New Private Investors Emerge During COVID
These people are attracted to the lack of competition and record low-interest rates in the market today.
While many investors have halted their CRE acquisitions during the pandemic, one group has been particularly active throughout the year, according to a JLL Trends & Insights article.
Private investors, including those entering the market for the first time, have ramped up their acquisitions. These people are attracted to the lack of competition and record low-interest rates in the market today, according to Sean Coghlan, global director, Capital Markets Research & Strategy at JLL. He also says they are showing interest in “real estate assets of scale.”
Family offices have long been players in the CRE space. Their investments in the area have tripled since 2010, and they own assets totaling more than $5 trillion, according to JLL.
While the US’ political situation may appear to be tumultuous at times, it’s nothing compared to the volatile climates in the Middle East and Hong Kong. That geopolitical instability is forcing family offices to look for investments in safer markets, according to Fraser Bowen, head of Capital for EMEA at JLL. Despite the COVID-travel restriction, this capital is moving internationally.
“As institutional investors have taken a step back this year to assess risk, private capital—which was already expanding in its influence before COVID-19—has emerged as an increasingly important source of liquidity,” Bowen said. “COVID-19 has prompted these investors to look at assets that they may not have previously been able to secure due to the larger volumes and the competitiveness of capital.”
JLL cites several examples of this trend in London, including the sale of the iconic Ritz Hotel in London for several hundred million to private overseas capital and the acquisition of 79 Wardour Street and 118 New Bond Street by private Hong Kong investors.
Traditionally these investors look to Gateway cities. As they enter new markets, they’re often partnering with local asset managers for expertise. For instance, when Singapore-based family office Pacific Eagle bought the Ludwig office complex in Munich, it enlisted the help of German asset manager KanAm Grund, according to JLL.
“While historically it has been harder to know in which funds and how private capital was invested, as it becomes more of a standalone, dominant force, there’s a real chance of more joint ventures and clubs emerging,” says Alice Buckingham, director in JLL’s International Capital Coverage team. “That will require more strategic thinking.”