There’s an exclusive club based out of the US through which multi-millionaires trade in advice, experiences and opportunities. It’s called Tiger 21 and to join you must be able to report assets valued at well over USD 10 million. But that’s no guarantee: the average net worth of its members comes in at around USD 75 million — collectively the group has the purchasing power of a small country.
The members of Tiger 21 have configured their portfolios around real estate, at 27 percent, followed by private equity at 26 percent and public equity at 22 percent. But after the outbreak of the COVID-19 pandemic, members reduced their real estate exposure to 26 percent — so they didn’t flee, they pruned. And Knight Frank’s latest Attitudes Survey tells us there is still quite the appetite for property among younger ultra-high-net-worth individuals (UHNWIs), particularly the growing base of young Asian UHNWIs.
It’s good practice to keep an eye on where the ‘one percent’ parks their money: it affords a clearer reading of economic trends. And the recent behaviour of the ultra-wealthy tells us in spite of near-term uncertainty, real estate continues to hold long-term appeal.
‘RESILIENT BUT UNEVEN’
The pandemic battered economies and disrupted deals. In the first half of 2020 alone, global real estate investment fell 33 per cent. Asia-Pacific took the biggest hit with volumes down 45 percent from the year-earlier period, then the Americas with a 36 percent drop, and last Europe, the Middle East, and Africa with a 19 percent drop.
But multiplying inoculation rates continued government stimulus programmes and improving economies are ushering real estate into recovery, says the latest report from JLL. Global real estate transaction volumes for the first quarter of 2021 totalled USD 187 billion, representing a 13 percent year-on-year decline, which adds up to “a resilient but uneven stage within the broader investment recovery”.
So, an uneven recovery across sectors and geographies: mature markets such as the US, the UK, France and Japan recorded strong performances. The appetite for high-quality core and core-plus real estate investments persisted, and the demand for opportunistic investments increased. Logistics and multi-family investments represented 63 percent of all opportunistic transactions, up from 44 percent in the first quarter of 2020.
Incidentally, Europe posted the strongest first quarter on record for industrial and logistics investment with over USD 12.1 billion transacted — over 40 percent higher than the five-year average for the same period. And investment into its multi-family sector saw a 66 per cent increase, led by the UK, Germany and France. In Asia-Pacific, Japan was the most liquid market, in part owing to the persistent appetite for multi-family assets in Tokyo, Osaka and Nagoya.
LOGISTICS: MAJOR BENEFICIARY IN 2021
Markets historically concentrated with office and retail investments also experienced gains in investor confidence, particularly select markets in Asia, such as Singapore and Hong Kong, where cultural norms and the housing infrastructure limit widespread work-from-home (WFH) policies.
The expectation now is for a stronger second half of the year as pent-up demand starts to filter through the global economy. According to Savills, logistics is expected to be the major beneficiary throughout the year, but the challenge for investors will be finding high-quality stock. Office is forecast to remain the largest sector and the core investment of choice, while residential may attract a growing share of global investment, supported by strong underlying fundamentals and cross-border investors growing and consolidating portfolios.
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