Millionaires See Real Estate as Top Investment for 2014
"The really good real estate deals are getting harder and harder to find," Ade said. "Once interest rates start to go up, whether it's farmland or single-family dwellings there's going to be huge downward pressure on real estate."
The Manhattan high-rise condominium buildings One57 and 432 Park Ave., where units have gone under contract for more than $90 million, are evidence of the faith that the very wealthy have in real estate, said Mitchell Roschelle, real estate advisory leader at PricewaterhouseCoopers. Such properties have also attracted international buyers.
Wealthy foreigners have bought high-end U.S. properties for their safety and because they're denominated in dollars, the world's reserve currency, he said. This helps domestic millionaires maintain the value of their property investments.
"It creates competition, which drives the price up for everybody," he said. "The sellers have multiple channels to sell into. That gives you more liquidity."
Self-storage properties are among commercial real estate investments wealthy individuals are buying, Kaminsky of Morgan Stanley said. Retail shopping centers are seen as less attractive as more consumers shop online through companies such as Amazon.com, he said.
Morgan Stanley Wealth Management surveyed 1,004 U.S. investors ages 25 to 75, with least $100,000 in assets, during the fourth quarter of last year. A third of them had more than $1 million.
BigSur Partners, a Miami-based wealth-management firm, has been helping some of its wealthy clients, who usually have at least $50 million, work with institutional investors such as a Chilean pension fund to invest in commercial real estate, chief executive officer Ignacio Pakciarz said. Deals include an office building in Princeton, N.J., he said.
"We don't feel there's a lot of value in emerging-market bonds, high-yield bonds and highly rated fixed income," Pakciarz said.
Owning the real estate is attractive because of the expected appreciation of property value and stream of rental income, as well as better control and supervision over the investments, he said. The firm has also bought office properties in Pittsburgh and Boston, multifamily residences in Texas and some industrial buildings for clients, and is looking for more opportunities this year in real estate purchases or lending, he said.