By Sam Bridge
Knight Frank says nearly a third of wealthy investors from the Middle East are targeting commercial property abroad, with the UK high on the list
Gulf-based real estate investors have the biggest appetite for targeting overseas commercial property, according to a new report.
Knight Frank’s Wealth Report 2020 revealed that private capital was responsible for $333 billion of commercial real estate purchases in 2019, up 5 percent on the previous year.
It also showed that nearly a third (32 percent) of wealthy investors from the Middle East are keen to spend overseas, the highest percentage of any region, with the UK being high on the target list.
Whilst 24 percent of global UHNWIs plan to invest in commercial property domestically, significant amounts of capital is set to be allocated to cross border purchases in the year ahead.
Ultra high net worth individuals confirmed that property remains the most attractive asset class when compared to traditional equities and bonds, due to its relative stability and higher returns.
Of those surveyed, 78 percent are set to increase or maintain their current allocations to property, ahead of bonds and equities, which saw 68 percent and 62 percent of respondents seeking to increase or maintain investment, respectively.
The office sector remains the primary target for private capital investors, with healthcare and hotels and leisure following closely in second and third, as the market is seeing investors looking to alternative property types in the hunt for yield, return and diversification. Structural change and uncertainty in other core sectors is prompting investors to reallocate funds.
William Mathews, head of capital markets research, Knight Frank, said: “In 2019, we saw an increase in the amount of private capital investing in global real estate... At a time of low and falling yields on competing assets, investors are turning to commercial real estate as a way to drive returns and enhance portfolio diversification.
“Investors from the Middle East, Europe and Latin America have the most appetite for investing overseas and the UK looks set to receive the lion’s share.
“Whilst offices remain a primary target for private capital, the once regarded ‘alternative’ sectors are coming to the fore, with hotels, healthcare, and retirement housing attracting $37 billion in the past year alone. This is a trend we expect to see continue as these sectors mature.”