David Forbes, chairman of Savills Private Office, says the appetite for real estate from family offices is hard to satisfy. “We receive a very wide spectrum of enquiries from family offices, from people looking for a flat for their children while they study to those looking to invest programmatically in commercial real estate.”

There is a definite preference for gateway cities: London, New York, Tokyo and the West Coast of the US, he says. Hotels, which are always popular with private buyers, are in particular demand at the moment.

“Real estate lends itself to compounding wealth, which is why it performs well over the very long term,” says Forbes, and some of the world’s wealthiest families have been investing for generations.

Christian Lyk is chief executive of Kendris, which advises 800 families around the world. He says wealthy families look at real estate in three different ways. “For some families there are heritage assets, which might be homes or estates, which they want to keep together and hold in perpetuity.

“Others are trophy hunters, looking for prestigious assets. Hotels are the favourite for this type of investor. Finally, family offices will buy real estate purely as an investment. Like all investors they seek diversification and a decent yield.”

For Asian family offices, especially those making their first investment overseas, a real estate asset in a developed market is often their first choice. “Real estate is material and reliable, something they can trust and it helps them test the waters,” says Lyk.

For Chinese families, a London home is often the first investment overseas, says Forbes, with a budget which could be in the £30-50m range.

For family offices investing in real estate, the ‘how’ is as important as the ‘what’, says Daniel Jacoel, managing director of Sino International Capital Group, a specialist advisory and investment firm.

“It is crucial that investment planning and structuring delivers investments which are tax-efficient and compliant,” he says. “For many new Asian family offices, the transfer of wealth between generations is yet to happen and the governance around this process will be as important as the investments themselves.”

The largest family offices have the investing capabilities of an institution, easily capable of investing $100m or more. For example the Kwok family of Hong Kong, which controls Sun Hung Kai Properties, took a 50% stake in Goodluck Hope (pictured above) a £500m London residential development by Irish group Ballymore.

However they behave differently, says Jacoel. The primary difference is that family offices are long-term, patient capital with a multi-generational outlook – quarterly valuations are not so important. They are also concerned with maintaining their reputation; investments need to befit the family name.

However, despite the long-term view, family offices tend to be more nimble than institutions, says Jacoel. “They are not restricted by investment committees, so have the ability to move quickly and to be flexible.”

What can the more modest family investor learn from those who have preserved wealth over generations? Jacoel says structuring and governance are crucial. In many jurisdictions inheritance tax needs to be dealt with and good estate planning can save both headaches and heartache. “Good tax planning can save families from having to sell assets,” he says.

Further reading:
Savills Private Office