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 financiers with a benchmark for the size and scale of the U.S. business real estate (CRE) market, specific residential or commercial property sectors and the "institutional" quality portion of the market. As much as this point, published price quotes on the size of the commercial property investable universe primarily focus on country-level global contrasts, taking a top-down technique to approximate the size of the total commercial real estate market in each region. 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 aims to fill this space in the business realty info landscape. Focusing exclusively on the United States, this report takes a bottom-up technique, aggregating estimates for the size of individual industrial real estate residential or commercial property types to come to a value for the total business realty market. This approach permits division between conventional and alternative residential or commercial property types, along with the capability to approximate the share of "institutional" property by sector.

Just how huge is the U.S. market? Although an apparently simple question, estimating the size of the marketplace is challenging for numerous reasons: absence of information and openness (specifically 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 inconsistent market definitions/classifications.

This analysis tries to address the question through a two-step process: first, estimating the gross possession value of each residential or commercial property sector no matter ownership, occupancy, tenure, size, area, and quality. After getting to a price quote for the total size of each sector, the 2nd step is to use filters based upon presumptions for constructing class, vintage, size and/or market to more narrow the investable universe to only include institutional assets - a subsegment of the investable universe that is restricted to residential or commercial properties that fit the typical requirements of institutional investors.

Sector sizes are estimated using the most reputable private and public information sources for business property offered, while also leveraging the understanding and insights generated by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the method to determining the general worth includes estimating the physical size of the sector, be it square footage, units, spaces, or beds; and combining this with an estimated value based on current deal data. Less historically 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 video footage or system counts were not readily available, overall value was estimated using info from third-party data 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 investor's point of view, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional requirements for building size and quality. Similarly, this broad procedure of the CRE universe includes a full series of geographies, including markets that are usually too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe worth using a careful series of presumptions to create an "institutional" universe quote. These filters differ by residential or commercial property sector and include developing area, quality, age and size. Through this technique, 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 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 consist of industrial, multifamily, office, retail, and hotels are valued at $16.9 trillion, representing 63% of the investable market. Of this total, 48%, or $8.2 trillion, is estimated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then represent close to 70% of the overall. With a worth of $2.6 trillion, apartment or condos are the biggest traditional 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 include residential or commercial property types that have actually historically not been the predominant focus of institutional investors, represent 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 noted REITs have been long-time gamers in the alternative sectors, however non-REIT investment has historically been limited. However, alternatives are an increasing share of institutional-investor portfolios.

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

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The property alternatives organizing (inclusive of single-family rentals, student housing, age-restricted housing, and manufactured housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the biggest estimated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next largest housing sector within the group, comprised of 2.4 million beds with an assessment of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the domestic alternatives grouping with traditional homes results in the combined assessment 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 industrial 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 standard commercial market results in a worth of $1.5 trillion, or 13.1%, of the institutional universe.
govt.nz
HEALTHCARE SECTOR

The healthcare residential or commercial property types: life sciences, medical workplace, and seniors housing, have a combined approximated institutional worth of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical office accounts for close to half of the value of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).
zhihu.com
AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is evolving quickly. Certain conventional sectors, such as workplace and retail, have actually faced structural challenges in the last years, lowering their total share of the investable universe by worth; on the other hand, lots of alternative sectors have seen worths increase significantly due to strong occupant and financier appetite. As a result, the share of capital flowing into the alternative sectors has increased considerably. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the previous four quarters, accounting for 16% of total CRE volume, well above the share because 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 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 largest alternative residential or commercial property sectors in the ODCE portfolio.