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 goal of this analysis is to provide financiers with a benchmark for the size and scale of the U.S. commercial real estate (CRE) market, specific residential or commercial property sectors and the "institutional" quality part of the marketplace. As much as this point, published quotes on the size of the business realty investable universe primarily focus on country-level worldwide comparisons, taking a top-down approach to estimate the size of the general commercial real estate market in each area. 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 intends to fill this space in the business realty details landscape. Focusing solely on the United States, this report takes a bottom-up method, aggregating estimates for the size of specific industrial genuine estate residential or commercial property types to reach a value for the overall business property market. This approach enables segmentation between traditional and alternative residential or commercial property types, as well as the ability to estimate the share of "institutional" genuine estate by sector.

Just how big is the U.S. commercial property market? Although an apparently straightforward question, approximating the size of the marketplace is challenging for numerous factors: lack of data and openness (specifically for smaller, less-liquid and historically tracked residential or commercial property sectors), the commonly varied nature of the series of investible residential or commercial property types, and inconsistent industry definitions/classifications.

This analysis attempts to address the question through a two-step process: initially, estimating the gross asset worth of each residential or commercial property sector regardless of ownership, occupancy, period, size, place, and quality. After getting here at a quote for the general size of each sector, the 2nd step is to apply filters based upon presumptions for building class, vintage, size and/or market to more narrow the investable universe to only consist of institutional assets - a subsegment of the investable universe that is limited to residential or commercial properties that fit the normal criteria of institutional financiers.

Sector sizes are estimated using the most reliable personal and public data sources for business real estate available, while likewise leveraging the understanding and insights generated by Clarion and Rosen Consulting Group (RCG)'s experience in the market. For a lot of sectors, the method to calculating the general worth includes approximating the physical size of the sector, be it square video footage, units, spaces, or beds; and combining this with an estimated worth based on recent deal information. Less historically tracked residential or commercial property sectors require more assumptions to approximate market-level and still-fluid industry definitions. For residential or commercial property sectors where square video footage or unit counts were not available, total worth was approximated using information from third-party data sources or insights from market individuals.

OUR ESTIMATE OF THE INVESTABLE UNIVERSE

We estimate the total 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 below typical institutional requirements for building size and quality. Similarly, this broad step of the CRE universe includes a full range of locations, consisting of markets that are usually too little or insufficiently liquid for institutional financiers. As such, we filtered our investable universe value utilizing a careful series of presumptions to create an "institutional" universe price quote. These filters vary by residential or commercial property sector and consist of constructing location, 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 industrial property index, the NCREIF Residential Or Commercial Property Index, (NPI).

We segment 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 include commercial, multifamily, office, 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 estimated to be of institutional quality. Within the $11.7 trillion institutional universe, conventional sectors then represent near 70% of the total. With a worth of $2.6 trillion, apartment or condos are the biggest standard 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 primary 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 listed below. Many noted REITs have been long-time players in the alternative sectors, but non-REIT financial investment has historically been limited. However, options 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 domestic alternatives organizing (inclusive of single-family rentals, student housing, age-restricted housing, and made housing) is valued at $2 trillion, or 17% of the institutional universe. Within this group, the single-family rental sector (with 3.9 million houses) has the largest approximated value ($ 1.3 T), accounting for 11.5% of the institutional universe. The student housing sector is the next biggest housing sector within the group, comprised of 2.4 million beds with an evaluation of $277B, followed by age-restricted housing at $251B and made housing at $165B. Combining the residential alternatives grouping with conventional apartment or condos leads to the combined valuation of $4.7 trillion, making housing in a broader sense represent the lion's share (40%) of the institutional universe.

INDUSTRIAL AND ADJACENT SECTORS

Consisted of industrial outside storage (IOS) and freezer warehousing, the industrial-adjacent group is valued at $187B, amounting to 1.6% of the institutional universe. Combining this group with the traditional 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 seniors housing, have a combined estimated institutional worth of $839B, corresponding to 7.2% of the institutional universe. With a value of $413B, medical office accounts for close to half of the worth of the combined healthcare sector, followed by senior housing ($ 302B) and life sciences ($ 125B).

AN EVOLVING CRE LANDSCAPE

The CRE investment landscape is progressing rapidly. Certain traditional sectors, such as office and retail, have dealt with structural obstacles in the last years, minimizing their overall share of the investable universe by value; meanwhile, many alternative sectors have seen values increase significantly due to strong occupant and investor appetite. As an outcome, the share of capital flowing into the alternative sectors has increased significantly. Investments in alternative CRE sectors amounted to $14.2 B in deal volume over the previous 4 quarters, representing 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 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 investments in self-storage and life sciences - the biggest alternative residential or commercial property sectors in the ODCE portfolio.