Estimated $26.8 T U.S. CRE investable universe

- Institutional-quality represents $11.7 T (44%).

- Residential sectors dominate.

- Alternative sectors account for over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The goal of this analysis is to supply financiers with a criteria for the size and scale of the U.S. industrial property (CRE) market, individual residential or commercial property sectors and the "institutional" quality part of the marketplace. As much as this point, released estimates on the size of the commercial realty investable universe mostly focus on country-level worldwide comparisons, taking a top-down method to approximate the size of the general commercial genuine estate market in each area. Existing literature does little to estimate 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 approach, aggregating price quotes for the size of private industrial realty residential or commercial property types to reach a worth for the overall industrial realty market. This technique enables for segmentation in between standard and alternative residential or commercial property types, in addition to the ability to estimate the share of "institutional" realty by sector.

Just how big is the U.S. commercial genuine estate market? Although an apparently simple question, estimating the size of the market is challenging for a number of factors: absence of information and transparency (specifically for smaller, less-liquid and historically tracked residential or commercial property sectors), the commonly varied nature of the variety of investible residential or commercial property types, and irregular market definitions/classifications.

This analysis attempts to respond to the question through a two-step process: first, estimating the gross property value of each residential or commercial property sector regardless of ownership, tenancy, period, size, place, and quality. After reaching a quote for the total size of each sector, the second action is to use 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 restricted to residential or commercial properties that fit the typical criteria of institutional financiers.

Sector sizes are estimated using the most trusted private and public information sources for industrial property readily available, while likewise 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 determining the total worth includes estimating the physical size of the sector, be it square video footage, systems, spaces, or beds; and combining this with an estimated value based on recent transaction information. Less historically tracked residential or commercial property sectors require more assumptions to estimate market-level and still-fluid market meanings. For residential or commercial property sectors where square video footage or unit counts were not offered, overall value was approximated using information from third-party information sources or insights from market participants.

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 investor's point of view, this is an overestimate, as it consists of 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 full series of geographies, consisting of markets that are typically too little or insufficiently liquid for institutional investors. As such, we filtered our investable universe value using a meticulous series of presumptions to generate an "institutional" universe quote. These filters differ by residential or commercial property sector and consist of developing area, quality, age and size. Through this method, the overall size of the institutional universe is approximated to be $11.7 trillion. Note, that this is over 10 times the size of the biggest commercial genuine estate 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 industrial, 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 approximated to be of institutional quality. Within the $11.7 trillion institutional universe, conventional sectors then represent near 70% of the overall. With a value of $2.6 trillion, homes are the biggest conventional 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, which include residential or commercial property types that have historically not been the predominant focus of institutional investors, 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 consists of the residential or commercial property types revealed listed below. Many listed REITs have been long-time gamers in the alternative sectors, but non-REIT financial investment has traditionally been limited. However, alternatives are an increasing share of institutional-investor portfolios.

There are 3 identifiable groupings within the options subset of the institutional market:

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The property options grouping (inclusive of single-family rentals, trainee housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has the largest estimated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The student 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 produced housing at $165B. Combining the property options organizing with standard apartment or condos 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 industrial outside 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 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 workplace, and seniors housing, have a combined approximated institutional value of $839B, corresponding to 7.2% of the institutional universe. With a worth of $413B, medical workplace represent close to half of the value of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is developing rapidly. Certain traditional sectors, such as office and retail, have actually dealt with structural challenges in the last years, decreasing their overall share of the investable universe by worth; on the other hand, lots of alternative sectors have actually seen values increase significantly due to strong tenant and financier cravings. As a result, the share of capital streaming into the alternative sectors has actually increased considerably. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the previous 4 quarters, accounting for 16% of overall 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 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.