The global UHNWI (Ultra-high net-worth individuals,those with $30m+ or more in net assets) population is expected to increase by 22 percent in the coming five years, in other words an extra 43,000 people will be added to the global UHNWI population by 2023, according to Knight Frank’s The Wealth Report.
Total UHNWI population rose by 4% in 2018, down from 10% growth in 2017 and despite a darkening economic outlook, wealth creation will remain stable in 2019.
Existing UHNWIs expect their wealth to increase over the next 12 months, with confidence most marked in the US where 80% expect to be better off.
Hard Brexit, no Brexit, Brexit-lite: whatever the outcome, London will remain the leading global wealth centre in 2019. With the world’s largest UHNWI population, the city sweeps the board in annual City Wealth Index, pushing its only serious rival, New York, into second place.
Asia’s strong economic performance (it hosts eight of the top ten countries with the fastest growing UHNWI populations) means 2019 will be the year the number of US$ millionaires globally exceeds 20 million for the first time. India will lead the annual growth with 39%, followed by the Philippines (38%) and China (35%).
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Commercial real estate will be attractive for the ultra-wealthy population
The Wealth Report also reveals that global commercial real estate investment will continue to be attractive for the wealthy population.
Investors in 2019 will increase their exposure to education facilities, student housing and “last mile” logistics property, as well as targeting office investment in key tech and innovation markets, according to the report.
According to Knight Frank these markets are worthy of consideration for the wealthy private investors targeting commercial real estate;
Australian offices: Among developed economies, Australia stands out for its remarkable track record of strong and sustained growth. Looking ahead, the outlook remains favourable, with strong population and employment growth continuing to create investment opportunities.
Co-working Hong Kong: Co-working has taken root in Hong Kong and has already had a noticeable impact on the territory’s office sector. In response, a number of property developers and office landlords have converted traditional offices and, in some cases, retail areas, into co-working and co-event spaces; This trend coincides with the findings in Knight Frank’s (Y)our Space report, which finds that even traditional firms are embracing co-working concepts in their real estate planning.
Long-leased assets in the UK: As investment horizons lengthen and investors seek ways to diversify their long-term income streams, some (both private and institutional) have taken defensive positions by investing in blue-chip tenanted long-leased real estate assets. As investment horizons lengthen and investors seek ways to diversify their long-term income streams, some (both private and institutional) have taken defensive positions by investing in blue-chip tenanted long-leased real estate assets. Accessing the market is not always straightforward, however. Nevertheless, opportunities do exist in non-core office and industrial markets, including those assets with lease covenants that are robust, albeit perhaps not quite strong enough for the stringent institutional investor.
German retail: The retail sector may not be the natural first choice, given the current challenges it faces in some countries however Germany’s population growth is running at above long-term average rates, and this, combined with improved economic momentum provides a good driver for growth in non-discretionary spending. The blanket anti-retail approach adopted by some could provide private investors with a good opportunity to acquire long-leased, defensive assets with strong covenants. Due to a combination of investment market momentum and strong underlying fundamentals, the European logistics market has gone from strength to strength since 2010.
Opportunities in The Netherlands: The Netherlands is a market currently in the crosshairs of many institutional investors due to its strong occupier market. Competition for core Amsterdam assets is increasing and investors have to price in strong future rental growth levels in order to secure assets. Opportunities do however lie in neighbouring Dutch cities such as The Hague and Rotterdam, which are also receiving the knock-on effects of strong economic conditions but which, as yet, have not seen pricing reach the levels of Amsterdam. This gives private investors an opportunity to secure higher yielding assets.
European logistics: Due to a combination of investment market momentum and strong underlying fundamentals, the European logistics market has gone from strength to strength since 2010. Given the high levels of institutional interest in the sector across mainland Europe, private investors have found it difficult to attain prime assets at prices that allow them to achieve the required rate of return. One alternative investment strategy for private investors is to target higher-yielding secondary assets in good locations (preferably urban edge) and with strong residual land values, with the long-term plan to convert them into prime ‘last-mile’ logistics facility.
US commercial real estate: Given the strength and depth of the US commercial real estate market, private investors need to be creative in order to avoid competition with the highly capitalised real estate investment trust market. One approach is to seek out investments in suburban or secondary office locations within gateway markets. These can provide alternative investment options for investors searching for higher yielding investments that still benefit from strong underlying economic fundamentals.