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 objective of this analysis is to provide financiers with a criteria for the size and scale of the U.S. commercial realty (CRE) market, specific residential or commercial property sectors and the "institutional" quality portion of the marketplace. Up to this point, released quotes on the size of the commercial realty investable universe mostly concentrate on country-level international contrasts, taking a top-down approach to estimate the size of the total commercial genuine estate market in each region. Existing literature does little to approximate the value of specific residential or commercial property types, not to mention alternative residential or commercial property sectors. This report aims to fill this space in the industrial property information landscape. Focusing solely on the United States, this report takes a bottom-up technique, aggregating quotes for the size of private industrial realty residential or commercial property types to reach a value for the total commercial realty market. This technique enables division in between standard and alternative residential or commercial property types, in addition to the capability to approximate the share of "institutional" realty by sector.

Just how big is the U.S. industrial realty market? Although a seemingly simple question, estimating the size of the market is challenging for a number of reasons: lack of information and openness (especially for smaller, less-liquid and traditionally tracked residential or commercial property sectors), the extensively diverse nature of the series of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis tries to respond to the concern through a two-step process: initially, estimating the gross possession worth of each residential or commercial property sector despite ownership, tenancy, period, size, area, and quality. After reaching a quote for the general size of each sector, the second step is to apply filters based on 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 limited to residential or commercial properties that fit the normal requirements of institutional investors.

Sector sizes are approximated utilizing the most trustworthy private and public data sources for industrial real estate readily available, while also leveraging the knowledge and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For a lot of sectors, the approach to calculating the total worth includes approximating the physical size of the sector, be it square video footage, units, spaces, or beds; and integrating this with an approximated worth based upon current deal information. Less traditionally tracked residential or commercial property sectors need more presumptions to estimate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video or unit counts were not available, total value was approximated utilizing info from third-party information sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

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

However, from an institutional investor's perspective, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional standards for building size and quality. Similarly, this broad procedure of the CRE universe includes a complete series of locations, including markets that are usually too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value utilizing a meticulous series of assumptions to create an "institutional" universe price quote. These filters vary by residential or commercial property sector and consist of developing area, quality, age and size. Through this method, the total size of the institutional universe is approximated to be $11.7 trillion. Note, that this is over ten times the size of the largest industrial realty 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, that include 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 approximated to be of institutional quality. Within the $11.7 trillion institutional universe, standard sectors then represent near to 70% of the overall. With a value 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 CONSIDERABLE AND RISING COMPONENT

" Alternative" sectors, that include residential or commercial property types that have 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 listed REITs have actually been veteran gamers in the alternative sectors, but non-REIT investment has actually historically been restricted. However, alternatives are an increasing share of institutional-investor portfolios.

There are three 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 $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has the largest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next largest housing sector within the group, made up of 2.4 million beds with a valuation of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the residential alternatives organizing with conventional apartments results in the combined appraisal 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 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 commercial market results in a value 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 seniors housing, have a combined approximated institutional value of $839B, corresponding to 7.2% of the institutional universe. With a value of $413B, medical office represent near half of the worth of the combined health care sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is progressing quickly. Certain conventional sectors, such as office and retail, have dealt with structural obstacles in the last decade, reducing their general share of the investable universe by value; meanwhile, many alternative sectors have actually seen values increase considerably due to strong tenant and financier cravings. As a result, the share of capital flowing into the alternative sectors has increased considerably. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the past four quarters, accounting for 16% of total CRE volume, well above the share given that 2014 of 13%, according to MSCI Real Capital Analytics.

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