Estimated $26.8 T U.S. CRE investable universe
- Institutional-quality represents $11.7 T (44%).
- Residential sectors control.
- Alternative sectors represent over 30%




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. industrial real estate (CRE) market, specific residential or commercial property sectors and the "institutional" quality part of the market. Approximately this point, released estimates on the size of the industrial genuine estate investable universe mostly concentrate on country-level global comparisons, taking a top-down technique to estimate the size of the overall commercial realty market in each region. Existing literature does little to approximate the value of specific residential or commercial property types, let alone alternative residential or commercial property sectors. This report aims to fill this space in the industrial realty info landscape. Focusing solely on the United States, this report takes a bottom-up technique, aggregating price quotes for the size of individual business real estate residential or commercial property types to reach a value for the total industrial genuine estate market. This approach permits segmentation between conventional 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 realty market? Although a seemingly uncomplicated concern, approximating the size of the marketplace is challenging for several reasons: absence of information and openness (especially for smaller sized, less-liquid and traditionally tracked residential or commercial property sectors), the commonly diverse nature of the series of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis attempts to respond to the concern through a two-step process: initially, approximating the gross property value of each residential or commercial property sector regardless of ownership, occupancy, period, size, location, and quality. After coming to a quote for the total size of each sector, the second step is to apply filters based on presumptions for developing class, vintage, size and/or market to further narrow the investable universe to only consist of institutional possessions - a subsegment of the investable universe that is limited to residential or commercial properties that fit the normal criteria of institutional financiers.

Sector sizes are approximated using the most trustworthy private and public data sources for commercial real estate offered, while likewise leveraging the knowledge and insights created by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For most sectors, the method to computing the overall value includes approximating the physical size of the sector, be it square video, units, rooms, or beds; and combining this with an approximated worth based on recent deal information. Less traditionally tracked residential or commercial property sectors require more assumptions to estimate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or unit counts were not offered, total value was estimated utilizing information from third-party data 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 perspective, this is an overestimate, as it includes residential or commercial properties that fall below normal institutional standards for constructing size and quality. Similarly, this broad measure of the CRE universe consists of a complete variety of locations, including markets that are typically too small or insufficiently liquid for institutional investors. As such, we filtered our investable universe worth utilizing a precise series of presumptions to produce an "institutional" universe estimate. These filters vary by residential or commercial property sector and consist of developing place, quality, age and size. Through this method, 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 biggest industrial realty 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 SHARE

" Traditional" residential or commercial property sectors, which consist of industrial, multifamily, workplace, 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 worth of $2.6 trillion, houses are the biggest conventional sector, representing more than one-fifth of the institutional universe.

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

" Alternative" sectors, which include residential or commercial property types that have actually historically not been the primary focus of institutional financiers, represent 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 includes the residential or commercial property types shown listed below. Many noted REITs have actually been veteran gamers in the alternative sectors, but 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 domestic options grouping (inclusive of single-family rentals, student housing, age-restricted housing, and produced housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the largest estimated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next biggest housing sector within the group, 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 options grouping with conventional homes leads to the combined appraisal of $4.7 trillion, making housing in a broader sense represent 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 traditional industrial market results in 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 workplace, and seniors housing, have a combined projected institutional worth of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical office accounts for near to half of the value of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is evolving quickly. Certain standard sectors, such as office and retail, have dealt with structural difficulties in the last years, decreasing their total share of the investable universe by worth; on the other hand, numerous alternative sectors have actually seen values increase significantly due to strong tenant and investor hunger. As a result, the share of capital flowing into the alternative sectors has increased substantially. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the past four 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% 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.