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The U.S. Commercial Real Estate Investable Universe

Estimated $26.8 T U.S. CRE investable universe

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

— Residential sectors control.

— Alternative over 30%

WHY MEASURE THE INVESTABLE UNIVERSE?

The goal of this analysis is to supply investors with a standard for the size and scale of the U.S. commercial realty (CRE) market, private residential or commercial property sectors and the «institutional» quality part of the market. Approximately this point, released estimates on the size of the commercial genuine estate investable universe primarily focus on country-level worldwide contrasts, taking a top-down method to approximate the size of the general commercial property market in each area. Existing literature does little to estimate the worth of specific residential or commercial property types, let alone alternative residential or commercial property sectors. This report aims to fill this gap in the commercial property details landscape. Focusing exclusively on the United States, this report takes a bottom-up approach, aggregating quotes for the size of private industrial property residential or commercial property types to come to a worth for the total business genuine estate market. This method enables for segmentation between conventional and alternative residential or commercial property types, along with the ability to approximate the share of «institutional» realty by sector.

Just how huge is the U.S. business property market? Although a relatively uncomplicated concern, estimating the size of the marketplace is challenging for numerous factors: absence of data and openness (particularly for smaller sized, less-liquid and historically tracked residential or commercial property sectors), the widely varied 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 procedure: initially, approximating the gross possession worth of each residential or commercial property sector despite ownership, occupancy, tenure, size, location, and quality. After coming to an estimate for the total size of each sector, the 2nd step is to use filters based on presumptions for developing class, vintage, size and/or market to additional narrow the investable universe to only include institutional properties — a subsegment of the investable universe that is restricted to residential or commercial properties that fit the normal requirements of institutional investors.

Sector sizes are estimated using the most dependable private and public data sources for industrial realty offered, while also leveraging the understanding and insights produced by Clarion and Rosen Consulting Group (RCG)’s experience in the market. For most sectors, the method to computing the general value includes approximating the physical size of the sector, be it square footage, systems, spaces, or beds; and integrating this with an approximated value based on current deal information. Less traditionally tracked residential or commercial property sectors need more presumptions to approximate market-level and still-fluid industry meanings. For residential or commercial property sectors where square video or unit counts were not offered, total worth was approximated utilizing details from third-party data 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 financier’s viewpoint, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional requirements for constructing size and quality. Similarly, this broad measure of the CRE universe includes a complete series of locations, including markets that are typically too little or insufficiently liquid for institutional investors. As such, we filtered our investable universe value utilizing a careful series of assumptions to produce an «institutional» universe price quote. These filters differ by residential or commercial property sector and include constructing area, quality, age and size. Through this method, the overall size of the institutional universe is estimated to be $11.7 trillion. Note, that this is over ten times the size of the largest industrial property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We segment 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, which include industrial, multifamily, office, 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 total. With a worth 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, that include residential or commercial property types that have actually traditionally 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 veteran players in the alternative sectors, however non-REIT investment has actually traditionally 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 residential alternatives organizing (inclusive of single-family leasings, student housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has the biggest estimated worth ($ 1.3 T), accounting for 11.5% of the institutional universe. The student 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 property alternatives grouping with standard houses results in the combined evaluation of $4.7 trillion, making housing in a wider sense represent the lion’s share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted 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 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 office, and senior citizens housing, have a combined approximated institutional worth 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 financial investment landscape is developing quickly. Certain traditional sectors, such as workplace and retail, have dealt with structural challenges in the last years, decreasing their general share of the investable universe by value; meanwhile, many alternative sectors have seen values increase significantly due to strong renter and financier hunger. As an outcome, the share of capital flowing into the alternative sectors has actually increased significantly. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the past 4 quarters, representing 16% of overall CRE volume, well above the share because 2014 of 13%, according to MSCI Real Capital Analytics.

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