Manhattan Class A office sales dip as fundraising favors higher risk-adjusted returns

January 31, 2019
  • From 2009 to 2016, increases in fundraising with core strategies have demonstrated a strong correlation to Manhattan Class A and Trophy office investment volumes.
  • Since 2016, those sales volumes have fallen more sharply than have fundraising dollars committed to core product, exposing some of the recent headwinds to the office sector’s transactional momentum such as upward pressure on cap rates, limited supply of properties available for sale and an enlarged bid-ask pricing spread.
  • While funds committed to core product have declined slightly since 2016, funds committed to value-add and opportunistic investments have risen 24.2 percent over that time frame as investors have increasingly sought higher yielding opportunities that are largely concentrated in other markets.
  • As investment strategies in the last few years have primarily targeted either value-add/opportunistic investments or debt vehicles, the prospect of core fundraising returning to a larger share of committed funds would be an auspicious indicator of recovering office investment volumes in Manhattan.

Source: JLL Research, Preqin

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