Family offices are no strangers when it comes to bricks and mortar, and real estate is truly a staple asset class in many family office portfolios. What’s more is that this is even where many family offices originated, in the case of in-house real estate companies. But what is it about real estate and its enduring love affair with family offices?
At face value, the real estate and family office ecosystem can be roughly divided into two major camps. Those that are invested – often this is where a family office is linked to the property company – and those that are not. The second group may include tech entrepreneurs or simply other family offices that haven’t had the opportunity to get into the real estate space yet.
As with family offices themselves, there is no one-size-fits-all approach to property. And their level of interest and involvement may also vary depending on their familiarity with the asset class, as well as what their goals are (beyond just financial). There is 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 that. New wealth owners, such as tech entrepreneurs, who have never been exposed to this traditional asset class and may not be as familiar with the lexicon of real estate, are likely to approach it one way. While next-generation owners who want to make a difference through real estate on a social and environmental level will look at it from a completely different angle. Finally, anyone else with an interest in real estate who wants a more structured view from a strategic asset allocation perspective will bring multiple views to the table when exploring real estate.
The key trends in family office real estate, 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 increasingly attracting 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 a few of the six megatrends affecting the world and there is no need to ignore them – as desirable as that may be.
When considering real estate investments, it is essential to take a broad view of these social 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? Although real estate has historically been considered a safe bet, these megatrends suggest that this will not always be the case in the future.
The primary real estate strategies
The four primary ways family offices can gain exposure to real estate are direct investments, funds, co-investments and real estate investment trusts (REITs). Each investment vehicle has distinct advantages and disadvantages and it is interesting to see how family offices weigh these 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 commitment to creating lasting legacies and many do so via their real estate investments. Could real estate be one of the clearest ways 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 clear, often highly locally rooted knowledge and despite many family offices keeping their real estate activities in-house, a large number choose to outsource these tasks. Here are a variety of companies that provide real estate products, solutions and services with the family office needs in mind.
Managing real estate investments can be time-consuming and staff-intensive. With the right kind of software, most of this process can be automated and improved.
Nines is a modern platform to streamline household management – making it easy to manage household employees, projects, suppliers 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 help value property, secure capital, manage assets and generate wealth.
Real Estate Investment Technology
When deciding whether or not to invest in real estate, 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 successfully navigate their investments.
Roofstock is an online marketplace for investing in rented single-family rental homes in a transparent and low-friction manner. The company provides its clients with research and analysis 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 capital raising to complex waterfall distributions.
CoStar’s suite of online services enables clients to analyze, interpret and gain unparalleled insight into commercial real estate values, market conditions and current availability.
Now Real Estate
This Fintech/SaaS company helps real estate firms raise and preserve more capital by automating their back office processes, increasing investor satisfaction and providing them with advanced tools to optimize 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 companies to digitally transform their business, address critical business operations and enable exceptional customer service.
In addition to an investor dashboard, the platform offers document management and sharing, CRM and waterfall distribution processing, while improving the efficiency of their services and investor relations.
Groundbreaker is an all-in-one package of tools intended for small to medium-sized commercial real estate investment firms raising 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.
Head of Asset Management
Principal Asset Management offers a wide range of solutions to help people and companies build, protect and promote 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 American real estate investment company, based in Silicon Valley.
Realtors can make or break the real estate process by streamlining the buying and selling activities.
Cushman and Wakefield
Offering real estate services at every stage of the real estate process, including buying, selling, financing, leasing, management, asset valuation, strategic planning and research, portfolio analysis, site selection, space location and advisory services, Cushman & Wakefield aims to deliver value for property owners.
In addition to providing franchise, title, settlement, brokerage and relocation services, Anywhere focuses on digitizing and integrating real estate transactions for consumers during the home buying and selling process.
Colliers maximizes the potential of real estate assets by offering services in occupier, capital market and investment, valuation and advisory, project management, design, logistics and property management.
Sotheby’s specializes in the sale and purchase of homes and properties, and sophisticated marketing.
As an independent, global property consultancy offering an integrated premium commercial and residential offering, Knight Frank advises clients ranging from individual private investors, clients and home owners to developers and investors.
Every day is a school day and no one knows this better than family office professionals, who are constantly refining their skills. While real estate does require a certain amount of expertise, there are many resources available for those who want to learn more.
The FORE Institute is a real estate executive education program created with family offices in mind, providing education, research and issues critical to family offices, taught by professors from leading universities.
Smartland is an investment platform and they also offer some learning resources and family office focused real estate insight
Family Office Real Estate Podcast
When in doubt, find a dedicated podcast. This one features industry experts tackling real estate topics specific to family offices.
Despite recent global turmoil, property doesn’t seem to be falling out of favor any time soon. At the end of the day, most property retains value in a way that differs from stocks and other less tangible assets. But like all investment decisions, property requires clear knowledge and expertise, of which there are many ways to follow.