What role does real estate play in family office and private wealth portfolios?

For families that have spent generations building wealth, finding ways to preserve and compound their capital while giving flexibility to future generations is a key challenge. Beyond its return potential, this helps explain why real estate occupies such an important position in many family office and private wealth portfolios, writes Saydam Salaheddin.

Properly selected and managed, real estate may offer a combination of income, capital preservation, diversification, inflation protection and control that is difficult to replicate. For families able to accept illiquidity and take a long-term view, those characteristics can make property a strategic holding. However, investors must also account for inherent risks such as the potential difficulty of exiting in stressed markets, sensitivity to interest rates and financing costs.

Knight Frank’s 2025 survey of 150 family offices found that direct real estate was the third most common allocation after equities and cash. Over the 18 months before the survey, 28 percent had increased their exposure, while 42 percent expected to increase it over the subsequent 18 months¹.

Wealth preservation and a multi-cycle view

The first generation often creates wealth through an operating business or profession. Later generations may face a different task: preserving and developing it without taking excessive risk. Well-selected real estate can support this transition.

Property may provide income without requiring family members to run an operating company. Unlike a traditional investment fund structure, direct ownership provides influence over financing, management and the timing of a sale or transfer.

That control can also bring significant capital requirements, management responsibilities and concentration risk, while illiquidity may limit when an asset can be sold. Families may nevertheless be able to shape development strategies and retain any resulting upside, as noted in Knight Frank’s 2026 Family Office Survey².

Although patient capital does not remove risk, family offices can take a multi‑cycle view, often using value-add strategies to preserve and develop assets over time.

The intergenerational advantage

Real estate’s compatibility with a multi-generational horizon can be a key advantage for private wealth. A family may hold an asset for decades and that patience creates optionality. A property’s uses can evolve in step with the family’s circumstances – it can be held for income, redeveloped, refinanced, partly sold or passed to the next generation.

As families increase their focus on preserving wealth, ownership structures and governance become more important as highlighted by JLL’s work on real estate legacy planning³. 

Real estate can therefore form part of the architecture of intergenerational wealth strategy. This may complicate decision-making, however, making clear planning essential to sustaining stewardship across generations.

The potential for resilience against inflation

Real estate may offer some resilience against inflation because rents can reprice over time, while rising replacement costs can support asset values. Sectors that allow for relatively frequent rent resets, such as multi-family residential, may be preferred by investors concerned about inflation.

However, real estate is not guaranteed to work as an inflation hedge. Fixed rents, rising financing costs, weak tenant demand, high operating expenditure or excessive leverage may all undermine such a role. Income quality, lease structure, location, sector and financing remain crucial.

Diversification beyond traditional portfolios

Appraisal-based pricing and contract-driven income make real estate a structural diversifier across market cycles.

Historically, direct real estate – with slower valuation cycles and limited exposure to short-term market sentiment – has reportedly often shown relatively low correlation with equities, although this relationship can vary over time and may be influenced by appraisal-based valuation practices. 

Nevertheless, this may be particularly useful where family wealth is concentrated in one operating business, geography or currency, or in public equities.

Real estate enables diversification across sectors, geographies and ownership approaches. It’s multi-faceted: property serves essential functions for society and the economy, from housing and healthcare to infrastructure, logistics and data centres.

Knight Frank’s family office research identifies living, logistics and luxury residential among the sectors most in demand⁴, while its 2026 survey highlights growing interest in data centres, student accommodation, healthcare and other operational sectors⁵. Many sophisticated private investors are focusing on assets with structural demand and specialist operating characteristics that complement long-term stewardship.

When considering investing in real estate, families can select assets where they have expertise, long-standing relationships or access to off-market opportunities. Joint ventures, club deals and specialist operating platforms allow larger or more complex assets to be held with shared expertise and clearly defined governance.

Direct ownership – an element of control

Direct ownership’s most distinctive feature, in my view, is control. It allows a family to determine when to buy, how much leverage to use, whether to refurbish or redevelop, which tenants to target and when to sell.

Family offices often favour direct investments for this flexibility⁶. It can be particularly important in periods of market dislocation, when investors without redemption pressures may be able to act while others are constrained.

Some family offices also participate in real estate debt, either directly or through private credit strategies, alongside a growing range of non-bank lenders⁷.

Property can therefore sit both as an owned asset and as collateral supporting private credit, although lending introduces distinct risks, including borrower default, declining collateral values, illiquidity, concentration and the potential complexity of enforcement. A private bank may be able to assist families by helping them assess suitable financing structures, undertake due diligence and coordinate specialist advice in certain circumstances.

A more professional approach

Family offices are becoming more sophisticated real estate investors, building specialist teams, working with operating partners and using joint ventures or co-investments to access complex opportunities. 

This does not mean every family should own more property. Real estate is illiquid, capital-intensive and dependent on asset selection and execution. Concentration risk may also be significant where a family already owns substantial business or residential property.

Rather than asking what percentage of wealth to allocate to real estate, it is more useful to ask what role real estate should play within the family’s balance sheet, objectives, governance and time horizon.

A strategic asset for patient capital

For private wealth, the value of real estate appears to lie in its potential to serve several functions simultaneously: it can generate income, help preserve purchasing power, diversify a portfolio, support financing flexibility and provide direct control. Most importantly, it allows compounding and active management to play out over decades.

As family offices look to build resilience amid geopolitical and economic uncertainty, that long horizon should not be confused with certainty of outcome. Real estate’s role comes with trade-offs that merit careful planning: exit timing can be difficult in stressed markets, valuations are sensitive to financing and interest-rate conditions and direct ownership brings governance demands that grow more complex over time.

For conventional investors, property may be one asset class among many. For private investors and families, it can be a store of wealth, a source of income, a potential hedge against inflation and a platform for active ownership that bridges generations. Whether it fulfils those roles depends on disciplined selection, prudent financing, effective governance and a clear understanding of the risks entailed – as well the prevailing conditions of the market, which can ebb and flow.

Beyond bricks and mortar, real estate has a human dimension: homes, workplaces, shops and leisure spaces shape how people live and interact. Stewarding such assets can carry meaning beyond financial return. Managed thoughtfully, property can support portfolio objectives and a reassuring sense of identity and continuity amid constant change.