Family offices are planning to broaden their exposure to real estate as they look for capital growth and wealth preservation, according to report from Knight Frank.

Its Wealth Report 2025 surveyed 150 family offices from around the world and found that 42 per cent were planning to increase their allocations to the real estate sector over the next 18 months.

By comparison, 10 per cent were planning to reduce their investment in real estate over the coming 18 months.

Direct real estate was the third most common asset allocation among the family offices questioned, behind equities and cash, with indirect real estate coming in seventh place.

Over the past 18 months, 28 per cent of family offices increased their allocations to real estate, while 17 per cent reduced their exposure.

The top real estate sectors for current allocations were offices (20 per cent), luxury residential (17 per cent), industrial (14 per cent), and hotels (12 per cent).

“Most respondents view real estate as one component within a broader investment strategy, balancing it alongside listed equities, venture capital or other private investments,” the report stated.

“Some continue to hold real estate for core commercial operations and see it as a strategic asset that underpins FO activities. For others, real estate is treated as a fixed income proxy, held long term to protect purchasing power and provide stable returns.”

When asked about the objectives that real estate fulfils within a portfolio, 42 per cent cited growth and capital appreciation, 23 per cent said it was for wealth preservation, and 19 per cent cited income generation.

Nearly a third (32 per cent) of family offices cited 'opportunistic' as their preferred real estate investment strategy, followed by 'value add' (30 per cent) and 'core' (16 per cent).

The most popular investment route was ‘solo’ direct investment (34 per cent), fund (19 per cent), and joint venture (13 per cent).

While Knight Frank’s findings highlighted that family offices saw opportunity in real estate, it also found a note of caution in the responses it received.

There was a desire from some to exit specific deals, where problematic loans or projects that no longer align with broader strategy need to be managed.

“Although most respondents see opportunity in a medium-term upturn in the real estate cycle, they remain cautious about the speed of interest rate cuts and high building costs,” the report stated.

“Despite concerns over the macro environment, 42 per cent of respondents expect to increase their exposure to real estate over the next 18 months, compared with only 10 per cent looking to reduce their investments.”

Family offices also highlighted the challenges involved in meeting their real estate investment objectives, with 23 per cent citing ‘difficultly in identifying reliable partners or operators’, followed by ‘challenging tax regimes’ (20 per cent), ‘the need for speed to access opportunities’ (19 per cent)’, and ‘regulatory and compliance barriers’ (17 per cent).

---