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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 goal of this analysis is to offer investors with a benchmark for the size and scale of the U.S. commercial real estate (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the marketplace. Up to this point, released quotes on the size of the commercial property investable universe mostly focus on country-level international comparisons, taking a top-down approach to estimate the size of the overall industrial property market in each region. 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 intends to fill this space in the industrial realty information landscape. Focusing solely on the United States, this report takes a bottom-up technique, aggregating quotes for the size of specific business property residential or commercial property types to show up at a worth for the total business real estate market. This method permits for segmentation 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. business property market? Although an apparently simple concern, estimating the size of the market is challenging for numerous factors: lack of information and transparency (especially for smaller, less-liquid and historically tracked residential or commercial property sectors), the extensively diverse nature of the variety of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis tries to address the question through a two-step process: initially, approximating the gross property worth of each residential or commercial property sector regardless of ownership, tenancy, period, size, place, and quality. After coming to an estimate for the total size of each sector, the second action is to use filters based upon presumptions for constructing class, vintage, size and/or market to more narrow the investable universe to only include institutional assets - a subsegment of the investable universe that is limited to residential or commercial properties that fit the typical criteria of institutional financiers.

Sector sizes are estimated using the most reliable private and public data sources for business genuine estate 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 technique to computing the overall value involves estimating the physical size of the sector, be it square footage, systems, rooms, or beds; and integrating this with an approximated value based upon current deal information. Less historically tracked residential or commercial property sectors require more assumptions to approximate market-level and still-fluid market meanings. For residential or commercial property sectors where square video footage or unit counts were not readily available, overall value was approximated utilizing details from third-party data sources or insights from market participants.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

We approximate 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 consists of residential or commercial properties that fall listed below normal institutional requirements for building size and quality. Similarly, this broad procedure of the CRE universe includes a full variety of geographies, consisting of markets that are generally too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value utilizing a precise series of assumptions to create an "institutional" universe price quote. These filters differ by residential or commercial property sector and consist of building area, 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 ten times the size of the largest industrial property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We sector the investable universe into 2 broad classifications: 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 total, 48%, or $8.2 trillion, is estimated 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, houses are the largest conventional sector, accounting for 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 investors, 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 shown listed below. Many noted REITs have been long-time players in the alternative sectors, however non-REIT investment has actually traditionally been limited. However, alternatives are an increasing share of institutional-investor portfolios.

There are 3 recognizable groupings within the alternatives subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The property alternatives grouping (inclusive of single-family rentals, trainee housing, age-restricted housing, and produced housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has the biggest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next largest housing sector within the group, comprised 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 apartments results in the combined valuation 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

Comprised 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 conventional 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 office, and seniors housing, have a combined approximated institutional value of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical workplace accounts for close to half of the worth of the combined health care sector, followed by senior housing ($ 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 difficulties in the last years, lowering their overall share of the investable universe by value; meanwhile, many alternative sectors have seen worths increase significantly due to strong renter and investor hunger. As an outcome, the share of capital flowing into the alternative sectors has actually increased considerably. 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 considering that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional financier interest in the alternative sectors has grown too. 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 investments in self-storage and life sciences - the biggest alternative residential or commercial property sectors in the ODCE portfolio.