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Family Offices: The New Players in Real Estate Investment

CEO Khai Intela
During times of economic uncertainty, family offices often have the advantage over institutional investors. They can make decisions more quickly, hold assets for longer periods, and do not face the same pressure to deliver short-term...

During times of economic uncertainty, family offices often have the advantage over institutional investors. They can make decisions more quickly, hold assets for longer periods, and do not face the same pressure to deliver short-term returns. As a result, many family offices are now looking to increase their investments in commercial real estate, taking advantage of the current market volatility.

A survey conducted by Ocorian, a global fiduciary services provider, found that 33% of family offices plan to increase their allocations to commercial real estate by 50% or more. Similarly, research by Goldman Sachs revealed that 27% of institutional family offices are planning to increase their investments in private real estate and infrastructure. These findings indicate a growing interest in real estate among family offices, surpassing any other asset class.

Not only are family offices looking to invest more in real estate, but they are also becoming more comfortable with taking on greater risks. Experts at RSM US LLP believe that family offices may become a major source of creative capital solutions in the commercial real estate space, offering rescue capital, mezzanine debt, and bridge loans. This shift in risk tolerance could make family offices attractive partners for real estate ventures.

However, family offices are becoming more selective about which firms they work with. They are seeking transparency in financial reporting and more flexible venture structures from their partners. The ability to build long-term, trusting relationships is important to family offices, as they value the expertise and knowledge that comes with these partnerships.

In terms of investment structures, family offices are considering co-GP arrangements that allow them to have a say in the operational aspect of the venture. This provides them with more control and potentially better economic results on a particular project. Additionally, family offices are interested in working with reputable firms and building generational relationships with third parties.

While family offices are sector-agnostic and invest in all sectors of real estate, the majority are currently focusing on multifamily properties, due to their strong performance and inflationary pressures. However, family offices do evaluate deals on a case-by-case basis and will operate in all sectors of real estate that present attractive opportunities.

In conclusion, family offices are ready to step up their real estate investments. They have the advantage of being agile decision-makers and are not beholden to short-term returns. This flexibility allows them to take on greater risks and explore creative capital solutions. Family offices are seeking transparency, flexibility, and long-term relationships in their partnerships. As they become more selective about their investment choices, they are poised to become significant players in the commercial real estate market.

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