Global super rich eye office blocks over mansions as wealth hits $20 trillion

LONDON, March 5 Tue Mar 4, 2014 7:01pm EST

LONDON, March 5 (Reuters) - The world's super rich are turning from luxury mansions to hotels and office blocks, as they hunt for bigger property deals to preserve their growing fortunes which hit a combined $20 trillion in 2013, data showed on Wednesday.

The move into commercial property comes as wealth levels rebound after the financial crisis and home values in London and Monaco soar, prompting the rich to look for riskier investments that offer higher returns than gold or bonds.

Wealthy individuals spent $11.2 billion on hotels, offices, warehouses and shops globally in 2013, up from $7 billion in 2012 and three times the amount spent in 2008 after the crash, data compiled for Reuters by research group Real Capital Analytics (RCA) showed.

Such high net worth investors, most of whom come from Asia or the Middle East and made their fortunes in manufacturing among other sectors, often already own homes in cities such as London and Hong Kong, said Jeremy Waters, head of international investment at UK-based property consultants Knight Frank.

"They may be moving money because of repercussions from the Arab Spring, or internally the families are looking to diversify across the globe," he said, adding that France, Germany and Spain were popular alongside Britain in Europe for property investment.

In its annual wealth report, released on Wednesday, Knight Frank said the combined wealth of the world's 167,669 ultra-high net worth individuals (UNHWI) had risen to $20.1 trillion last year, from $19.5 trillion in 2012. It defines an UHNWI person as someone who has $30 million or more in net assets excluding their principal residence.

Recent deals by UHNWI include the purchase of retail properties worth more than $350 million in total around London's Queensway district by a club of investors that included Brunei's royal family, and the 44 million euro ($60.60 million) purchase of BMW's logistics centre in Niederaichbach, near Munich, by Tilad, a company that invests on behalf of Arab families.

The biggest UHNWI deal last year was the $1.36 billion purchase of a stake in the General Motors' tower in New York by the family trust of Zhang Xin, chief executive of office landlord Soho China and Brazil's Safra family, RCA said.

"Commercial property is not their primary source of income, but they seem to have an understanding of it because they will occupy buildings as part of their business," Waters said, adding they were hunting for deals as large as 100 million pounds ($167.17 million) which offered yields of 3.5-6.5 percent.

Knight Frank said 40 percent of respondents to its annual wealth survey of 600 private bankers, who represent 23,000 UHNWIs on average worth $68 million each, said their clients had increased their exposure to commercial property in 2013 while 47 percent said it was set to rise further this year.

Office block deals were especially gaining popularity, the RCA data showed. The average price paid for an office property rose to $162.7 million in 2013, from $63.9 in 2012 and $78.5 million in 2007, the year before the crash.

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