The Family Office of Spanish billionaire Amancio Ortega is offering an example to Family Offices everywhere of why real estate is still a ruling asset class.
In July, Ortega’s Family Office reported its real estate portfolio rose by more than €1BN from its 2020 status of €14BN to €15.2BN. While diversifying into the energy space through investments in both an electricity grid operator in Spain and a wind farm operated by another Spanish energy group, the main focus of the Family Office has remained on real estate assets which include buildings in New York, Toronto, London and Madrid and it has most certainly paid off.
This comes just months after UK retailer John Lewis made a public bid to generate 40% of its returns from real estate in 2023, like Ortega diversifying away from retail and offering a general consensus that real estate is stronger than ever before. While John Lewis will continue to serve a purpose on British highstreets and Ortega remains as the main shareholder of Inditex Group – the owners of Zara, the two are certainly spreading their risk and as a result, their rewards.
Real Estate is not exclusive to retail either. A Family Office Principal recently attended an event with Agreus and offered his take on two sub-asset classes within real estate that offer promising returns for Family Office investors.
This included film studios, to cope with the backlog of productions post-pandemic and retirement living to deal with an ageing population. His take-away was that while many think of real estate as an older and over-saturated market, there will always be new ways to generate returns within the asset class, serving as a reminder to Family Offices who have started to pull away from real estate during the pandemic.
In 2020, we discovered that 86% of Family Offices were invested in property but when surveying the same audience of single Family Offices in 2021, we discovered that 84% of Family Offices were invested in property, a drop of 2%. This coincides with the 67% of Family Offices who diversified their portfolio during the pandemic and the 59% who told Agreus their appetite for riskier asset classes had increased.
It isn’t just household brands or prominent Family Office Leaders trying to change this. China is reinjecting $148BN into the real estate industry in a bid to kick-start its second largest sector and by doing so, is offering investors an early glimpse into the returns that could be generated over the next 5-10 years.
With household names, prominent Family Office Leaders and international governments painting the prospects of investing in real estate, we anticipate the asset class will experience a tremendous amount of growth by the time of our next survey. Do you agree?