Commercial properties still popular among private buyers, says Knight Frank

PETALING JAYA (April 18): Commercial real estate remains an important asset class for private investors, with 27% of global transaction volumes attributed to them in 2016, according to global real estate consultancy Knight Frank citing Real Capital Analytics.

In its first Investment Trends Survey, Knight Frank found the majority of investments into commercial properties were primarily driven by diversification, with real estate being used to provide variation from both domestic economy and across asset classes.

The survey identified office property as the most popular sector in investors’ portfolios at 54%.

Despite an element of caution expressed, investors continue to have a healthy appetite for further commercial real estate investment in 2017.

Most survey respondents talked in terms of large double-digit percentage target increases in the level of assets under management, said Knight Frank.

Rise of logistics properties

The Investment Trends Survey also found that logistics real estate is becoming increasingly attractive with 15% already invested and 22% looking to invest.

The report stated that retail property is being affected by a huge shift in consumer behaviour; specifically, urban logistics, as part of the new e-commerce supply chain is seeing the biggest step-change in how property is used and where it is located.

It is in these urban, local facilities that are seeing the greatest potential for private investors seeking secure long-term returns, and looking to tap into the growth opportunities created by the rise of cities and increasing urbanisation, said the report.

“Commercial property market, mainly retail businesses are facing major challenges as more consumers today opt for online shopping with the convenience of mobile devices. This trend in consumer behaviour will impact the logistic operations, resulting in changes in property usage and location, said Knight Frank Malaysia executive director of Capital Markets Allan Sim.

“Urban logistics are expected to attract more private investors in the short and medium term. The revolution is being driven by the accelerating trend of online retailing and is now gaining traction elsewhere as the popularity of e-commerce continues to grow worldwide.

“As retailers and parcel delivery firms continue to improve their urban logistics services to meet consumers’ needs, we anticipate demand for more appropriate facilities will also grow accordingly,” said Sim.