What are family offices investing in?

Welcome to this week’s installment on commercial real estate trends! Head over to our Youtube channel and take a look at this article from WealthManagement.com learn more.

WealthManagement.com puts out articles with great research, the one we just shared above is no exception. It’s on a study done by Citi Private Bank of family offices and talks about what they’re allocating their investment funds to in 2021. The survey indicated a lot of movement and that real estate, for the family offices that were surveyed, has moved up to the number three asset category. Here’s a sort of rundown.

Suburban/multi-family, so suburban apartment buildings. They’re very bullish on that. There’s no surprise there. Multifamily’s been doing well for some years now, and the outlook continues to look very strong, so a lot of family offices are directing their attention here.

This one we find fascinating: single family rentals. We’ve been in the real estate industry for a while and frankly never had a lot of luck with these. But that all changed back in 2010-2011, when there were some pretty big portfolios of single family rentals coming on the market, and some bigger players have done well. Single family rentals have now caught the attention of family offices. There are some operators out there claiming 97 percent occupancy from their operations, and what’s really interesting is that some of the bigger players, such as D.R. Horton, Meritage Homes, Taylor Morrison and Toll Brothers, have all started programs of build-to-rent home communities. You’re going to have whole neighborhoods of rentals, so just think of it as a spread out apartment complex, where everything is a stand-alone building.

Manufactured home communities are similar to the single-family home, but in a different class. Frankly this is a class that has been performing well for many years, but it’s usually been done by local individuals. We’ve talked before about how the industrial class is under demand with all the e-commerce business. There’s real demand for warehouse space. And the last class is an acquired taste: distressed properties. You’ve got to be a little bit patient, but there are some family offices that are pursuing this as well. Distressed properties are exactly what they sound like: properties that aren’t cash flowing. Perhaps it’s just a debt situation, regardless of cash flow, and might be a good core business. Maybe it needs to be fixed up and repositioned, and then you wait to rent it up again.

So those are the categories that family offices are moving their increased allocations of commercial real estate to. As always, if there’s any way we help you, let us know!

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