As wealth levels rebound after the financial crisis the world’s mega-rich are turning their back on luxury mansions and investing in hotels and office blocks, new research claims.
The shift into commercial property — and investments that offer higher returns than gold or bonds — is being partly fuelled by the rocketing values of London city centre apartments and residences in locations such as of Monaco.
Research compiled by Real Capital Analytics and published by Reuters says that the collective fortunes of the super-rich topped $20 trillion in 2013 — one trillion US dollars is worth £597bn. And last year wealthy individuals spent $11.2bn [£6.7bn] on hotels, offices, warehouses and shops around the world, up from $7bn [£4.1bn] in 2012, and three times the amount spent in 2008 after the crash.
The majority of these investors come from Asia or the Middle East and made their fortunes in manufacturing and oil, explained Knight Frank’s chief of international investment Jeremy Waters. Most already own homes in cities such as London and Hong Kong.
Recent deals by so called “ultra-high net worth individuals” include the purchase of retail properties worth more than $350m [£209m] around London’s Queensway district by a club of investors that includes Brunei’s royal family, and the €44m [£36m] purchase of BMW’s logistics centre in Niederaichbach, near Munich, by Tilad, a company that invests on behalf of Arab families
Last year’s biggest deal was the $1.36bn [£813m] purchase of a stake in the General Motors’ tower in New York by the family trust of Zhang Xin, chief executive of office landlord Soho China and Brazil ‘s Safra family.
“Commercial property is not their primary source of income, but they seem to have an understanding of it because they will occupy buildings as part of their business,” added Waters. Office block deals are especially gaining popularity with the average price paid for an office property climbing to $162.7m [£97m] in 2013, up from the previous year’s $63.9m [£38m], and $78.5m [£47m] in 2007.
In a separate survey — Knight Frank’s annual Wealth Report — it’s claimed that New York will overtake London as the most popular city for the ultra-wealthy by 2023. “History, location and their long-established wealth mean that London and New York’s positions look unassailable, at least for now,” explained Liam Bailey. “It is further down our leader board that the real city wars are being waged. The main battleground is Asia, where a handful of locations are slugging it out in the hope of establishing a clear lead as the region’s alpha urban hub.”
The Knight Frank survey says that by 2023 the top five cities of choice for the world mega-rich, in order, will be: New York, London, Hong Kong, Singapore and Shanghai.
