19% Of Super Wealthy Plan To Invest In Commercial Properties In 2023
GLOBAL – About 19 percent of surveyed ultra-high-net-worth individuals (UHNWI), or those with at least US$30 million in investable assets, intend to directly invest in commercial properties this year, according to Knight Frank’s latest Wealth Report.
On the other hand, 13 percent are looking to invest indirectly, such as via debt funding or real estate investment trusts (REITs).
By asset class, the most popular is healthcare, followed by logistics and office buildings. In particular, Knight Frank expects office assets to attract the highest cross-border allocation in 2023, with London forecasted to be the top target.
Notably, the real estate consultancy’s HNW Pulse Survey showed that almost 40 percent of respondents are looking to invest in commercial assets outside their country of residence. However, Knight Frank said that debt looks set to be a key consideration for all investors for 2023.
“With interest rates at multi-year highs, and the all-in cost of debt elevated in most markets, we could see affordability challenges. This is especially pertinent given that global commercial real estate investment was 19 percent and 31 percent above the long-term average in 2017 and 2018.”
“If we assume a five-year loan term, debt-backed buyers will be facing higher costs upon refinancing as these loans come to maturity this year. Higher debt costs may lead to opportunities for equity injection or partnering, as well as assets being brought to the market, should investors choose not to refinance,” noted the property consultancy.
Aside from that, Knight Frank’s HNW Pulse Survey revealed that over 25 percent of high-net-worth individuals (HNWI) are considering to increase their commercial property holdings.
Queried on how much they are likely to invest in commercial assets, 27 percent of the respondents said up to US$500,000, another 27 percent stated between US$500,000 and US$1 million. 16 percent gave a figure ranging from US$1 million to US$5 million, 8 percent said US$5 million to US$10 million, while 9 percent reckoned US$10 million to US$20 million. Finally, 11 percent declared that they intend to invest more than US$20 million.