The Role of Family Offices in Real Estate Investments

For wealthy families, real estate often represents more than just an asset; it’s a cornerstone of their long-term wealth strategy. Its tangible nature, potential for steady income, and unique control features make it a compelling choice for multi-generational portfolios.

Family offices, tasked with preserving and growing this wealth, have developed distinct approaches to real estate, balancing tradition with innovation, and legacy with opportunity. Their strategies often reflect a careful alignment between financial goals and family values, whether through focusing on income-generation, long-term appreciation, or impact-driven developments.

Understanding these approaches offers valuable insight into how real estate supports both stability and growth across generations.

Why Real Estate is a Core Asset for Family Offices

Real estate is a core asset for family offices because it offers stable income, long-term capital growth, inflation protection and legacy value. Its tangible nature, flexible ownership structures, and ease of management make it well-suited for multi-generational wealth preservation.

• Tangible and Stable: Real estate is a physical asset, offering a sense of permanence and stability. This “bricks and mortar” nature aligns well with the long-term horizons and multi-generational goals of family wealth.
• Attractive Returns: It typically provides consistent income streams and offers the potential for significant long-term capital appreciation. Real estate can also serve as a hedge against inflation and market volatility, contributing to portfolio resilience.
• Flexible Ownership: Family offices often hold real estate under various structures, not just direct personal ownership. It can be held through different entities and even leveraged for credit. This flexibility allows for strategic structuring that aligns with specific family needs and broader financial plans.
• Simpler Management: Compared to complex operational businesses or cash management, real estate is generally easier to oversee. Its management isn’t always highly sophisticated, making it a more straightforward asset to integrate into family portfolios.
• Long-Term Legacy Protection: Families often view real estate as a safer asset to pass down through generations. A well-chosen real estate portfolio typically retains its value and can even generate ongoing income. This long-term hold potential is vital for families focusing on estate planning. As Maximilian Kunkel, CIO at UBS Global Wealth Management, notes, “Family offices bring patient capital and entrepreneurial spirit to real estate investments, making it a natural fit.“

How Family Offices Approach Real Estate

Family offices approach real estate with a sophisticated and strategic intent; balancing cash flow, wealth preservation and legacy planning. They diversify across geographies and categories, combining direct ownership with fund investments to optimise control, tax efficiency, and portfolio resilience.

Family offices align real estate decisions closely with personal values and generational goals. This results in tailored strategies, from acquiring income-generating properties to preserving legacy estates, that extend beyond pure financial returns.

Allocations and Portfolio Trends

Real estate allocations within family office portfolios are driven by a blend of factors, aligning with their specific strategic goals. While historically family offices allocated up to 14% of portfolios to real estate (2019 data), this saw a temporary dip to 10% by 2023 due to rising interest rates, as reported by a UBS study. Despite this, real estate’s foundational role remains. 77% of JP Morgan’s family office clients maintain allocations averaging 14%, indicating its sustained importance.

Strategies often vary based on core expectations:

• Cash Flow Generation: Some families prioritise stable, recurring income from commercial or residential properties.
• Wealth Preservation & Hedge: Real estate acts as a tangible asset for wealth preservation, often serving as a hedge against inflation and market volatility across diverse geographies.
• Geographical Diversification: Investments span global markets, including key cities for prime residential or commercial properties, to spread risk and access new growth opportunities.
• Family Use & Lifestyle: A portion of the portfolio may include properties specifically acquired for family use, such as residences in key global hubs, providing both an asset and a lifestyle benefit.

Families may focus on various sub-sectors like commercial real estate (offices, retail, industrial), residential properties (single-family, multi-family), or even undeveloped land, depending on their strategic intent and market outlook.

Direct Ownership vs. Funds: Structural Considerations

The choice between direct ownership and funds in real estate is a strategic one, heavily influenced by control, liquidity, and tax efficiency. Holding assets personally versus under a legal structure significantly impacts inheritance and property taxes, which vary widely by country.

For instance, holding prime UK real estate personally versus through an offshore entity can have vastly different inheritance tax implications. Similarly, property taxes and transfer duties differ dramatically across jurisdictions, making the legal structure a critical consideration.

Increasingly, family offices also invest in geographically diversified funds and REITs (Real Estate Investment Trusts). These provide exposure to markets they may not fully understand or have direct access to, such as emerging market real estate or specialised sectors like logistics and data centres.

This approach allows for spreading risk and enhancing liquidity compared to direct holdings. Investment in global real estate funds reached approximately $1.1 trillion in assets under management by 2023 (Preqin data), highlighting the significant role funds play for institutional investors, including family offices, seeking broad market exposure and professional management.

Legacy Assets

Beyond purely financial metrics, certain assets hold profound legacy value for families. These properties are often acquired not just for their returns, but for their significance as enduring family assets that can be passed down through generations. This includes family estates, historical properties, or even commercial properties tied to the family business.

These assets provide continuity and a sense of shared heritage. They can serve as a source of ongoing income for all family members, be designated for the use of current or future generations, or even be integrated into a family foundation’s mission.

Shifting Trends in Real Estate Investments

The real estate market is dynamic, and family offices are actively adjusting their strategies to capitalise on emerging opportunities and adapt to new realities.

The Impact of Rising Interest Rates

The interest rate hikes between 2022 and 2023 significantly impacted real estate markets. They reduced leverage and slowed investment activity. During this period, many family offices temporarily shifted allocations towards liquid alternatives.

