Christopher Zenios
Family offices are doubling down on bricks and mortar. According to Knight Frank’s Wealth Report 2026, direct real estate already accounts for 22.5% of the typical family office portfolio, and more than four in ten (44%) intend to increase that allocation over the next 18 months. The conviction is backed by deployment: private investors, led by HNWIs and family offices, poured USD 464 billion into global commercial real estate in 2025 — outpacing institutional investors’ USD 347 billion for the fifth consecutive year. For private wealth, luxury and income-producing property has become a core strategic holding.
By the High Worth Citizen Editorial Team
Key Takeaways
- Direct real estate makes up 22.5% of the average family office portfolio, with 44% planning to increase exposure within 18 months (Knight Frank).
- HNWIs and family offices deployed USD 464 billion into commercial property in 2025, beating institutional capital for a fifth straight year.
- Demand is led by the living, logistics, and luxury residential sectors.
- Family offices target an average unleveraged return of 13.8%, prioritising capital growth (42%), preservation (23%), and income (19%).
- Global prime residential prices rose 3.2% in 2025, with Dubai, Tokyo, Miami, and Mumbai among the strongest markets.
Why the Allocation Is Rising
The shift reflects how family offices have professionalised. Knight Frank estimates roughly 10,000 family office entities now operate globally, many functioning as sophisticated investment platforms that recruit in-house real estate specialists, co-invest alongside private equity, and pursue “value-add” assets — properties requiring repositioning or active management to unlock returns. This is a marked departure from passive trophy-asset ownership. Real estate offers family offices three things institutional mandates struggle to combine: tangible inflation hedging, durable income, and long holding horizons that suit intergenerational capital. With an average return target of 13.8% unleveraged, the asset class is being underwritten for performance, not just prestige.
Where the Capital Is Going
The Wealth Report 2026 identifies living (residential-for-rent and senior housing), logistics, and luxury residential as the sectors drawing the most demand. On the prime residential side, global luxury values rose 3.2% in 2025 — modest in aggregate but masking sharp divergence, with Dubai, Tokyo, Miami, and Mumbai posting strong gains. For family offices, the appeal of luxury residential is dual: it doubles as a usable family asset and a store of value in markets with constrained supply and persistent international demand. Commercial allocations, meanwhile, concentrate in gateway cities such as Paris, London, Tokyo, Sydney, and Hong Kong, reflecting a flight to liquidity and quality.
What This Means for HNWIs
For HNWIs and the family offices that serve them, the data argues for treating real estate as a deliberately structured allocation rather than an opportunistic purchase. That means defining the objective up front — capital growth, preservation, or income — because each points to different markets and asset types. It means weighing direct ownership against co-investment and club deals that spread risk and provide specialist access. And it means aligning property holdings with a family’s broader relocation and tax-residency plans, since prime residential in a wealth hub can serve double duty as both an investment and a lifestyle or residency anchor. Understanding how HNWIs and investors approach property at scale is the starting point for building a resilient allocation.
Market Comparison
Not all luxury markets serve the same purpose. Dubai offers strong recent appreciation, no property or income tax, and an investor-friendly residency link, making it a favourite for growth-oriented capital. Established European gateways such as London and Paris offer liquidity, legal certainty, and wealth-preservation credentials, albeit with higher carrying costs and tighter yields. Emerging-prime markets like Mumbai and Miami pair higher growth with higher volatility. Family offices increasingly blend these — pairing a stable European or gateway-city core with higher-growth satellite exposure — rather than concentrating in a single market.
Risks and Considerations
Real estate’s strengths come with real constraints. It is illiquid and slow to exit, exposing owners to timing risk if circumstances change. Currency movements, local financing costs, and shifting tax and regulatory regimes — from foreign-buyer levies to rent controls — can erode returns. Concentration in a single city or sector amplifies downside, and value-add strategies carry execution risk that demands genuine operational expertise. Headline price growth of 3.2% also reminds investors that broad prime markets are normalising after the post-pandemic surge; returns will increasingly be earned through selection and management, not market beta alone.
The Bottom Line
Family offices are raising luxury and commercial real estate exposure because the asset class delivers what intergenerational wealth most needs: inflation protection, income, and longevity. The opportunity is substantial, but in a normalising market the edge will belong to disciplined allocators who match each property to a clear objective and manage it actively.
This article is for informational purposes only and does not constitute legal, tax, financial, or migration advice. HNWIs and family offices should consult qualified professionals in the relevant jurisdiction before making decisions based on the information presented.
