The CRE investment landscape is evolving quickly as traditional sectors such as office and retail have faced structural challenges during the past decade while alternative sectors have attracted an increasing share of capital. Investments in alternative CRE sectors have reached $14.2 billion in transaction volume during the past year, or 16% of total CRE volume, according to a report from Clarion and Rosen Consulting Group (RCG).
The total size of the US CRE investable universe is $26.8 trillion, of which $11.7 trillion is institutional quality, according to the report. The institutional estimate filters out properties that fall below typical institutional standards for building size and quality as well as markets that are too small or insufficiently liquid for institutional investors. The study noted this estimate is more than ten times the size of the NCREIF Property Index (NPI).
Traditional property types, including industrial, multifamily, office, retail and hotels, make up the largest share of the investable universe at $16.9 trillion or 63% of the investable market. Of this total, 48%, or $48.2 trillion, is considered of institutional quality. Within the $11.7 trillion institutional universe, traditional sectors account for close to 70% of the total. Apartments are the largest traditional sector with a value of $2.6 trillion, accounting for more than one-fifth of the institutional universe.
An increasing share of the investable universe is composed of alternative sectors that historically have not been the focus of institutional investors. This component accounts for $9.9 trillion, or 37% of the investable universe, or $3.6 trillion (31%) of the institutional landscape.
The residential alternatives group, including single-family rentals, student housing, age-restricted housing and manufactured housing, is valued at $2 trillion, or 17% of the institutional universe. The single-family sector, including 3.9 million houses, has the largest estimated value at $1.3 trillion.
Student housing, including 2.4 million beds, is valued at $277 billion. Age-restricted housing is valued at $251 billion and manufactured housing at $165 billion. When combined, the residential alternative groups and traditional apartments account for $4.7 trillion in value or 40% of the institutional universe.
Industrial and adjacent sectors, including industrial outdoor storage and cold storage warehousing, are valued at $187 billion, or 1.6% of the institutional universe. Combined with traditional industrial, these sectors account for $1.5 trillion in value or 13.1% of the institutional universe.
Alternative healthcare property types, including life science, medical office and senior housing, have a combined estimated institutional value of $839 billion, or 7.2% of the institutional universe. With a value of $413 billion, medical office accounts for close to half of the value of the combined healthcare sector, followed by senior housing at $302 billion and life sciences at $125 billion, according to the report.