Institutional investors have left the Manhattan office market in the lurch in recent months, but family offices and smaller investors are moving to fill the gap.
Wealthy families and small developers have comprised a growing share of transactions in the wake of the market downturn, Bloomberg reported. The subset of buyers are seizing on deals as owners contend with rising interest rates and default risks.
During the second half of last year, 11 office deals in Manhattan closed for at least $50 million, according to Savills. Among those, seven of them featured a family office or non-institutional investor as the buyer. In the first half of that year, those entities accounted for almost none of the purchases.
Despite the wealth of some of these firms, it has been difficult to enter a market dominated by institutions with mounds of cash. But a lane has opened in the past year as these companies don’t need to justify choices to committees or go through a lengthy decision-making — they can simply go for it and hope the office market turns around down the road.
“One person’s trash is another person’s treasure,” Marisha Clinton, senior director of Northeast regional research at Savills, told Bloomberg.
The prominent family office purchases of the second half of last year included the son of a Quebec businessman who founded one of Canada’s largest biotech companies; Carlo Bellini purchased 175 Water Street in Lower Manhattan — the former AIG headquarters — from the Vanbarton Group for $252 million.
Another notable deal was the $320 million purchase of 1330 Sixth Avenue, which was acquired by investors including Josh Rahmani and Ebi Khalili’s Empire Capital, