U.S. CRE Market Hits $27T as ‘Alternative’ Sectors Grow

According to a report from Clarion and RCG, the total size of the investable U.S. CRE market is now nearly $27T. Traditionally dominant sectors like office, retail, and hotels continue to face long-term structural challenges that opened the door for diversification, as reported by GlobeSt.

Zooming Out

Out of the $26.8T U.S. CRE market, $11.7T meets institutional standards. This designation filters out lower-quality and smaller-scale properties and those in less liquid markets. Comparatively, the total size of the investable universe is more than 10x the NCREIF Property Index (NPI).

Junior and Senior Circuits

• Traditional Sectors: These remain the largest component, valued at $16.9T, or 63% of the total market, with $11.7T categorized as institutional quality. Multifamily is the standout traditional sector, valued at $2.6T and comprising over 20% of the institutional universe.
• Alternative Sectors: Now accounting for 37% of the investable market at $9.9T, alternative sectors have grown in appeal, representing $3.6T, or 31% of the institutional market. This shift indicates a broader acceptance by investors.

Top ‘Alternative’ Sectors

• Residential Alternatives: This group, which includes single-family rentals, student housing, age-restricted housing, and manufactured homes, is valued at $2T and makes up 17% of the institutional market. The single-family rental market alone is estimated to be worth $1.3 T.
• Student Housing, Senior Residences: Student housing, with approximately 2.4M beds, is worth $277 billion. Age-restricted housing contributes $25B and manufactured housing rounds out this group at $165B.
• Industrial Properties: With $187B in value, sectors like cold storage and industrial outdoor storage total 1.6% of the institutional CRE universe. Including traditional industrial, this category accounts for $1.5T or 13.1% of the market.
• Healthcare Properties: Life sciences, medical office buildings, and senior housing collectively hold an institutional value of $839B or 7.2% of the pie. Medical offices lead this subsector at $413B, followed by senior housing at $302B and life sciences properties at $125B.

Looking Ahead

As the CRE market continues to diversify, alternative property types will likely capture even greater attention, serving as a hedge against the volatility of traditional assets. 

The expanding footprint of alternative sectors reflects a strategic pivot within the industry. The growing share attributed to healthcare, residential alternatives, and specialized industrial sectors highlights an adaptive approach that aligns with evolving market conditions and trends.