As interest rates stabilise, a renewed increase in real estate allocations is anticipated for 2024, reflecting cautious optimism as patient capital seeks long-term value.

Changing Focus Areas

As family offices respond to these shifting trends, they are refining their focus toward sectors and strategies that promise growth, diversification, and alignment with emerging economic and social dynamics.

From reimagining office spaces to capitalising on digital infrastructure, these evolving priorities highlight how real estate investment is being reshaped for the next generation.

• Office Space Transformation: Post-COVID hybrid work models have reshaped office demand where secondary office markets face persistent challenges. Simultaneously, in areas with severe housing shortages, like New York City, local governments are providing incentives and regulatory easements for converting vacant office buildings into residential units. While specific global conversion project data is still evolving, the increasing legislative support points to a growing pipeline of such adaptive reuse projects.
• Growth in Travel & Leisure Investments: Beyond traditional commercial spaces, family offices are increasingly exploring the tourism and leisure sector. Driven by rising travel and experience-based spending, investors are venturing into new geographies and different types of properties. This includes boutique hotels, luxury resorts, and unique hospitality ventures.
• Industrial, Logistics, and Data Centre Resilience: E-commerce continues to fuel strong and steady demand for industrial and logistics properties, making warehouses and distribution centres vital components of global supply chains. Additionally, data centres have become increasingly attractive assets, driven by the exponential growth of AI and digital infrastructure. Some specialised funds now allocate over 20% to data centres, recognising their critical role in the digital economy’s expanding needs. This combined sector highlights the evolving commercial landscape where digital and physical infrastructure converge.
• Residential Stability and Affordable Housing: Residential properties, particularly multi-family housing, maintain consistent interest. Demographic shifts and macroeconomic trends, such as immigration, continue to drive this demand. Rising housing costs are driving significant demand for affordable housing solutions. This growing need attracts large institutions and investors, including family offices, seeking stable returns from a sector with strong underlying social and demographic drivers.

The Value of Family Offices in Real Estate Investments

While real estate appears tangible and straightforward to acquire, family offices bring a sophisticated, institutional-level approach that adds value beyond what individual investors can typically achieve. They transform property investment into a strategic pillar of long-term wealth management.

Oversight and Long-Term Vision

A family office provides a unique advantage by applying patient capital and a long-term perspective to real estate. This allows them to:

• Proactive Opportunity Identification: Unlike individual investors reacting to public listings, family offices often access off-market deals and distressed assets during market downturns, capitalising on favourable valuations before wider competition.
• Complex Project Engagement: They can engage in large-scale, transformative projects, such as converting underutilised commercial buildings into high-demand residential units. These ventures require sustained capital, deep expertise in urban planning, and a long-term vision not typically easy to execute by individual investors.
• Capital Preservation in Prime Markets: For families looking to diversify globally, real estate is one of the preferred asset class. A family office simplifies navigating varied country regulations, local processes, and sourcing the right properties across borders.
• Integrated Management: Beyond acquisition, a family office brings professional management to real estate. This includes optimising property operations, tenant relations, and maintenance, ensuring sustained performance and value appreciation.

Advanced Structuring and Financing Access

A key value proposition of a family office lies in its ability to implement optimal legal and financial structures for real estate investments.

• Leveraging Tax Advantages: Real estate investments, by their nature, involve significant capital, making tax optimisation crucial. Particularly for investors in complex jurisdictions, a mismanaged tax approach can lead to undue burdens. Family offices strategically utilise available advantages—through depreciation, like-kind exchanges (e.g., 1031 exchanges in the US), or other sophisticated planning.
• Strategic Financing Options: Whether families acquire luxury residential properties for personal use or build a diversified portfolio across various real estate classes, financing options play a vital role. Family offices can access diverse financing solutions, negotiating favourable terms, managing debt strategically, and efficiently deploying capital.
• Ownership Structures: A family office focuses on the multi-generational preservation of wealth, which directly influences how real estate portfolios are structured. This could involve holding assets directly, through trusts, corporate entities, funds or other specialised vehicles. A family office ensures the proper legal and financial frameworks are in place, facilitating seamless cash flow distribution and income allocation.

Integrated Sustainability and Impact

For families seeking to align their wealth with values, integrating environmental and social goals into real estate investments has become a distinct layer of value. When a family prioritises impact, a family office can actively facilitate this approach within their strategies.

• Green Investment Focus: For families committed to environmental stewardship, a family office helps identify and invest in sustainable, net-zero carbon buildings. This aligns with growing regulatory pressures and corporate sustainability goals, allowing these families to capitalise on the “green premium”—attractive returns often seen from environmentally responsible properties.
• Wellness-Driven Development: For families focused on well-being, investments can shift towards properties that incorporate wellness features like health clubs, medical facilities, and green spaces. These developments reflect a broader societal trend towards holistic living, enhancing both asset value and the family’s desired impact.
• Addressing Supply-Demand Gaps: Family offices are well-positioned to address critical supply-demand imbalances in sustainable infrastructure. With only 1% of existing building stock refurbished annually and 40% of companies aiming for net-zero by 2030, significant investment opportunities exist in green retrofits and new sustainable developments. For families seeking both financial return and a positive environmental footprint, investing in the transformation needed to meet future market demands.