Estimated $26.8 T U.S. CRE investable universe

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

- Residential sectors control.

- Alternative sectors account for over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The objective of this analysis is to offer financiers with a criteria for the size and scale of the U.S. business property (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 business property investable universe primarily focus on country-level global comparisons, taking a top-down technique to estimate the size of the total commercial property market in each region. Existing literature does little to estimate the worth of particular residential or commercial property types, not to mention alternative residential or commercial property sectors. This report intends to fill this gap in the business property details landscape. Focusing specifically on the United States, this report takes a bottom-up method, aggregating price quotes for the size of individual industrial genuine estate residential or commercial property types to come to a value for the total industrial real estate market. This technique enables for division between traditional and alternative residential or commercial property types, in addition to the ability to approximate the share of "institutional" genuine estate by sector.

Just how big is the U.S. commercial property market? Although an apparently simple question, approximating the size of the marketplace is challenging for numerous reasons: lack of information and transparency (specifically for smaller, less-liquid and traditionally tracked residential or commercial property sectors), the extensively 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: initially, approximating the gross asset value of each residential or commercial property sector no matter ownership, occupancy, period, size, place, and quality. After arriving at a quote for the general size of each sector, the 2nd step is to use filters based on presumptions for building class, vintage, size and/or market to more narrow the investable universe to just consist of institutional properties - a subsegment of the investable universe that is limited to residential or commercial properties that fit the typical requirements of institutional financiers.

Sector sizes are estimated utilizing the most trusted personal and public information sources for business realty readily available, while also leveraging the knowledge and insights created by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For many sectors, the approach to calculating the overall value involves estimating the physical size of the sector, be it square footage, systems, rooms, or beds; and integrating this with an estimated value based upon recent transaction data. Less traditionally tracked residential or commercial property sectors need more presumptions to approximate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video or system counts were not readily available, overall value was estimated using details from third-party data sources or insights from market individuals.

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 consists of residential or commercial properties that fall listed below normal institutional requirements for building size and quality. Similarly, this broad step of the CRE universe includes a complete variety of locations, including markets that are generally too small or insufficiently liquid for institutional investors. As such, we filtered our investable universe worth using a careful series of presumptions to produce an "institutional" universe estimate. These filters differ 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 biggest commercial real estate index, the NCREIF Residential Or Commercial Property Index, (NPI).

We sector 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, that include commercial, multifamily, workplace, 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 account for close to 70% of the overall. With a value 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 SIGNIFICANT AND RISING COMPONENT

" Alternative" sectors, that include residential or commercial property types that have historically not been the primary focus of institutional financiers, 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 noted REITs have been veteran gamers in the alternative sectors, however non-REIT financial investment has actually traditionally been restricted. However, options are an increasing share of institutional-investor portfolios.

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

THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT

The residential alternatives grouping (inclusive of single-family leasings, trainee housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million homes) has the largest estimated worth ($ 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 assessment of $277B, followed by age-restricted housing at $251B and produced housing at $165B. Combining the domestic options grouping with standard apartment or condos leads to the combined appraisal of $4.7 trillion, making housing in a wider 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, amounting to 1.6% of the institutional universe. Combining this group with the standard commercial market results in a value 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 senior citizens housing, have a combined estimated institutional value of $839B, corresponding to 7.2% of the institutional universe. With a value of $413B, medical office accounts for near half of the value of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is progressing quickly. Certain standard sectors, such as workplace and retail, have dealt with structural challenges in the last years, decreasing their total share of the investable universe by value; meanwhile, numerous alternative sectors have seen values increase significantly due to strong renter and financier hunger. As a result, the share of capital flowing into the alternative sectors has actually increased considerably. Investments in alternative CRE sectors amounted to $14.2 B in transaction volume over the past 4 quarters, accounting for 16% of total 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 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% as of 2024 Q2, led by investments in self-storage and life sciences - the largest alternative residential or commercial property sectors in the ODCE portfolio.