Family offices are no strangers when it comes to bricks and mortar, and real estate truly is a staple asset class in many family office portfolios. What’s more, is that it’s even where many family offices originated, in the case of in-house in real estate companies. What is it about real estate, though, and its enduring love story with family offices?
At face value, the ecosystem of real estate and family offices can be roughly divided into two major camps. Those invested – oftentimes this is where a family office is linked to the real estate company – and those who are not. The second group could include tech entrepreneurs or simply other family offices that haven’t yet had the opportunity to get into the real estate space.
As with family offices themselves, there is no one-size-fits-all approach to real estate. And their level of interest and involvement can also vary depending on their familiarity with the asset class, as well as what their goals are (beyond just financial). There’s an on-ramp to real estate for everyone, it’s just a case of finding the best one for you and the data strongly suggests this. New wealth owners, such as tech entrepreneurs, who have never been exposed to this traditional asset class and might not be as familiar with the lexicon of real estate will likely approach it in one way. Whereas, next-generation owners who want to make a difference through real estate on a social and environmental level, will view it from a completely different angle. Lastly, anyone else with an interest in property, who would like to have a more structured view from a strategic asset allocation perspective, will bring various views to the table when exploring real estate.
The key trends in real estate for family offices, according to data from the Simple Family Office Real Estate Review:
Traditional subclasses and the rise of non-traditional subclasses.
Real estate is typically divided into four traditional subclasses: residential, commercial, industrial, and undeveloped land. In addition to these traditional subclasses, student housing, medical facilities and assisted living communities are considered non-traditional classes and are gathering increasing attention from large investors, including family offices. Real estate investors and funds typically identify strategies within these categories, but these growing non-traditional subclasses call for a non-traditional approach.
Megatrends: Where is the world going and will real estate follow or lead the way?
Digital disruption, the climate crisis and demographic shifts are just some of the six megatrends influencing the world and there’s no ignoring these – as desirable as that might be.
When considering property investments, it’s vital to take a broad view of these societal megatrends. Where is the world economy going? What will society look like in ten, twenty-five, or fifty years? How and where will people choose to live and work? While real estate has historically been viewed as a safe bet, these megatrends suggest this might not always be the case going forward.
The primary real estate strategies
The four primary ways for family offices to gain exposure to real estate are direct investments, funds, co-investments, and real estate investment trusts (REITs). Each investment vehicle has distinct pros and cons and it’s interesting to see how family offices weigh these up in various ways in relation to their interest in real estate.
ESG and its role in real estate
As more wealth owners put their money to good use, family offices continue to increase their commitments to creating lasting legacies and many are doing so via their real estate investments. Could real estate be one of the clearest avenues for family offices to directly impact the environment and society through their investments?
Provider Landscape and what they can do for FOs
Like all investment decisions, real estate requires distinct, often extremely locally rooted knowledge and despite many family offices keeping their real estate activities in-house, a large number opt to outsource these tasks. Here are a selection of companies providing real estate-focussed products, solutions and services with the family office needs in mind.
Real estate technology
Managing real estate investments can be time-consuming, and staff-heavy. With the right kind of software, most of this process can be automated and improved.
Nines is a modern platform for streamlining household management – making it easy to manage household employees, projects, vendors, and more.
With a dedicated focus on real estate assets, Way2B1 aims to streamline the complex lives of HNWIs by providing a secure, private, and efficient operating environment that connects them with their ecosystem service providers and each other.
Through their mobile asset management solutions, EstateSpace helps family offices manage, communicate and share information.
ARGUS Enterprise is the global standard for property valuation and comprehensive asset and portfolio management solution. The platform can halp to value property, secure capital, manage assets, and generate wealth.
Real estate investment technology
When deciding whether or not to invest in property, these companies can help you pull the trigger….
Yieldstreet gives members access to an exclusive marketplace of investment opportunities and arms them with the knowledge to navigate their investments successfully.
Roofstock is an online marketplace for investing in leased single-family rental homes in a transparent and low-friction way. The company provides its clients with research and analytics to evaluate and purchase independently certified properties at set prices.
InvestNext’s technology creates one workspace to manage the entire lifecycle of real estate syndication, from raising capital to complex waterfall distributions.
CoStar’s suite of online services enables clients to analyse, interpret and gain unmatched insight into commercial property values, market conditions and current availabilities.
This Fintech/SaaS company helps real estate firms raise and preserve more capital by automating their back-office processes, increasing investors’ satisfaction, and providing them with advanced tools to optimise operational efficiency.
Update Capital is a web-based platform for commercial real estate firms to engage investors and manage assets. They offer investor dashboards, CRM, document sharing and investor statements.
Appfolio is an innovative cloud-based solution to enable property management businesses to digitally transform their business, address critical business operations and enable exceptional customer service.
In addition to an investor dashboard, the platform provides document management and sharing, CRM, and waterfall distribution processing while improving the efficiency of their services and investors’ relationships.
Groundbreaker is an all-in-one suite of tools intended for small to medium-sized commercial real estate investment firms that raise outside capital. They aim to help teams increase productivity and investor satisfaction by automating fundraising, reporting and investor relations workflows.
Real Estate Asset Managers
As with all asset classes, the deeper you want to dive, the more expert guidance you’re going to need.
Principal Asset Management offers a wide variety of solutions to help people and companies in building, protecting and advancing their financial well-being with discretionary mandates and asset management expertise.
Patrizia’s activities include the acquisition, management, repositioning and sale of residential and commercial real estate through its own licensed investment platforms.
Pioneer Investments is an innovative US real estate investment company, based in Silicon Valley.
Realtors can make or break the real estate process by streamlining the buying and selling activities.
Offering real estate services at every stage of the real estate process including buying, selling, financing, leasing, managing, valuing of assets, strategic planning and research, portfolio analysis, site selection, space location and advisory services, Cushman & Wakefield aims to deliver value for real estate owners.
In addition to providing franchising, title, settlement, brokerage, and relocation services, Anywhere focuses on digitising and integrating real estate transactions for consumers during the home buying and selling process.
Colliers maximises the potential of real estate assets by offering services in occupier, capital market and investment, valuation and advisory, project management, design, logistics and real estate management.
Sotheby’s specialises in selling and buying houses and estate properties, and sophisticated marketing.
As an independent, global real estate consultancy providing an integrated prime commercial and residential offering, Knight Frank advises clients ranging from individual private investors, clients, and homeowners to developers and investors.
Every day is a school day and no one knows this better than family office professionals, who are continuously fine-tuning their skills. While real estate does require a certain degree of know-how, there are many resources available to those wanting to learn more.
A real estate executive education program created with family offices in mind, the FORE Institute provides education, research, and issues critical to family offices, taught by professors from leading universities.
Smartland is an investment platform and they also provide some learning resources and family office-focused insight into real estate
When in doubt look for a dedicated podcast. This one features industry experts tackling real estate topics specific to family offices.
Despite recent global turbulence, it doesn’t look like real estate is falling out of favour anytime soon. At the end of the day, most property retains value in a way distinct from equities and other less-tangible assets. But like all investment decisions, real estate requires distinct knowledge and expertise, of which there are many avenues to go down.