housing, have a combined approximated institutional worth of $839B, equating 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 investment landscape is developing quickly. Certain conventional sectors, such as office and retail, have actually dealt with structural challenges in the last years, their total share of the investable universe by worth; on the other hand, lots of alternative sectors have seen values increase considerably due to strong occupant and financier appetite. As an outcome, the share of capital flowing into the alternative sectors has actually increased significantly. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the previous 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 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 biggest alternative residential or commercial property sectors in the ODCE portfolio.