A recent report has highlighted the important place of real estate investment for family offices. The Global Family Office Report 2015, issued by Campden Wealth Research, in conjunction with UBS, surveyed over 224 family offices in 37 different countries in Europe, North America, Asia-Pacific, the Middle East, Latin America and Africa. Principals and senior executives of family offices with an average of USD 806m of assets under management were questioned.
The survey found that in 2014 the average family office invested around USD 105m in real estate, both residential and commercial. Of this, it is significant that 42% of investment was in residential property.
This shows that while High Net Worth Individuals (HNWIs) are choosy about their working environment, they also care deeply about where they live. Indeed, whichever wealth bracket an individual falls into, the family home remains a prime concern. The message is that if you get your home life in order, you have a much better chance that the other parts of your life will follow.
What the survey also revealed was that when it comes to real estate, family offices prefer to operate within their own area, be it locally or nationally. This is because these offices tend to rely on their in-house expertise, and so staff are likely to know their own patch better than a more distant territory.
However, as any experienced family office knows, it is the client’s wishes which are paramount, and so the family office must be prepared to be flexible; and if the client wants them to find real estate outside the office’s region they must be prepared for this. Most family offices, it seems, will do this, but will charge more for the service.
Stuart Rutherford, the Director of Research at Campden Wealth, says that this is understandable. As he explains it, “The higher investment returns expected for more far-flung property is attributable to the higher costs and outsourcing requirements for investing in an unfamiliar environment.”
Mr Rutherford went on to underline the importance of real estate to the business of the family office, when he said, “Not only does real estate provide a consistent return for family offices, it was a major contributor to the 6.1% return that the average family office made in 2014. Typically seen as more of a conservative asset holding, the muted performance of equities and other asset classes made real estate investment stand out.”
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