Family offices are eager to expand their real estate investments, viewing the sector as a strong opportunity for both growth and wealth preservation, finds Knight Frank's Wealth Report.
A survey of 150 family offices globally, conducted in November and December 2024, showed that 44% of respondents plan to increase their real estate exposure over the next 18 months, while only 10% intend to reduce it.
The survey included 121 single-family offices, 18 multi-family offices, and 11 heads of diverse structures, located across 29 cities in Asia, Europe, the Middle East, and the Americas, with significant representation from London, Singapore, New York, Geneva, Sydney, and Hong Kong SAR. The family offices surveyed manage an average of $560 million in assets, totaling over $84 billion.
Some 70% of real estate investment is domestic, with the most domestically minded family officess based in New Zealand (93%), Australia (90%) and the US (86%). The most geographically diverse portfolios are those of family offices based in Switzerland (31% domestically invested), Hong Kong SAR (33%) and Singapore (41%).
Currently, the top real estate sectors for these investors are offices (20%), luxury residential (17%), industrial (14%), and hotels (12%). Looking ahead, the sectors attracting the most interest for increased investment are living sectors (14%), industrial/logistics (13%), and luxury residential (12%).
Despite the enthusiasm for real estate, family offices face challenges, including difficulty in identifying reliable partners or operators (23%), challenging tax regimes (20%), high competition for assets, and the need for speed in transactions (19%). Regulatory and compliance barriers are also significant concerns (17%).
Real estate is viewed as a medium- to long-term strategy, with the largest share of investments made with an outlook of nine years or more (37%).
In addition, the survey confirms that millennials and Gen Z are being prepared for primary decision-making positions.
Almost one in ten respondents indicated that millennials are already the primary decision-makers, while 44% stated they hold secondary powers. A fifth of respondents reported that members of Gen Z hold secondary powers.
