Family offices allocated 22.5% of their portfolios to direct real estate, according to Knight Frank's Wealth Report 2026. More than four in ten family offices intend to increase that allocation over the next 18 months. Private investors, led by high-net-worth individuals and family offices, deployed $464 billion into global commercial real estate in 2025. That figure exceeded the $347 billion deployed by institutional investors, marking the fifth consecutive year private capital outpaced institutional buyers.
The shift reflects the professionalization of family offices. Knight Frank estimates roughly 10,000 family office entities now operate globally. Many function as sophisticated investment platforms that recruit in-house real estate specialists, co-invest alongside private equity, and pursue value-add assets requiring repositioning or active management. Family offices target an average unleveraged return of 13.8%, the report said.
Real estate offers family offices three attributes institutional mandates struggle to combine. The asset class provides tangible inflation hedging, durable income, and long holding horizons that suit intergenerational capital. Investment priorities break down as 42% capital growth, 23% capital preservation, and 19% income generation.
The Wealth Report 2026 identified living, logistics, and luxury residential as the sectors drawing the most demand. Living includes residential-for-rent and senior housing. Global prime residential prices rose 3.2% in 2025. Dubai, Tokyo, Miami, and Mumbai posted strong gains. For family offices, luxury residential serves dual purposes as a usable family asset and a store of value in markets with constrained supply and persistent international demand.
Commercial allocations concentrate in gateway cities including Paris, London, Tokyo, Sydney, and Hong Kong. The concentration reflects a flight to liquidity and quality.
Dubai offers strong recent appreciation, no property or income tax, and an investor-friendly residency link. 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 approaches, pairing a stable European or gateway-city core with higher-growth satellite exposure rather than concentrating in a single market.
Real estate's strengths come with constraints. The asset class 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 can erode returns. Concentration in a single city or sector amplifies downside. Value-add strategies carry execution risk that demands operational expertise.