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 objective of this analysis is to supply financiers with a criteria for the size and scale of the U.S. business property (CRE) market, private residential or commercial property sectors and the "institutional" quality portion of the marketplace. Up to this point, released estimates on the size of the industrial realty investable universe mainly focus on country-level worldwide comparisons, taking a top-down technique to estimate 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, not to mention alternative residential or commercial property sectors. This report aims to fill this gap in the business realty information landscape. Focusing exclusively on the United States, this report takes a bottom-up technique, aggregating price quotes for the size of specific industrial realty residential or commercial property types to reach a worth for the total commercial property market. This method allows for segmentation in between standard and alternative residential or commercial property types, as well as the capability to estimate the share of "institutional" realty by sector.

Just how huge is the U.S. business property market? Although a seemingly simple concern, estimating the size of the marketplace is challenging for several reasons: absence of information and transparency (specifically for smaller sized, less-liquid and traditionally tracked residential or commercial property sectors), the commonly diverse nature of the variety of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis attempts to address the concern through a two-step process: initially, estimating the gross property worth of each residential or commercial property sector despite ownership, tenancy, period, size, location, and quality. After getting to a quote for the total size of each sector, the second action is to apply filters based upon assumptions for building class, vintage, size and/or market to additional narrow the investable universe to only consist of institutional assets - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the common requirements of institutional financiers.

Sector sizes are approximated using the most trusted personal and public data sources for industrial realty offered, while also leveraging the knowledge and insights created by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For the majority of sectors, the approach to computing the total value includes approximating the physical size of the sector, be it square footage, systems, rooms, or beds; and integrating this with an approximated value based on recent deal information. Less traditionally tracked residential or commercial property sectors require more presumptions to estimate market-level and still-fluid market definitions. For residential or commercial property sectors where square footage or system counts were not readily available, total worth was approximated utilizing information from third-party information sources or insights from market participants.

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 financier's viewpoint, 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 consists of a complete variety of locations, including markets that are generally too small or insufficiently liquid for institutional financiers. As such, we filtered our investable universe worth using a meticulous series of presumptions to create an "institutional" universe estimate. These filters vary by residential or commercial property sector and include building place, quality, age and size. Through this technique, 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 biggest industrial realty 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 commercial, 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 approximated to be of institutional quality. Within the $11.7 trillion institutional universe, conventional sectors then account for near 70% of the total. With a worth of $2.6 trillion, houses are the largest standard 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 consist of residential or commercial property types that have historically not been the primary 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 players in the alternative sectors, however non-REIT investment has actually traditionally 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 residential options organizing (inclusive of single-family rentals, trainee housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has actually the largest approximated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next biggest housing sector within the group, consisted of 2.4 million beds with an assessment of $277B, followed by age-restricted housing at $251B and made housing at $165B. Combining the domestic options organizing with conventional houses results in the combined evaluation of $4.7 trillion, making housing in a broader sense account for the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted of commercial 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 traditional industrial market leads to 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 workplace, and senior citizens housing, have a combined estimated institutional worth of $839B, corresponding to 7.2% of the institutional universe. With a value of $413B, medical office represent near to half of the value of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is evolving rapidly. Certain conventional sectors, such as workplace and retail, have actually faced structural difficulties in the last decade, decreasing their overall share of the investable universe by worth; on the other hand, many alternative sectors have seen values increase significantly due to strong tenant and financier appetite. As a result, the share of capital flowing into the alternative sectors has actually increased considerably. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the previous four quarters, accounting for 16% of overall CRE volume, well above the share since 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor interest in the alternative sectors has 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.