About half of respondents said 14 percent or fewer of their clients are invested in commercial real estate. However, more than one-quarter of WealthManagement.com respondents said 40 percent or more of their clients are invested in commercial real estate.
Perceptions of what percent of HNWIs' portfolios is devoted to commercial real estate aligned between the NREI and WealthManagement.com audiences.
Just more than two-fifths of NREI’s respondents estimated HNWI commercial real estate allocations are increasing, which was in line with advisors’ views. However, another one-fifth of NREI readers in the 2018 study estimated HNWI interest is falling vs. just 6.6 percent of WealthManagement.com readers. On balance, a majority of advisors said client allocations are remaining flat (53.9 percent) vs. 36.3 percent of NREI readers who responded that way.
When it came to identifying investment vehicles, the most popular answer from the NREI audience for HNWIs was private real estate equity funds (53.6 percent). But only 26.1 percent of advisors pointed to those funds. Conversely, the WealthManagement.com audience pointed to publicly-traded REITs (46.2 percent), while only 24.9 percent of NREI readers picked that option. (Similarly, non-traded REITs had a higher response rate from the WealthManagement.com audience than the NREI audience.)
The two audiences aligned, however, in gauging HNWI’s preference for direct investing in multi-tenant assets and single tenant net lease assets.
Advisors pointed to diversification as the most popular reason why they recommend their clients invest in commercial real estate. (This was not an option in the NREI survey.) The NREI audience pointed to wealth preservation as the most important factor, while advisors ranked that below factors such as income, tax advantages and asset appreciation.
There was some divergence in assessing what property types HNWIs might prefer. While both audiences identified multifamily as a top choice, the perceived preference among HNWIs for industrial assets diverged between the two audiences.
WealthManagement.com readers identified some of the key ways that advising on commercial real estate investment had helped them in working with clients.