Real estate, alternative real assets and other diversions

Family offices: focus shifting to higher-risk sectors

The Analyst

German family offices are looking to increase the proportion of their investments held in residential property to around 40% by 2025, says a new report by Catella Research. Investor focus is steadily shifting from offices to higher-risk sectors such as hotels and social properties, micro apartments and student housing.

Global investment activity by family offices has increased significantly over the last 10 years, says Catella. The proportion of their total investments currently held in real estate assets is around 34% but they wish to bring that up to 42% by 2025. The survey examined 81 family offices via conversations and data bases and gathered detailed information from 16%. 46 of the investors in the survey are focussing on properties in the Core plus segment. 23% are looking to invest in Value-add properties. None of the respondents said that they would be increasing their Core holdings in the period up to 2021. This indicates a tendency towards a higher risk profile going forward.

“It is clear that family offices have not been an entirely risk-averse investor group over the recent past”, says Catella’s head analyst Thomas Beyerle. He says that although family offices have primarily invested in office properties and will continue to do so, the next five years will see increasing focus on hotels and social properties, residential properties, micro apartments and student housing. There is expected to be less interest in the retail sector in the future.

The market for family offices is still opaque, according to Catella. Wealthy private individuals and family offices are the world’s second largest real estate investor group after the institutional funds, but they are still seen as an obscure, albeit increasingly active, purchaser group.

The majority of family offices tend to invest in local submarkets: 60% of respondents are active in specific regions across Germany. It is expected that the geographical focus of both private investors and family offices will become more international. Beyerle says that the cut in US interest rates in 2019 has attracted multi-family offices to increase their activity in the direction of North America.

“Since 2015, the falling interest rates and the increasing liquidity of family offices have resulted in a shift of focus to alternative investment opportunities in order to build up long-term investment portfolios and to achieve diversification, and Catella expects increased investment activity from this group going forward”, concludes Beyerle.






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About Charles Kingston

Charles Kingston is the Publisher and Editor-in-Chief of REFIRE, a specialist newsletter and website focused on German real estate for institutional investors. Based in Berlin, he has lived in Germany for 30 years, and can look back on a varied career including stints working for the Financial Times, the DeAgostini Group, the Toronto Globe and Mail, and as a proprietary derivatives trader. A native Dubliner, he graduated with a degree in Business from University College Dublin, and subsequently pursued post-graduate studies in real estate finance at the University of Middlesex.

Articles by Charles Kingston

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