Private capital has increasingly supported investment in office buildings in recent years. Now, with the COVID-19 pandemic, family offices are reshuffling the cards and refocusing on specific assets.
A new report published by Highworth Research on Single Family Offices states that over 50% of family offices in Europe allocate capital to residential real estate.
Private families have increasingly supported investment in office buildings in recent years. Today with the crisis, family offices are concerned about whether growing unemployment, conversion to home-working and the use of videoconferencing such as Zoom, will reduce the demand.
Family offices, invested in retail real estate or hospitality, are anxious about whether tenants will pay rent or whether they will be able tp meet their debt covenants on a building.
Savills forecast in April 2020 that housing transactions in the UK this year could fall by 20-40% from the past 5 years’ average. Similarly in Spain the Don Piso network of estate agents forecasted that the Spanish housing market could contract by 20-25% this year compared to 2019.
Sensitivity & infighting
A family office suing another billionaire family office is a rare event, underlining the complexity of the situation in the retail business. The coronavirus has introduced a new set of challenges for asset allocation.
In June 2020 Pontegadea, the family office of Amancio Ortega, Chairman of fast-fashion multinational Inditex, took legal action against H&M, owned by the family of Stefan Persson, for non-payment of rent on H&M’s 4,000 sqm store in San Francisco.
Luxury, logistics & farming
Family offices invested in luxury residential, logistics, warehouses, farms, agricultural land, and certain niche markets such as data centres are the clear winners. Malls and hospitality will have to wait for better testing & control over present & future pandemics.
Highworth Research finds that 26% of family offices in the EMEA region have investments in industrial real estate, or warehousing and logistics buildings.
Meanwhile, luxury real estate has seen a remarkable “instant” recovery in Paris, London and across Europe, with a strong demand for larger assets offering gardens and extra rooms. The experience of working from home has made people aware of the limitations of their existing residences, and increased inside and outside space has become the crucial driver of demand.