Family Office Real Estate

Multi-family residential apartments top real estate investment option for family offices

Multi-family residential apartments have extended their lead as the top real estate investment option for family offices,  according to Evergreen Property Partners’ annual survey. 

The poll underpins Evergreen’s 2021 Family Real Estate Report. As the pandemic waned, it found that 75.5% of family offices investing in multi-family in 2021, against 70.5% the previous year, as interest in offices and shops collapsed.

Senior apartments rose to 13.2% (8.4%) and workforce housing achieved 28.6% (21%). Mobile home parks returned to favour with 14.3% (3.2%) of respondents investing.  

Evergreen co-manager DJ Van Keuren says “Multi-family properties provide diversification and risk mitigation.  With 300 tenants, for example, you could have 30 rentals vacant and still see cash flow from 90% of your building.  

“In contrast, an office building may be reliant on one, or a few, tenants who would severely impact on its value, if they were to vacate.”

He says the current generation want to rent apartments, rather than own. “Many renters were moving to the outskirts of downtown due to out-of-office requirements and social distancing. Now they see they can get more room for their money.”

He concluded: “The bottom line is that the demand for apartments continues to increase and family offices want to stay the course.” 

The pandemic has also triggered a debate over the extent to which offices would fall out of failure as a result of staff working from home.

According to the Evergreen survey, buying interest in offices has halved to 26.5%, against 52.6% in 2020, when the sector came second to multi-family.

Investment in retail space has nearly halved to 22.5% against 41% in 2020 due to the pandemic and online competition. Hotels have suffered vacancies and their popularity has fallen to 28.6%, against 33.6%, although quality brands continue to attract buyers.

Single family rentals have dropped in popularity with a decline to 20.4% (24.2%) possibly due to reduced tolerance for single lets in a hot market. 

According to data provider DBRS Morningstar, vacant-to-occupied annualised residential rent growth rose by 7.5% in October 2020. This reading was the second-highest since tracking began, after hitting a record 7.8% in August.  

According the S&P Case Shiller index, house prices rose 13.2% in the year to March. But supply could be squeezed by a fall in housing starts in April as builders get hit by higher labour and materials costs.

According to Evergreen, industrial premises have taken advantage of the logistics boom.  The sector has become second to multifamily with 53.1% of the investment dollar, against 43% in 2020.  

The year before, industrials were backed by 31% of family offices. Self storage investing has also risen to 24.5% (19%) of respondents, against 9% in 2019.

Depressed animal spirits means the willingness of family offices to gamble on land fell to 14.3% of respondents, a third of the 45% achieved in 2020.  

Faith in real estate shares and mutual funds also fell away, confirming a marked decline in speculative fervour. Rising inflation could, however, reignite interest, as developers rebuild their land banks.

 The Fore 2021 Family Office Real Estate report is due out soon. Register your interest on  

https://zfrmz.com/mVrAl5h8s1H2PkmFrIwA

 

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