Family offices prioritise residential real estate investment

Family offices continue to prioritise real estate, especially direct investments in residential properties, despite market volatility. 

Maximilian Radert

This was a key takeaway from a recent webinar hosted by Kingstone Real Estate. Taking part were Maximilian Radert, head of Product Development & Research at Kingstone Real Estate; Elena Reuter, head of Real Estate at Finvia Family Office; Marie Lindenstruth, managing director at Lindenstruth & Cie.; Alexander Lehnen, one of the partners of the law firm Heussen Rechtsanwälte; and Tim Schomberg, CEO & co-founder of Kingstone Real Estate.
A report by Kingstone Real Estate shows that roughly 80% of family office real estate investments are direct, bypassing intermediary funds. This indicates a desire for greater control and an entrepreneurial approach to real estate. Many family offices view real estate not just as an investment but as a core part of their business identity, valuing direct oversight of assets and management.
Residential real estate, particularly multi-family homes, remains the dominant asset class, accounting for 37.5% of allocations, followed by office space at 25%. While office investments are carefully screened, the residential sector is gaining even more focus, with some family offices planning to increase their residential holdings due to attractive entry opportunities. Real estate primarily serves as a stabilising force in portfolios, focusing on capital preservation and sustainable performance rather than aggressive opportunistic ventures.
Family offices are acutely aware of geopolitical and regulatory risks, integrating them into their strategies. However, these concerns haven't led to a fundamental shift in their long-term real estate investment approach. Structural factors like demographics, decarbonization, and evolving work models also play a significant role in their strategic considerations.
Tax planning and structuring are also crucial. With potential changes to inheritance tax in Germany, family offices are looking for current opportunities to transfer and structure real estate assets.
Looking ahead, family offices generally expect returns between four and six per cent, with a focus on either value retention or moderate growth, depending on their risk appetite. Most plan to modestly increase their real estate exposure in the next year, particularly in direct investments and within Germany, taking advantage of current market conditions for strategic acquisitions.