The New Real Estate Investors | Article | FTI Consulting

The New Real Estate Investors

Corporate Finance | Real Estate & Infrastructure | Real Estate Forum (Reprint)

June 1, 2017

money

When it comes to investment in real estate assets, America is the land of opportunity, for both domestic family offices and overseas investors. With a view toward more long-term investment goals that reflect prevailing market conditions, both of these groups have shown a growth trend in real estate investing in recent years.

High Net-Worth Families

Family offices have always included real estate in their portfolios but today, they are becoming a more prominent investor pool. Although we can name many famous families who historically generated wealth through real estate (with names on iconic buildings), many others have made their money elsewhere and are now increasing their investment allocations into real estate for several reasons. For one, they are generational investors. Family offices are not necessarily looking at an asset’s ROI today; rather, they are looking for long-term asset appreciation and wealth preservation. They’re also attracted to the liquidity US real estate offers as well as the inflation protection and stability, as they hold on to the assets for long periods of time. Further, more wealthy families are looking to develop institutionalized portfolios, diversifying them to include class A office space or upscale multi-family projects. Many US markets offer ample opportunities to expand investment portfolios to include these assets and enjoy long-term gains for generations to come.

Foreign Investors

These investors typically come from countries with much smaller economies (China being an exception) who are seeking to fulfill their government and institutional real estate investment mandates. However, their financial resources far outweigh their domestic investment opportunities, as they may lack the same ground-up or repositioning projects we have in the States, for a variety of reasons. These include the resurgence of the suburban office market and suburban downtowns; the development of transit hub villages; neighborhood gentrification; the repositioning of assets from office (or other, such as schools) to residential; and the redevelopment of mall properties.

Posted with permission from Real Estate Forum, An ALM Publication. Copyright ©2017. All rights reserved.

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