Family offices continue to seek opportunities in commercial real estate, especially the office sector, during market volatility and trade tensions. That’s despite the fact that the sector faces headwinds such as low occupancy rates and lower valuations due to rising interest rates.
Over the past 1½ years, 28% of family offices surveyed by Knight Frank said they have increased their investment in real estate — with office space the top category, followed by luxury residential, industrial properties and hotels. In addition, 44% of them said they plan to increase their investment in real estate in the near future — especially in the U.S., Canada and the UK.
Among them is Eti Lazarian, a principal at the Elle Family Office, a single-family office for the Atlanta-based family.
“We are opportunistic buyers who recognize the office market is undergoing a natural reset similar to the housing correction in 2008,” she said. “Real estate moves in cycles. While the office sector is currently in transition, it still has significant long-term potential.
“Our strategy focuses on acquiring office properties with substantial, foundational land value in high-density, prime areas, in addition to securing assets at highly strategic valuations. This affords … the flexibility to reposition and align these high-value assets with evolving market demand, whether that is through conversion to multi-family, hospitality or other to-be-determined uses.”
Also eyeing the sector is Lane MacDonald, CIO of Boston-based SCS Financial, a multi-family office with $33 billion in assets under management and a greater appetite for high-risk, high-reward investments.
“I think there are pockets of real estate where there is real value — certainly some distress on the commercial office side, where there could be some opportunities there,” he said.
Recently, the New York-based Kaufman Family Office ramped up its commercial real estate investments — committing over $250 million to acquisitions, with a focus on stable, long-term assets.
Real estate experts see a rebound in the sector as more companies reduce their tolerance for work-from-home arrangements. Though demand for office space fell by about 41% from 2019 to 2023 among companies that expected workers to be in the office only one day per week, it grew by 1% for those that expected employees to be on-site for four or five days a week, according to Preqin.
In the fourth quarter last year, private capital office deals globally surpassed $10 billion for the first time since 2022. And CBRE expects demand to lower prime office vacancy rates to prepandemic levels of 8.2% by 2027.
For family offices — which have long regarded real estate as a critical investment for maintaining generational wealth due to its tax benefits, cash flow and long-term appreciation — the disruption in commercial office presents an opportunity. They are investing in the sector through “private credit, preferred equity or historical limited-partner positions,” the consulting firm RSM US wrote in a report.
“Private capital is poised to play a critical role in the recovery,” Will Matthews, Knight Frank’s head of commercial real estate research, said in a statement, describing the role of family offices. “All of this points to 2025 as a turning point, with increased capital flows driving renewed momentum.”