Market turmoil makes real estate a draw for family offices

High net worth investors are increasingly turning to bricks and mortar to allocate capital, with Japan and its residential housing sector emerging as a favoured destination.
Market turmoil makes real estate a draw for family offices

High net worth (HNW) investors and the family offices that manage their wealth are flocking to commercial real estate. The development comes at a time where public markets are showing high volatility, and institutional investors using the services of real estate asset managers may find themselves challenged by the constraints on investment periods for their funds.

Joel Rothstein

According to Joel Rothstein, who chairs the Asia real estate practice at US-based law firm Greenberg Traurig, the growth of cross-border deal activity among HNW family offices has accelerated over the past 3-5 years, despite the Covid-19 pandemic.

“HNW investors do not necessarily have the time pressures with regards to the timing of the entry and exit of investment assets,” Rothstein told AsianInvestor. “Thus, real estate, which may be less liquid than other investments, can be an acceptable target.”

Last month, Raffles Family Office (RFO), a Hong Kong-based multi-family manager, expanded its investment capabilities, hiring Joe Kwan as managing director to lead and build the firm’s new real estate team. Kwan sees expanded scope for high net worth individuals (HNWIs) to avail themselves of real estate opportunities.

Joe Kwan

“Private wealth that is less sensitive to leverage and entry yield can take advantage of a market starved of liquidity to cherry pick the best assets, which are normally unavailable or only accessible to a select group of market participants,” Kwan told AsianInvestor. “Structurally, this will likely signal the start of a new capital trend where private wealth is invited to the largest negotiation tables along with the traditional big hitters.”

For RFO’s clients looking to allocate more capital to real estate, current themes include hedging against inflation, better hedging against volatility, and managing regulatory and geopolitical risks.

“The current uncertain global environment is leading us to international gateway cities, where we are beginning to see strong value propositions,” Kwan said. “While we are mindful of rising interest rates and inflation levels, we believe there are ample opportunities for smart longer-term money – those that look far beyond the typical fund lifecycle of seven to nine years, for instance.”

Other than seeking to deploy capital to gateway cities across the world, RFO also looks within Asia, as the region’s many emerging markets offer opportunities for long-term investors.


According to wealth and asset manager Lombard Odier’s 2022 APAC HNWIs Study, Asia Pacific HNW investors are repositioning their portfolios, diverting more from traditional asset classes such as equities and bonds. The study showed a 37% increase in investment in alternative and private equity assets over the past two years.

Also read: Asian family offices expand into alternatives


“Real estate is also viewed as a convenient asset for storing wealth,” Rothstein said. “It is also a tangible asset which is attractive to individual investors. In addition, direct investment in real estate affords the investor more control over the investment than fund investments or investments in complex financial instruments.”

In recent years, the most active cross-border HNWI capital movement in real estate has been from Singapore into Japan, from Hong Kong and China – in the form of offshore capital – into the United States, and from Japan into the United States, Rothstein said. Most recently, due to the strengthening of the yen, there has been a decrease in real estate capital flows from Japan to the US.

Based in Tokyo during the height of the Covid-19 pandemic, Rothstein had a front row seat in the most popular investment destination in Asia. A key reason for Japan’s attractiveness is a lack of barriers to entry that foreign investors face in several other Asian markets.

Japan is a transparent market in which transactions can be executed relatively easily, without the currency repatriation issues that investors can face in other markets. Another advantage is that assets of various sizes and prices are sold in the commercial real estate space.

“The variation of asset sizes and prices points is helpful for HNW investors,” Rothstein said. “They are not buying a grade-A landmark office building. They are more likely to acquire a small portfolio of multi-family properties, such as 15-30 units per property. Also, affordable and attractive financing is readily available in Japan for those investors that would like to leverage their investments.”

Hideotoshi Ono

The attractiveness of Japanese real estate has lured family offices onshore. In July, Singapore-based Tsao Family Office, which manages wealth for the descendants of the late shipping tycoon Frank Tsao, hired Japanese real estate veteran Hidetoshi Ono as its country head for Japan. Tsao Family Office did not respond to AsianInvestor’s inquiries about its expansion in Japan.

According to global commercial real estate brokerage Jones Lang LaSalle’s research report Japan Capital Flow 1H22, inbound investments, defined as purchases of real estate by overseas investors, amounted to ¥362.1 billion ($2.52 billion) in the first half of 2022, down 8% from ¥392.3 billion during the same period the previous year.


A focus on more business-oriented assets such as offices, retail premises and logistics facilities has been the textbook approach of institutional investors venturing into real estate investments. But that approach may not be the most prevalent among HNWIs and family offices.

The most popular asset class across geographies has been multi-family housing. According to Rothstein, these assets offer stable cash flows, which are an attractive feature for HNW investors and relatively easy to manage.

For instance, the share of multi-family residential investment in Japan increased from 11% of total real estate investments in 2021 to 20% in H1 2022, according to Jones Lang LaSalle’s Japan Capital Flow 1H22 report. Offices, the staple assets, fell slightly to 44% from 47%, while logistics fell to 13% from 19%.

“There has also been interest in hotel properties,” Rothstein said. “These assets tend to be three- or four- star hotels with up to 100-150 rooms at the most. There is a preference for branded hotels that are professionally managed by the brands.”

RFO’s Kwan said investment decisions by family offices are often made with solid knowledge of the fundamentals of real estate investments.

“Many single-family offices and ultra-high net worth families have been in real estate for a long time, and some are becoming increasingly sophisticated when it comes to investing in the asset class,” he said. “The scale and scope of their investments are also growing, and often cross borders and market segments.

“So while much of our current focus revolves around optimising our clients’ existing real estate portfolio, we are also actively looking to deploy fresh allocations globally in search of alpha. There will be variations in terms of segmental and geographical preferences, of course, and we’ll also have to align to the long-term risk appetite of each client,” Kwan said.

Rothstein said the increased appetite has been noticed, as it is not uncommon to meet representatives of HNW family offices at real estate conferences in Asia, something that would have been rare 10-15 years ago.

“The brokerage community will target certain HNW investors as ‘usual suspects’ to market assets of certain sizes [in the] asset class. The fact that they are targets for marketing deals confirms their arrival and important presence in the market,” he said.

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