HNWI real estate investment opportunities abound this year

HNWI real estate investment opportunities abound this year

The world’s wealthiest individuals will continue to look at real estate investment opportunities this year, with a particular focus on the commercial sector. In addition, most high-net-worth individuals (HNWIs) intend to increase their assets in 2023, according to the latest Knight Frank Wealth Report. As a result, nearly 70% should see growth in their wealth.

Real estate investment dominates portfolios

In terms of portfolio allocations, property continued to take the lion’s share in 2023. First and second homes accounted for 32% of HWNIs assets, while commercial real estate (direct or through funds) made up another 34%.

Furthermore, many HWNIs plan to increase real estate in their portfolios this year. For example, 32% intend to up their residential property holdings and 28% plan to add more commercial property. 

Private buyers rush to commercial property investment

Knight Frank reports that despite 2022’s economic and geopolitical challenges, “investment from private sources remained robust”. It was the most active in commercial real estate, with US$455 billion from private investors, 41% of the total. This percentage is the highest on record and significantly, higher than institutional investment (US$440 billion).

Private investors flocked to multi-family residential along with offices and industrial real estate investment opportunities. However, in terms of year-on-year increases, hotel investment saw the biggest uptick, with a 17% increase, the highest of all. Over the last decade, private hotel investment has risen by 35%.

Luxury residential property in 2022

All but 16 cities in Knight Frank’s prime residential index saw increases last year. Dubai real estate experienced the highest uptick, with a surge of 44.2%, followed by Aspen, where homes increased by 27.6%. Property in Florida also featured in the top five since the Miami market rose by 21.6%.

In terms of the type of luxury residential property, homes in “sun” locations saw the highest upticks, rising by an average of 8.4%. Again, Dubai and Miami stood at the top of the table. The Americas had the biggest continental rise, and property here rose by 7% last year.

Real estate investment opportunities this year

The Report finds that inflation will be a major factor in investment decisions this year among HWNIs. 80% claimed it would carry some weight, with 37% of them saying that its influence would be “significant”.

As a result, Knight Frank suggests that commercial real estate could receive more investment this year because of “its strong growth potential”. Assets with indexation could prove particularly attractive.

However, this prediction is subject to the downward shift in inflation rates expected in most major economies this year. Consequently, inflation’s “influence on investment choices could start to moderate”.

(Source: Knight Frank)