Understanding the evolving role of real estate in high-net-worth portfolios

Real estate has long held an important place in the portfolios of high-net-worth investors, yet its role within strategic asset allocation has undergone a major shift over the past decade. Today, it is firmly established as a key asset class for wealthy families, provided it is approached in a more professional and strategic manner, guided by a clearly defined strategy aligned with broader wealth objectives.

Real estate investment encompasses a diverse and increasingly sophisticated universe of assets. Different segments—including residential, logistics and office property, as well as hospitality, student accommodation and data centres—offer distinct risk-return profiles, varying levels of liquidity and different growth drivers.

Creand Asset Management has produced a report examining the role of real estate in the investment portfolios of high-net-worth clients, the different ways it can be incorporated into portfolios, its contribution to a broader wealth planning framework, and the structural risks that investors need to manage.

1. Direct investment or specialist vehicles: structuring exposure to real estate

In recent years, the way high-net-worth investors access real estate has evolved. Direct investment remains an important option, particularly for assets that a family knows well and wishes to retain control over. Increasingly, however, investors are adopting a hybrid approach that combines direct investment with regulated funds, co-investments and club deals.

Direct investment offers greater control, but it also requires resources, expertise and management capacity. Funds provide diversification across property types, geographies and strategies, while offering professional management within a more institutional framework. Club deals and co-investments, meanwhile, provide access to larger transactions, enable investors to share risk and invest alongside other families with similar objectives. In every case, the key considerations are alignment of interests, transparency, robust governance and clearly defined entry and exit mechanisms.

2. Avoiding overconcentration and managing risk proactively

For high-net-worth families, a well-constructed real estate allocation depends not only on the quality of the underlying assets, but also on how risk is distributed. One of the key priorities is therefore avoiding excessive concentration, particularly where property holdings have accumulated over time through historical acquisitions, inheritance or successive family decisions. Owning a large number of properties does not necessarily amount to a coherent investment strategy. A portfolio may include high-quality assets and still be overly concentrated in a single property type, location, income source, operator or tenant.

From this perspective, active risk management is every bit as important as identifying attractive investment opportunities. Illiquidity, property market cycles, interest rates, regulation, asset obsolescence and (increasingly) operational risk all require continuous monitoring to ensure that real estate exposure remains aligned with the overall wealth strategy.

3. A core element of the wealth architecture, not just a portfolio allocation

Real estate should not be viewed merely as an additional component of a high-net-worth portfolio, but as a central pillar of an overall wealth strategy. Its importance is determined not simply by the proportion of assets it represents, but by the role it plays within the broader strategy: providing stability, generating income, increasing diversification, preserving value and facilitating the transfer of wealth.

María Orozco Cremades, Real Estate Associate at Creand Asset Management, explains that “for high-net-worth families, real estate should be assessed according to the role it plays within the family’s overall wealth: the contribution it makes in terms of stability, income generation, diversification and continuity across generations, as well as the risks it introduces”.

The key question is therefore not simply how much real estate a portfolio should contain, but what type of asset is appropriate, for what purpose, through which investment vehicle, over what investment horizon, and with what oversight and exit mechanisms. A residential rental building behaves very differently from a development project, a logistics asset, an office building undergoing repositioning or a purpose-built student residence operated by a specialist manager.

4. A source of stability and a long-term store of value

One of the principal roles of real estate within high-net-worth portfolios is to provide stability. Compared with the day-to-day volatility of listed markets, real estate assets generally exhibit a smoother pattern over time, with valuations that are less affected by short-term market noise and therefore perceived as more stable by investors.

Real estate also serves as a long-term store of value. Stability, however, should not be mistaken for the absence of risk. The fact that property prices are not quoted daily does not eliminate exposure to market cycles, regulatory changes, interest rates or structural shifts in demand. Asset quality, location, leverage, tenant creditworthiness and the capacity for effective asset management remain fundamental determinants of long-term performance.

5. A source of recurring income and a partial hedge against inflation

Recurring income from rental properties or comparable structures can complement other sources of regular income, such as bonds or dividends. This role is particularly valuable for family wealth seeking to finance recurring expenditure, retirement or regular distributions without relying solely on the sale of assets.

In addition, certain types of real estate can provide a partial hedge against inflation.  Assets with inflation-linked leases, rent review mechanisms or strong structural demand may enable part of any increase in prices to be reflected in rental income.  That protection, however, is not automatic. It depends on the lease terms, the duration of tenancy agreements, the market’s capacity to absorb rental increases and the applicable regulatory framework.

6. Diversification beyond traditional markets and exposure to structural trends

Within a well-constructed portfolio, real estate can provide diversification alongside traditional financial assets. Its performance is not fully correlated with either equities or fixed income, as it is driven by factors such as location, occupancy levels, rental income, planning regulations, demographic trends and changing patterns of consumption and working practices. This partial decorrelation is particularly valuable for high-net-worth investors seeking to reduce their dependence on listed markets.

Real estate also provides access to structural demand trends that are driven by forces extending beyond the traditional economic cycle. Sectors such as logistics, living, student accommodation, senior living, hospitality and data centres reflect broader shifts in the real economy and evolving needs in housing, consumption, tourism, healthcare, education and digital infrastructure. Against this backdrop, Spain continues to offer an attractive market for international capital, reinforcing the appeal of its domestic real estate sector. At the same time, however, growing global competition makes an increasingly professional approach essential.