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 provide investors with a criteria for the size and scale of the U.S. industrial real estate (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the marketplace. Approximately this point, released price quotes on the size of the industrial realty investable universe mostly concentrate on country-level international contrasts, taking a top-down approach to estimate the size of the general industrial realty market in each area. Existing literature does little to estimate the value of specific residential or commercial property types, not to mention alternative residential or commercial property sectors. This report intends to fill this gap in the industrial realty information landscape. Focusing solely on the United States, this report takes a bottom-up approach, aggregating estimates for the size of specific business realty residential or commercial property types to reach a value for the general industrial property market. This technique permits segmentation between traditional 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. business property market? Although a relatively uncomplicated concern, approximating the size of the marketplace is challenging for a number of factors: lack of information and openness (specifically for smaller sized, less-liquid and historically tracked residential or commercial property sectors), the commonly diverse nature of the variety of investible residential or commercial property types, and inconsistent market definitions/classifications.

This analysis attempts to answer the question through a two-step procedure: first, estimating the gross possession worth of each residential or commercial property sector despite ownership, occupancy, period, size, location, and quality. After getting here at a price quote for the overall size of each sector, the second step is to use filters based on assumptions for building class, vintage, size and/or market to further narrow the investable universe to just include institutional possessions - a subsegment of the investable universe that is limited to residential or commercial properties that fit the normal criteria of institutional investors.

Sector sizes are approximated using the most dependable private and public information sources for business realty readily available, while likewise leveraging the knowledge and insights generated by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the technique to calculating the general worth involves approximating the physical size of the sector, be it square video, units, rooms, or beds; and combining this with an estimated worth based on recent transaction data. Less traditionally tracked residential or commercial property sectors need more assumptions to approximate market-level and still-fluid industry meanings. For residential or commercial property sectors where square video or system counts were not offered, overall worth was estimated utilizing details from third-party information sources or insights from market individuals.

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 consists of residential or commercial properties that fall below typical institutional requirements for constructing size and quality. Similarly, this broad measure of the CRE universe consists of a complete variety of locations, including markets that are usually too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe worth using a meticulous series of assumptions to produce an "institutional" universe quote. These filters vary by residential or commercial property sector and include developing 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 ten times the size of the largest business property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We section the investable universe into two 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, 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 estimated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then account for near to 70% of the overall. With a value of $2.6 trillion, apartment or condos are the biggest traditional sector, representing more than one-fifth of the institutional universe.

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

" Alternative" sectors, that include residential or types that have actually traditionally 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 includes the residential or commercial property types shown below. Many listed REITs have been long-time players in the alternative sectors, however non-REIT investment has actually historically been restricted. However, options 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, student housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the largest approximated worth ($ 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 appraisal of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the domestic options grouping with standard homes results in the combined valuation of $4.7 trillion, making housing in a more comprehensive sense represent the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Comprised of commercial outside storage (IOS) and cold storage warehousing, the industrial-adjacent group is valued at $187B, amounting to 1.6% of the institutional universe. Combining this group with the standard commercial market leads to a worth 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 senior citizens housing, have a combined estimated institutional worth of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical workplace represent near half of the worth of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is evolving rapidly. Certain standard sectors, such as office and retail, have faced structural challenges in the last years, minimizing their overall share of the investable universe by worth; meanwhile, many alternative sectors have actually seen worths increase significantly due to strong renter and investor appetite. As a result, the share of capital flowing into the alternative sectors has actually increased significantly. Investments in alternative CRE sectors totaled up to $14.2 B in transaction volume over the past four quarters, representing 16% of total CRE volume, well above the share considering that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional investor 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 largest alternative residential or commercial property sectors in the ODCE portfolio.