Economy Watch: Wealthy Individuals Playing Larger Role in CRE Investment Sales

Private investors accounted for nearly 30 percent of all transaction volumes in 2016, with particular interest in residential and commercial properties in some major U.S. cities, according to Knight Frank's latest wealth report.

moneyAs an investor class, private investors—including ultra-high and high-net-worth-individuals, as well as various kinds of family offices—are now major drivers of CRE transactions, both domestically and abroad, according to the 2017 Knight Frank Wealth Report, which was released this March.

The report noted that private investors have been key players in the global market for some time now, accounting for 20 to 25 percent of all transaction volumes over the last 10 years. The total rose to nearly 30 percent in 2016.

Four U.S. cities were favorites for investment in residential and commercial property among ultra-high-net-worth individuals in 2016. The cities are New York at No. 2, Los Angeles (No. 3), San Francisco (No. 6) and Chicago (No. 9). The ranking is by total dollar investment, and the report defines such individuals as those with assets valued at more than $30 million, not counting their primary residence.

Other cities in the top 10 for property investment among this rarefied group include (in order): London (despite Brexit), Sydney, Paris, Singapore, Hong Kong and Melbourne. Each of the cities on the list attracts private investor attention and investment dollars from domestic as well as international investors.

The report also detailed specific neighborhoods in various cities that are expected to attract increasing attention from private investors going forward. Examples in the United States include the Lower East Side of Manhattan, which is undergoing a transformation that includes more residential space and as a center for gastronomy and artisanal crafts; West Aspen in Colorado, as an alternative to that town’s hyper-expensive downtown; and Hancock Park in Los Angeles, which is attracting new interest among investors.