Multifamily Offices Increase Investments in Commercial Real Estate
Multifamily offices, representing the investment arms of high-net-worth investors, are increasingly allocating capital to commercial real estate (CRE). Instead of acting alone, many are joining forces to pool resources, share expertise, and access larger, more lucrative deals. This trend is driven by a desire to diversify portfolios and tap into the potential benefits of direct real estate investments.
The Multifamily Office Advantage
According to Travis King, CEO of Realm, a multifamily office investment platform with over $12 billion under management, collective investment offers significant advantages. By combining capital, trusted relationships, industry knowledge, and geographic expertise, multifamily offices can make more informed and effective investment decisions than individual family offices.
“We are better investors collectively than we would be individually. So what that means is we're combining not only capital, but also our collective trusted relationships and industry knowledge and geographic knowledge to find and execute better investment decisions." - Travis King, CEO of Realm
While institutional investors have significantly increased their real estate allocations, many family offices are still under-allocated. Multifamily offices provide a pathway for these families to access direct real estate investments, diversify their holdings, and potentially achieve higher returns without the intensive time commitment and dedicated staff typically required for individual ownership.
Navigating the Evolving Real Estate Landscape
King emphasizes the importance of adapting to the evolving nature of real estate and avoiding a singular focus. "Location, location, location" remains a critical adage, but successful investment also requires an understanding of both macro and micro-cycles within different geographies and property types. Realm’s strategy involves moving across property types and geographies to capitalize on opportunities within these micro-cycles.
Current Opportunities and Areas of Focus
Realm sees potential in the office sector, particularly in areas where pricing has potentially bottomed out. They are currently evaluating investments in locations like Northern California, where assets are trading at significant discounts to replacement cost. Realm is actively pursuing deals in the lower middle market, typically below $50 million, where they believe they have a competitive edge.
Conversely, Realm is cautious about investing heavily in sectors that are perceived to be over-invested, such as data centers. While acknowledging the widespread interest in data centers, King notes that the large capital requirements and potential for over-saturation make it a less attractive area for their investment strategy.
Impact of Interest Rate Changes
While not explicitly stated how interest rates will change their business, it is an important question to be asked regarding the CRE market as a whole.
