The majority of private capital investment into UK real estate came from international investors in 2020, while residential properties outshone other sectors on the global stage.
Knight Frank’s latest wealth report found that although overall activity levels were down year-on-year during the pandemic, investment volumes from high-net-worth individuals totalled $232bn (£164.7bn) globally, which was 9% above a 10-year average.
The UK ranked third for private capital real estate investments in 2020, attracting $10.6bn from high-net-worth individuals. Of this, 53% came from overseas investors.
It was the only market among the top 10 not to rely on domestic investment over international activity.
Geographically, the US enjoyed the most private capital activity with $141.7bn in investments during the year. This was mostly driven by domestic investor activity (97%).
Germany was second by country, recording $11.1bn in 2020. Domestic activity accounted for two-thirds of this amount.
By sector, apartments were the biggest draw for private capital investment. Nearly $89bn (£63bn) was invested into the asset class, down by 28.5% on the previous year.
Offices netted $59.2bn of private capital, decreasing by just over a third from its equivalent in 2019, while $34bn was invested into industrial and logistics (down by 30%).
The amount invested in retail fell by 36% year-on-year to $27.7bn, while hotels dropped by almost 56% to $13bn.
A quarter of ultra-high-net-worth individuals plan to invest in commercial real estate this year, according to the agent’s latest Attitudes survey.
The residential private rented sector topped ultra-rich investors’ wishlists, with average asset allocation for those investments standing at 32% of their real estate portfolios.
This was followed by logistics (28%) and development land (24%). Offices accounted for 18%, while industrial and healthcare each stood at 17%.
At the bottom of the pile was education (6%) and student housing (9%).
Victoria Ormond, capital markets research partner at Knight Frank, said that “large, relatively liquid, transparent markets should continue to attract global investment” and that global travel disruptions are providing the opportunity for private investors to “leverage understanding and ties to more local markets”, where they might usually face more competition from institutional investors.
She added that the rise of data centres could offer “huge potential” for opportunities for private investors.
Alex James, partner and head of commercial private client advisory at Knight Frank, said: “Commercial real estate provides investors with a relatively high-yielding stable income return, the potential for capital value growth and diversification. These are all key drivers in preserving wealth for future generations and protecting against the impact of the global pandemic.
“While the pandemic has impacted the way we live, work and do business, there is renewed optimism in 2021 that as travel restrictions reduce and the rollout of the vaccination programmes reaches advanced stages, private capital will look to increase its exposure in familiar markets and focus on sectors with strong long-term fundamentals.”