John Forbes (John Forbes Consulting LLP): the long-term view

John Forbes, Partner at John Forbes Consulting LLP, describes family offices’ investment strategies in the real estate sector, which has changed significantly since 2009. 

How can family offices leverage real estate as an asset class?

High net worth individuals and family offices have been long-standing investors in the real estate asset class because it provides a good means of wealth preservation and dependable long-term income streams. However, the cost of buying and selling direct property is higher than many other asset classes so family offices must carefully consider the best way to achieve exposure to this asset class, the returns which they will achieve and the length of time during which they will hold investments. For lower-risk core property investments, where returns are lower, it makes sense to hold investments for longer, through the cycle, and to consider indirect investment through listed and unlisted vehicles to mitigate the frictional cost of investing. Opportunistic, short-term and leveraged investments potentially bring higher returns but come with higher risks.

“Family offices have traditionally been investors in property funds and developments since 2008 have made these funds more attractive.”

Traditionally, what links have there been between real estate investment vehicles and family offices? 


Since the financial crisis a decade ago, many lessons have been learnt about long-term indirect investment in real estate as an asset class. One of the key findings was that many investors were investing in open-ended property funds not because they wanted the ability to redeem their investment at short notice but because they wanted to invest in a long-term vehicle without a fixed duration. This has led to the development of new types of long-term funds. At the same time, the development of the secondary market in fund interests provides more flexibility at a lower cost for investing and divesting. Family offices have traditionally been investors in property funds and developments since 2008 have made these funds more attractive. Some family offices are also starting to look at the benefits of these vehicles for the single- or multi-family offices themselves. 

What challenges and opportunities do you see within the real estate industry? 

Real estate is an extremely granular and cyclical asset which creates short-term opportunities and risks. However, many investors are taking a longer-term view, investing through cycles. This reduces the risks and frictional costs but requires a different approach when it comes to evaluating opportunities. Societal and demographic changes are causing rapid obsolescence in some property types, such as retail property, thereby creating demand for other types, such as residential property for rent, particularly for later living. Major structural changes are also happening within the industry. Many traditional sources of capital for real estate investment, defined benefit pension schemes and traditional on-balance sheet life insurance products are in long-term decline. Appropriate investment vehicles for investment in illiquid assets, defined contribution pension schemes and retail products are underdeveloped. In the short term, this creates opportunities for family offices to invest but this will also create longer-term challenges if it is not addressed.