The Next Wave of Capital: How Generational Wealth Transfers Will Shape Future Investment in CRE

February 19, 2025

As one of the largest wealth transfers in history unfolds, inherited capital is set to become a dominant force in institutional real estate. Over the next two decades, an estimated $84 trillion in assets will change hands from baby-boomers to Generation X, Millennials, and Gen Z. This unprecedented shift will reshape CRE investment strategies, influencing asset allocation, risk appetite, and investment strategies.

Background on Inherited Wealth

Up until recently, family wealth had been vulnerable to what is commonly referred to as the ‘three-generation curse.’ This pattern suggests that the first generation builds wealth, the second enjoys but mismanages it, and the third is left to recover from financial decline. Historically, many family fortunes failed to survive beyond the third or fourth generation.

By the mid-20th century, shifting socio-economic dynamics placed greater pressure on inherited wealth, emphasizing the need for prudent financial stewardship. Rather than simply spending or dissipating their wealth, succeeding generations recognized the importance of preservation and strategic investment. By the end of the 20th century, inherited capital had become an influential driver of safe, long-term investments—particularly within the institutional CRE market.

The Scale of the Wealth Transfer

As shown in the graph below, data published by financial consultants Cerulli Associates, this massive intergenerational shift is poised to significantly alter the investment landscape.

Unlike previous generations, these new inheritors will leverage innovative, data-driven, financial structures to inform their real estate decisions. Portfolio diversification will remain a guiding principle, but the approach to CRE will reflect evolving economic, social, and technological influences.

Key Trends Driving Institutional CRE Investment

Eight critical factors are expected to define their investment strategies:

1. Enhanced Data Access & Analytical Tools – Increased transparency and sophisticated analytics will enable investors to navigate the CRE market with greater precision.
2. A Shift Toward Higher-Risk Investments – With more tools at their disposal, new generations may move beyond core assets, favoring value-add, opportunistic, and alternative real estate investments.
3. Sustainable & Impact Investing – Environmental, social, and governance (ESG) considerations will play a larger role, driving capital into energy-efficient buildings, mixed-use developments, and urban regeneration projects.
4. A Dynamic Approach to Housing Markets – While multifamily and single-family rental investments remain attractive, emerging strategies such as ‘BRRR’ (Buy, Rehab, Rent, Refinance, Repeat) will appeal to hands-on investors.
5. New Investment Vehicles & Platforms – While traditional REITs, syndications, and Delaware Statutory Trusts (DSTs) remain relevant, alternative investment structures will emerge to attract capital.
6. Balanced Allocation Between Direct & Indirect Investments – Institutional investors will face competition from alternative platforms as wealth holders weigh direct property ownership against fund-based investment strategies.
7. Increased Reliance on Third-Party Expertise – Despite being technologically savvy, these investors will seek trusted advisors, valuers, and investment managers to guide their CRE allocations.
8. Financial Education as a Prerequisite for Wealth Inheritance – Many family offices and high-net-worth individuals (HNWIs) emphasize investment education to ensure long-term capital preservation.

The Liquidity Challenge & Real-Time Valuation

One of the primary challenges in CRE investing is the lack of real-time pricing due to its inherently illiquid nature. Unlike publicly traded securities, CRE assets do not have readily available, real-time market pricing, making valuation a complex and often delayed process. Even more than for their predecessors, this will continue to be a challenge for next-generation investors accustomed to instant data access in other asset classes.

To address this, emerging investors will gravitate toward CRE platforms that offer enhanced transparency and near real-time valuation. AI-driven models and advanced data analytics will become essential in bridging the gap between traditional valuation methods and modern investment expectations. Fund managers who can provide more accurate price discovery and improved liquidity mechanisms will be better positioned to attract and retain capital from these new wealth holders.

Implications for CRE Investors & Fund Managers

As a consequence, institutional real estate players must prepare for a more sophisticated investor base – one that demands transparency, efficiency, and alignment with long-term macroeconomic trends. The influx of generational capital is likely to impact:

• Fundraising Strategies – CRE investment firms must tailor their offerings to attract younger investors, emphasizing digital platforms, sustainability, and alternative investment structures.
• Portfolio Diversification Trends – An appetite for higher-yield and alternative real estate segments will require asset managers to expand beyond traditional core properties.
• Market Liquidity & Transaction Volume – Increased participation from next-generation investors may contribute to greater liquidity in select CRE sectors, particularly those aligned with demographic shifts and technological advancements.

The Future of Generational Wealth in CRE

While CRE stands to benefit from this generational wealth shift, uncertainties remain. Will these new investors embrace real estate with the same conviction as their predecessors? Will the rapid pace of technological and regulatory change create unforeseen obstacles?

One thing is certain—this new wave of investors will not blindly follow historical trends. Given changes in their lifestyles, while they continue to regard commercial real estate as an enduring cornerstone of wealth preservation, they will seek greater flexibility, innovation, and impact-driven opportunities The industry must adapt accordingly, ensuring it remains an attractive destination for capital in a rapidly evolving financial landscape.

The more things change, the more they stay the same—except this time, the next generation is setting the terms.