It is important to recognize that high-net-worth individuals account for 25 percent of all global commercial property transactions. In 2015, Knight Frank found that the UHNW population invested $178 billion in commercial properties, with a total of $902 billion since 2009.
When considering a property, the wealthy are not “hunting [solely] for trophy assets,” but are looking for commercial property that is tangible, controllable and not subjected to daily pricing. Likewise, the ideal property must present real performance in relation to other asset classes. Much of these property investments are rooted in hospitality, with hotel openings in the Middle Eastern and Asian markets being the most popular sector for investment.
Knight Frank suggests that UHNW individuals choose to invest into the hotels asset class through long-term association as operators, investors or both, due to experience, familiarity and confidence cues.
The North American market saw the highest concentration of private investment throughout 2015, with 32.3 percent of commercial real estate investments coming from private investors. Most noticeable has been the increase of inbound capital from Chinese and Middle Eastern UHNWs.
“Private investors are now well-established as a bedrock of the commercial real estate market. Since 2009 they have represented $1 of every $4 invested in the commercial market.” Lee Elliott, Head of Commercial Research at Knight Frank