Family offices are quietly stepping into one of the most interesting corners of today's commercial real estate market: the capital gap that's opened up as banks retrench and large institutions turn more selective.
In the middle market—where deal sizes often fall below the radar of the biggest funds—dislocation is creating room for flexible equity and relationship-driven capital to set terms rather than accept them, according to Travis King, founder and CEO of REALM, a platform representing more than 100 family offices.
King noted that the shift began when higher interest rates, valuation resets and uneven price discovery pushed many traditional lenders and institutional investors to the sidelines. While sponsors still need capital to refinance, recapitalize or transact, their options have become significantly more constrained. King observed that family offices are stepping into this void, leveraging their patient capital and their ability to be more selective and to structure deals more customarily.
Instead of writing passive checks into commingled funds, many family offices are moving toward direct and co-sponsored deals. King explained that this change is particularly visible in the middle market, where institutional influence is weaker and information is less symmetrical.
"As a result, family offices are moving beyond passive fund allocations and becoming more direct, selective, and relationship-driven investors," he said.
With fewer large players bidding, local knowledge and trusted relationships can translate into proprietary deal flow and stronger downside protection.
King, who invests across various property types and geographies, emphasizes a "relationship-first" approach. He suggests that these investors now prioritize direct connections with the operator, broker, lender and equity partners, looking well beyond the role of a traditional fund manager.
For King, this model is about building a system to find and execute off-market opportunities. Aligning with a small group of trusted partners helps family offices generate repeatable deal flow and can lead to smoother diligence and faster decision-making.
"Over time, these trusted relationships lead to opportunities, more flexible capital during downturns, smoother restructurings and repeat business, which lowers basis and reduces execution risk," he said.
The middle market is where King sees this model working best today, given inherent inefficiencies, such as fewer buyers and less standardized information.
"Less institutional influence leads to more asymmetric information and makes the market segment much more reliant on trusted relationships," King said. He added that family offices are particularly well-suited to operate in such an environment.
Geographically, King pointed to North Carolina as a market where these dynamics are currently playing out. Reduced competition and a scarcity of capital have created openings for patient investors to step in with creative structures, such as partnering on a recapitalization or providing gap capital where a bank has pulled back.
Since its founding in 2019, REALM has observed common threads across its network: a shift toward direct exposure and a focus on middle-market situations where capital constraints enable the acquisition of quality assets on more attractive terms.
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