With the new year comes a new look at your portfolio allocation, perhaps with a more focused regard for real estate investment according to research from National Real Estate Investor (NREI).
According to NREI’s survey, high-net-worth individuals’ (HNWIs) demand for real estate remains healthy, and real estate investment allocations are expected to increase in 2018.
Highlights from the 2017 HNWI Research Report:
- As of November 8, 2017, the Dow Jones Industrial Average was up 21.5% over the previous 12 months. This has led to concern of overvaluation in the public markets and is causing many HNWIs to reevaluate their real estate allocations.
- As the HNWI market continues to grow (the U.S. HNWI population increased 7.6% in 2016), so will its allocation toward real estate. Estimates of HNWI allocation to real estate rest between 6% and 25%, with a mean of 20%.
- The goal of wealth preservation is motivating HNWIs’ shift toward real estate. Other goals — cited as income production, asset value growth, tax purposes, and estate planning — all come in close behind.
- Multifamily remains the preferred asset class for most investors, accounting for 46% of the investment sales in 2017.
- HNWIs will continue to reduce exposure to certain types of retail real estate in response to changes and uncertainty in the retail industry.
Interestingly, respondents in the survey held mixed views about whether investors are and will be focusing more on cash-flow generation vs. growth in asset valuation. Other sources believe that because appreciation is likely to be muted, investors should focus on cash flow and proactive asset management for at least the short-term.
Are you looking to increase your real estate allocation in 2018? If you are, it’s important to think through your strategy, align your real estate portfolio with your investment goals, and proactively manage your real estate assets. Contact us today to learn how we can help you optimize your real estate investments.
