Over a quarter of all global commercial real estate transactions involve private investors, new research from Knight Frank has revealed.
According to the Knight Frank Active Capital Report, 27% of all global commercial property transactions in 2016 involved a private buyer. And a quarter of private wealth is held in real estate investments of some kind - excluding primary residences and second homes - the highest allocation since records began.
'We predict that private investors will continue to take global market share as both the number of wealthy individuals and their assets grow,' said Anthony Duggan, head of Capital Markets Research, Knight Frank. 'The number of Ultra-High-Net-Worth Individuals (UHNWIs) – those with $30 mln or more in net assets – rose by 6,340 in 2016 alone, taking the total to 193,490.'
He added: 'We expect that the appetite from private investors for commercial property will continue to increase. The Active Capital report shows that 32% of UHNWIs will invest in cross-border real estate deals in the next two years.'
US & Asia
'Asia is starting to challenge the US in terms of the largest regional population of UHNWIs,' Duggan noted.
'At present, Asia is home to 27,020 fewer ultra-wealthy people than the US, but by 2026 this difference will have shrunk to just 7,068. However, while North America may not top the growth rate charts it will stay the largest hub of UNHWIs in 2026 and growth will continue to outstrip many other developed economies.'
He added: 'While China will continue to lead the way in Asia, places like Vietnam, Sri Lanka and India will also see substantial expansion.'
Investment themes
While the drivers behind the investment purchases will vary greatly depending on the motivations of the individual, there are a number of investment themes in the market, according to the report, including risk mitigation, a drive to seek more control over assets, currency diversification and portfolio globalisation.
'These themes, plus individual investor specific drivers, will continue to attract private investors towards global real estate,' said Andrew Sim, head of global capital markets, Knight Frank. 'The top markets targeted will primarily be those exhibiting solid fundamentals including tenant demand, liquidity and transparency.'
'However, increasingly we are advising clients not only on prime office, retail and hotel assets in these cites but also strategic investments in growth sectors such as urban logistics, leisure and specialist operating assets including student housing and multi-housing. Overall, property as an asset class remains high on the agenda of private investors,' Sim concluded.