Family Offices Demand Steeper Discounts as High Rates Narrow Real Estate Appetite

Chief investment officers say they need conviction rates will fall before committing capital beyond deeply discounted properties and rent-reset plays.

By the Family Office Real Estate Daily Desk·Tuesday, October 27, 2026·1 min read

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How are family offices adjusting their real estate strategy in response to high interest rates?

Family offices are narrowing real estate allocations as rates stay high, focusing on deeply discounted properties and assets that can reset rents quickly, chief investment officers told CNBC. HB Wealth CIO Joel Houck warns clients to avoid funds with leverage above 65%. Rob Haugen of Michels Family Office and River1 Asset Management says the firm needs conviction that rates are heading lower before moving beyond rare, discounted deals.

Key facts

Rob Haugen, who runs private capital investments at Michels Family Office and serves as CIO of its spinout River1 Asset Management, told CNBC the firm needs to be convinced rates are heading lower before it commits beyond 'the really special project.'
Michels Family Office bought a Kohl's outside Milwaukee alongside a group of investors roughly 18 months ago, according to Rob Haugen.
Joel Houck, CIO of HB Wealth, told CNBC that large family offices have been asking more about real estate and wider real assets, including warehouses, farmland and timber, with inflation ranking near the top of their worries.
HB Wealth tells clients to avoid funds above 65% leverage, whether at the property or fund level, according to CIO Joel Houck.
Mike Silverman, CIO at Cresset, told CNBC clients ask about data centers often, yet Cresset has not pursued any because of the risk, with Silverman characterizing data centers as more of a tech bet than a property bet.
Rob Haugen told CNBC he balks at a 10- to 15-year data center lockup with rates this high.

Family Offices Demand Steeper Discounts as High Rates Narrow Real Estate Appetite — Image: editorial illustration · Story sourced from finance.yahoo.com

Family offices are more selective on real estate as rates stay high, focusing on heavily discounted properties and assets that can reset rents, chief investment officers told CNBC.

Rob Haugen runs private capital investments at Michels Family Office and is chief investment officer of its spinout, River1 Asset Management. He told CNBC the firm needs to be convinced rates are heading lower before it does much beyond the really special project.

Haugen told CNBC an office building bought cheaply, with a tenant already in place for much of the space, fits the bill. Big-box retail is another avenue. The firm bought a Kohl's outside Milwaukee alongside a group of investors roughly 18 months ago, Haugen said.

Joel Houck, chief investment officer of HB Wealth, told CNBC that large family offices have been asking more about real estate and wider real assets, including warehouses, farmland and timber. Inflation ranks near the top of their worries.

Taxes help too. A depreciation shield can push tax on distributions out until the asset sells, Houck said.

Houck cautioned that the hedge only works if the property manager can reprice leases quickly. Multifamily, industrial and retail do not reset at the same pace. Industrial and housing can lift rents on a regular schedule, he said, and both gain from limited supply.

Family investors are curious about data centers, but Haugen balks at a 10- to 15-year lockup with rates this high. Mike Silverman, chief investment officer at Cresset, told CNBC clients ask about them often, yet the firm has not pursued any because of the risk. He sees data centers as more of a tech bet than a property bet. A long lease to a major tenant looks safe until technology change erodes the building's value, Silverman said.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

The clearest route is co-investment alongside sponsors who can deliver steep basis discounts and tenant credit already in place. Office and big-box retail are the named targets, but the deployment test is simple: the price must compensate for the rate environment, and the lease roll must be manageable or already covered.

Houck's leverage ceiling is the underwriting guardrail. At 65 percent loan-to-value, a property needs roughly 35 percent equity. On a ten-million-dollar office building, that implies a three-and-a-half-million-dollar cheque if buying directly or a proportional commitment if co-investing. Run the cash-on-cash return at today's debt cost and compare it to the distribution yield on a core fund. The discount has to be large enough that the levered return still clears that bar.

Industrial and multifamily offer faster rent resets, which matters if inflation stays elevated. Farmland and timberland deliver the same inflation linkage with lower leverage, but liquidity is worse and the hold period is longer. Price those trades for a ten-year lock and size them accordingly.

Skip data centers unless the lockup shortens or the rate path clarifies. A 15-year commitment at current rates leaves too much embedded interest-rate risk, and the technology risk at lease end is real. If a tenant's hardware is obsolete when the lease expires, the building reprices as generic shell space, not as fitted infrastructure. That is a principal risk, not a beta you can hedge.

Questions this story answers

01Why are family offices pulling back from real estate right now?

Higher interest rates are making family offices more selective about real estate, with many chasing steep discounts and assets that can raise rents, chief investment officers told CNBC. Rob Haugen of Michels Family Office and River1 Asset Management said the firm needs conviction that rates are heading lower before committing capital beyond the rare, deeply discounted opportunity.

02What real estate asset types are family offices still interested in?

Joel Houck, CIO of HB Wealth, told CNBC that large family offices have been asking about warehouses, farmland and timber as inflation hedges. Industrial and multifamily also appeal because they can lift rents on a regular schedule and both benefit from limited supply, Houck said. Discounted office buildings with tenants already in place and big-box retail are also mentioned by Rob Haugen of Michels Family Office.

03How much leverage should family offices accept on real estate funds?

HB Wealth tells clients to avoid funds above 65% leverage, whether at the property or fund level, according to CIO Joel Houck. Houck said higher rates can open the door to buying at a discount, but leverage is the guardrail.

04Are family offices investing in data centers?

Family offices are curious about data centers but cautious. Rob Haugen of Michels Family Office told CNBC he balks at a 10- to 15-year lockup with rates this high. Mike Silverman, CIO at Cresset, told CNBC clients ask about data centers often but Cresset has not pursued any, with Silverman viewing them as more of a tech bet than a property bet.

05Does real estate still offer a tax benefit that attracts family offices?

Yes, according to Joel Houck, CIO of HB Wealth, who told CNBC that a depreciation shield can push tax on distributions out until the asset sells. Houck also noted the inflation-hedge angle, but cautioned the hedge only works if the property manager can reprice leases quickly, and that multifamily, industrial and retail do not reset at the same pace.

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Original reporting

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