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 dominate.

- Alternative sectors account for over 30%






WHY MEASURE THE INVESTABLE UNIVERSE?


The goal of this analysis is to provide investors with a standard for the size and scale of the U.S. commercial property (CRE) market, private residential or commercial property sectors and the "institutional" quality part of the marketplace. Approximately this point, released estimates on the size of the industrial real estate investable universe primarily concentrate on country-level international contrasts, taking a top-down technique to approximate the size of the total commercial genuine estate market in each region. Existing literature does little to approximate 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 property information landscape. Focusing solely on the United States, this report takes a bottom-up approach, aggregating price quotes for the size of specific industrial real estate residential or commercial property types to get to a value for the overall commercial realty market. This technique enables for division in between conventional and alternative residential or commercial property types, along with the ability to approximate the share of "institutional" property by sector.


Just how big is the U.S. industrial realty market? Although a seemingly uncomplicated concern, approximating the size of the marketplace is challenging for a number of reasons: lack of information and transparency (specifically 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 address the concern through a two-step process: first, approximating the gross asset worth of each residential or commercial property sector no matter ownership, occupancy, tenure, size, area, and quality. After coming to a price quote for the total size of each sector, the second action is to use filters based on presumptions for constructing class, vintage, size and/or market to more 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 typical criteria of institutional financiers.


Sector sizes are approximated utilizing the most dependable private and public information sources for commercial real estate readily available, while also leveraging the knowledge and insights generated by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For a lot of sectors, the method to computing the total value involves estimating the physical size of the sector, be it square footage, systems, spaces, or beds; and integrating this with an approximated value based on recent deal data. Less historically tracked residential or commercial property sectors need more assumptions to approximate market-level and still-fluid industry meanings. For residential or commercial property sectors where square video or system counts were not readily available, overall value was approximated utilizing information 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 financier's viewpoint, this is an overestimate, as it includes residential or commercial properties that fall listed below common institutional standards for constructing size and quality. Similarly, this broad procedure of the CRE universe consists of a full series of geographies, consisting of markets that are usually too small or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value utilizing a careful series of presumptions to produce an "institutional" universe quote. These filters vary by residential or commercial property sector and consist of constructing place, quality, age and size. Through this technique, the overall size of the institutional universe is estimated 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 two broad classifications: Traditional and Alternative residential or commercial property types.


TRADITIONAL RESIDENTIAL OR TYPES MAINTAIN A DOMINANT SHARE


" Traditional" residential or commercial property sectors, that include commercial, 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 estimated to be of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors then represent near 70% of the total. With a value of $2.6 trillion, houses are the largest 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, which consist of residential or commercial property types that have traditionally not been the predominant focus of institutional financiers, account for 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 shown below. Many noted REITs have been veteran players in the alternative sectors, but non-REIT investment has traditionally been limited. However, alternatives are an increasing share of institutional-investor portfolios.


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


THE RESIDENTIAL SECTOR IS THE LARGEST COMPONENT


The property alternatives grouping (inclusive of single-family leasings, student housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has actually the largest estimated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next largest 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 residential options grouping with conventional homes results in the combined appraisal 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 commercial outdoor storage (IOS) and freezer warehousing, the industrial-adjacent group is valued at $187B, totaling up to 1.6% of the institutional universe. Combining this group with the traditional industrial market results in a value of $1.5 trillion, or 13.1%, of the institutional universe.


HEALTHCARE SECTOR


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


AN EVOLVING CRE LANDSCAPE


The CRE investment landscape is evolving rapidly. Certain traditional sectors, such as office and retail, have dealt with structural difficulties in the last decade, reducing their total share of the investable universe by value; on the other hand, many alternative sectors have seen worths increase considerably due to strong renter and financier cravings. As an outcome, the share of capital streaming into the alternative sectors has increased substantially. Investments in alternative CRE sectors totaled up to $14.2 B in deal volume over the previous 4 quarters, representing 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 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 investments in self-storage and life sciences - the largest alternative residential or commercial property sectors in the ODCE portfolio.