Commercial property has become a more attractive investment for ultra-high net worth individuals (UHNWIs) in the Middle East as volatility in residential markets affects demand, a new survey has revealed.
Findings from Knight Frank’s 2016 Attitudes Survey conducted in conjunction with Wealth-X, shows that commercial real estate is expected to become an established component of the investment portfolios of regional UHNWIs over the next decade.
The poll showed that while 82 percent of UHNWIs from the MENA region have invested in residential property over the past decade, only 53 percent are expected to allocate funds to the asset class over the next decade.
Responses from MENA reveal a growth in allocation to offices from 41 percent between 2005 and 2015 to 53 percent between 2015 and 2025.
The survey also revealed the emergence of warehousing and logistics as a key element in UHNWIs’ real estate portfolio over the next decade, with 32 percent saying they would invest in assets within the sector.
Retail investment over the next decade is forecast to rise from 15 percent to 21 percent while investment in hotels is set to slip from 47 percent to 38 percent.
“Despite the recent decline in oil prices and the slowdown in global trade and commercial volumes, UHNWI’s are committed to the growth of businesses and the industrial, logistics and transport sectors over the next decade,” said Dana Salbak, head of MENA Research at Knight Frank.
“While residential property was historically seen as a secure form of investment, the volatility of the asset class has made the commercial sector more appealing as its value extends beyond the ability to produce income,” added Salbak.
In terms of location, total cross-border investment from Middle Eastern capital into commercial properties focused on the major global gateway cities of London, Paris, New York and Sydney, the survey said.
“The availability of diverse investment products have made property more accessible to a wider range of investors, while the high level of market transparency and diverse expertise across these markets enables private investors to overcome their knowledge gaps,” said Salbak.
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