Ultra high net worth individuals* (UHNWIs) now account for 25 per cent of investment in global commercial property, according to Knight Franks’ newly published ‘Wealth Report 2016’.
In Birmingham, private property companies backed by high net worth individuals spent more than £108million on city centres offices last year, more than 16 per cent of the overall £660million spend.
Overseas investors and UK institutions accounted for 50 per cent (£335million) and 33 per cent (£218million) of total Birmingham office purchases respectively.
According to Ashley Hudson, investment partner and head of Knight Frank’s Birmingham office, private investors have become a permanent fixture in Birmingham’s commercial property investment market.
He said: “As an asset class, property has become increasingly attractive to individuals with deep pockets. It is a tangible asset, with an underlying value as well as providing income. It offers reduced volatility relative to assets subject to daily market pricing and protection from inflation.
“In Birmingham, office lots of sub £30million are the most attractive to private buyers. The bigger beasts – the likes of Brindleyplace and Colmore Plaza – tend to go to institutional buyers.”
Knight Frank’s ‘Wealth Report’ shows that private individuals continued to back property even during the downturn. The proportion of private wealth invested in commercial property remained consistent from 2009 – 2015 at 23.4 per cent – 26.6 per cent of total volumes.
Ashley said: “High nets stepped in to fill the gap vacated by debt finance following the global financial crisis. In the last decade they have emerged to become a major force and property is now viewed as a vital component in a diversified investment portfolio.”
But UHNWIs have many competing claims on their cash. According to the Knight Frank report, last year proved a record breaking one for auctioneers selling luxury goods including cars, timepieces and art to the ultra rich.
Marc Newson’s Lockheed Lounge Sofa fetched £2.4million at auction in April 2015, making its buyer the owner of the world’s most expensive design object. Instead, he could have bought Birmingham’s 36 Great Charles Street, which went to Circle Property Unit Trust for £2.5million.
Ashley said: “The owner of the world’s most expensive Jaguar, a 1953 C-Type which sold for £8.4million at auction in August last year, could have had change from the £7million acquisition of Louisa Ryland House on Newhall Street. Admittedly, the building has limited garaging.”
One Brindleyplace, home to Deutsche Bank, achieved £36.7million last year following its sale to GLL Real Estate Partners. “A veritable bargain,” according to Ashley, “compared to the £35million a Hong Kong buyer lavished on the Blue Moon diamond last November as a gift for his seven year old daughter.”
Picasso’s Women of Algiers became the world’s most expensive artwork following its £102.6million sale last May.
Ashley said: “The painting has divided art critics. I can’t say the same for VGV’s £131million purchase of 7, 8 and 10 Brindleyplace. And at least they have plenty of wall space to hang any pictures.”
* Ultra high net worth individuals = $30million or more in net assets, excluding their principal residence
