Emotional ties, historical significance, and the complexities of succession planning make real estate one of the most demanding aspects of a family’s portfolio. Successfully navigating this requires not only deep real estate expertise but also a nuanced understanding of the family’s long-term vision.
This need has never been greater. With more than $84 trillion expected to be transferred to the next generation over the next 20 years — and real estate making up a significant portion of these assets — families are facing growing pressure to ensure a seamless transition of ownership while maintaining faithful stewardship and achieving long-term returns.
Increasingly, families are turning to outside partners with real estate expertise to guide strategy, manage execution, oversee asset management, and prepare the next generation for ownership.
As the president of Kibo Capital and founder of Fire Tower, I work with family offices to navigate the complexities of real estate and succession planning. I know that the growing demand for outsourced real estate investment management stems from the need for comprehensive, tailored solutions that extend the capabilities of internal teams and optimise long-term portfolio performance.
The rise of outsourced real estate investment management
Real estate is a highly specialised asset class that is often underrepresented within family offices, largely due to its complexity, unique challenges, and the active management it requires.
Effectively allocating to and managing a real estate portfolio demands deep expertise and continuous oversight – resources that many family offices, particularly those managing under $1 billion in assets, find challenging to attract and retain in-house.
While there’s an industry-wide trend towards outsourcing the Chief Investment Officer (CIO) role, many professionals in these roles lack the niche expertise needed for real estate portfolio and operations management, which has made finding a qualified individual or outsourced team increasingly difficult.
What we’re seeing is a growing demand for outsourced real estate investment management teams that can deliver comprehensive, tailored solutions for family offices. By engaging an external team that understands these distinctive needs, family offices can improve and professionalise their real estate investment strategies, extend the capabilities of their internal team, and optimise the performance of the portfolio without incurring the significant cost and operational burden of hiring and retaining a full-time real estate team.
Key drivers behind the outsourcing trend
A recent Deloitte report underscores this shift, revealing that nearly 40% of family offices managing between $50 million and $1 billion in assets are outsourcing aspects of their investment management.
Several factors are driving this evolution:
- The rise of alternative investments and sophisticated real estate opportunities requires expertise that many family offices currently lack internally.
- Outsourced teams often bring the level of discipline and capability typically associated with large institutional investors.
- Real estate is becoming increasingly intertwined with family succession plans and tax strategies, requiring an approach that considers both investment performance and legacy goals.
Bridging the gap between real estate and succession planning
For many family offices, real estate and succession planning have historically been treated as separate domains. However, as the next generation prepares for ownership, these areas are becoming deeply interconnected. Families are now recognising the need for strategic alignment between their real estate portfolios and their long-term vision for wealth transfer.
Real estate ownership is often measured not in days or months but in years and generations. A real estate transfer between generations allows family owners – past, present, and future – to appreciate what has been built, assess what can be accomplished, and execute the vision for the next generation.