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 supply investors with a benchmark for the size and scale of the U.S. business realty (CRE) market, specific residential or commercial property sectors and the "institutional" quality portion of the marketplace. As much as this point, released price quotes on the size of the industrial realty investable universe mainly focus on country-level international comparisons, taking a top-down method to approximate the size of the total industrial realty market in each area. 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 intends to fill this gap in the business property info landscape. Focusing specifically on the United States, this report takes a bottom-up approach, aggregating quotes for the size of specific business realty residential or commercial property types to reach a value for the total industrial real estate market. This approach enables segmentation between conventional and alternative residential or commercial property types, along with the ability to estimate the share of "institutional" real estate 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 several factors: absence of data and transparency (particularly for smaller, 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 inconsistent market definitions/classifications.

This analysis tries to answer the concern through a two-step procedure: first, estimating the gross asset value of each residential or commercial property sector despite ownership, occupancy, period, size, area, and quality. After getting here at a quote for the overall size of each sector, the second step is to apply filters based on assumptions for developing class, vintage, size and/or market to further narrow the investable universe to only include institutional properties - a subsegment of the investable universe that is limited to residential or commercial properties that fit the common requirements of institutional financiers.

Sector sizes are approximated utilizing the most dependable private and public information sources for industrial property readily available, while also leveraging the understanding and insights produced by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For the majority of sectors, the approach to calculating the total worth involves estimating the physical size of the sector, be it square video footage, units, rooms, or beds; and combining this with an estimated value based upon current deal information. Less historically tracked residential or commercial property sectors require more presumptions to estimate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or unit counts were not readily available, total value was approximated using information from third-party information sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

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

However, from an institutional financier's point of view, this is an overestimate, as it includes residential or commercial properties that fall listed below typical institutional standards for developing size and quality. Similarly, this broad step of the CRE universe includes a full range of locations, including markets that are generally too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value utilizing a precise series of assumptions to create an "institutional" universe price quote. These filters differ by residential or commercial property sector and consist of building place, quality, age and size. Through this method, the total size of the institutional universe is estimated to be $11.7 trillion. Note, that this is over 10 times the size of the biggest business genuine estate index, the NCREIF Residential Or Commercial Property Index, (NPI).

We section 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, which consist of commercial, 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, standard sectors then represent near 70% of the total. With a value of $2.6 trillion, houses are the largest standard sector, representing more than one-fifth of the institutional universe.

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

" Alternative" sectors, which include residential or commercial property types that have historically not been the primary 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 revealed below. Many listed REITs have actually been long-time players in the alternative sectors, however non-REIT investment has 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 residential options organizing (inclusive of single-family rentals, student housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the biggest approximated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The trainee housing sector is the next biggest housing sector within the group, made up of 2.4 million beds with an evaluation of $277B, followed by age-restricted housing at $251B and manufactured housing at $165B. Combining the residential options organizing with standard apartments results in the combined assessment of $4.7 trillion, making housing in a more comprehensive sense account for the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted of industrial outdoor 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 value of $1.5 trillion, or 13.1%, of the institutional universe.

HEALTHCARE SECTOR

The healthcare residential or commercial property types: life sciences, medical office, and elders housing, have a combined estimated institutional value of $839B, relating to 7.2% of the institutional universe. With a worth of $413B, medical workplace represent near half of the value of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE financial investment landscape is evolving quickly. Certain conventional sectors, such as workplace and retail, have actually dealt with structural obstacles in the last years, lowering their general share of the investable universe by value; on the other hand, many alternative sectors have actually seen worths increase significantly due to strong renter and investor cravings. As an outcome, the share of capital streaming 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 considering that 2014 of 13%, according to MSCI Real Capital Analytics.

Institutional financier interest in the alternative sectors has actually grown also. 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% since 2024 Q2, led by financial investments in self-storage and life sciences - the largest alternative residential or commercial property sectors in the ODCE portfolio.