As per a recent report, affluent investors emerged as the most prolific buyers of commercial properties in 2022.
Last year, Amancio Ortega, the wealthiest person in Spain and the founder of Zara, increased his worldwide assortment of commercial real estate by purchasing a minimum of ten properties in North America and the UK for over $2 billion.
A recently released wealth report reveals that additional ultra-affluent individuals and their investment companies continued to concentrate on commercial real estate, despite the asset class being among the most severely impacted by the pandemic and the enduring impacts of remote work.
In contrast to institutional investors, who reduced their portion of the $1.1 trillion market for rental housing, offices, and logistics sites due to rising interest rates at the conclusion of the easy-money period, wealthy investors continued to maintain their position in the market. This was a notable contrast.
According to the report released on Wednesday by a prominent broker, affluent individuals, family offices, and closely held enterprises, taking advantage of their lower debt levels and more extended investment time frames, invested a total of $455 billion in commercial real estate last year. As a result, they became the most prolific purchasers in the industry annually, a first in the history of the sector.
According to the report, the amount invested on behalf of the affluent across the globe decreased by 8% from the previous year. However, this contrasted with the record-high property expenditures seen during the previous year, when pent-up demand resulted from Covid-19 lockdowns. In the same period, institutional firms’ volumes declined by 28%.
Buying Boom
In recent years, there has been an increase in private investors’ allocation to commercial property.
Today, private buyers are leveraging the ongoing repricing of assets and stronger currency positions. However, this trend is expected to persist as private investors actively search for options to preserve their liquid wealth.
The numbers highlight the world’s ultra wealthy’s long-term investment perspectives and the tendency to diversify their wealth through real estate. Commercial mortgage bond sales are currently decreasing due to increased interest rates cutting into lending volumes.
In September, at the age of 86, Ortega purchased five US logistics sites for over $700 million. Later, in December, he acquired a luxury residential skyscraper in Seattle for around $300 million, having previously purchased an Amazon.com Inc. office building in the same city.
A spokesperson for Pontegadea, Ortega’s family office, declined to provide any comment. Ortega’s net worth, which is primarily derived from his controlling interest in Inditex SA, the owner of Zara, is estimated to be $63.5 billion according to the Bloomberg Billionaires Index.
Last year, Joe Tsai, the co-founder of Alibaba Group Holding Ltd., obtained an indirect interest in over half a dozen five-star hotels throughout Spain via his family office, Blue Pool Capital.
The global research team at Investment.org, explained that there is frequently a “skin-in-the-game” factor when private investors buy commercial properties. The team noted that while institutional firms may primarily invest in office buildings in London as an investment play, wealthy individuals and family offices may also be motivated by the need for an office of their own.
Capital Allocation
During 2022, private investors primarily concentrated on rental housing in the commercial real estate sector.
The United States received the most significant capital allocation, with New York remaining a hub for residential real estate deals of $25 million or more, according to a research report. New York also topped the global list of cities for the amount spent on commercial property by local private investors in 2022, while London received the most substantial investment from foreign investors.
