At a time when acquisitions by REITs have marginally retreated three per cent, it looks like private capital has taken the moment to account for a growing share of acquisitions.
In Australia, private capital rose to a new high at 26 per cent of total commercial property investment volumes, up from 25 per cent the year prior, according to Knight Frank.
Institutional investment dipped from 19 per cent in 2021 to 16 per cent to and listed capital fell from 17 per cent to 14 per cent.
Overall commercial volumes in Australia will be $52 billion in 2022, down 21 per cent from $65.5 billion in 2021, although private investors are more confident and active than others Knight Frank CEO James Patterson said.
“There was a lull in transactional activity last year as many buyers and sellers took a ‘wait and see’ approach following uncertainty that resulted when interest rate rises began in May last year,” he said.
“The share for institutional and listed capital dropped over 2022 as they were more cautious in reacting to adverse market conditions, while private capital is often more nimble and opportunistic, hence more likely to buy amidst market uncertainty.
“In the future Australian ultra-high-net-worth individuals plan on investing more in commercial property than their global average, demonstrating their confidence in the asset class.
“Residential is often the entry point into real estate for ultra-high-net-worth individuals, but a larger weight of private capital is targeting commercial property given attractive pricing and stable income from well-located assets with tenants on long-term leases.
“High inflation will be one of the biggest factors influencing investment decisions in 2023, but as we pass the peak we expect the level of concern to ease through the course of the year.”
According to Knight Frank’s The Wealth Report 2023, Australia is placed fourth internationally for plans to invest directly in commercial property, with 24 per cent declaring their intentions, significantly above the global average of 19 per cent.
Australia is also placed fourth for plans to invest in commercial property indirectly, although on par with the worldwide average.
According to the report, eight out of ten high-net-worth people intend to acquire their next commercial property in Australia.
Ben Burston, Chief Economist at Knight Frank said the commercial property sectors with the most current investment by Australian ultra-high-net-worth individuals include retail, offices, logistics, and industrial.
“This year the top targeted sectors are logistics and industrial, offices, healthcare and build-to-rent, which reflects a growing focus on alternatives, since these markets are perceived to offer resilient demand and income streams that will respond quickly to rising inflation,” he said.
“The Wealth Report 2023 Attitudes Survey also pointed to strong interest in data centres and agricultural land as investors seek to broaden their portfolios across a wider set of property types.
“In the logistics and industrial sector, a deal size of $5 to 20 million would buy a private investor a strata industrial investment or a multi-tenanted industrial unit in a regional centre.
“For the same price in the office market you could get a strata office investment in Sydney of 500 to 5000 square metres within an office tower or a small suburban office building.”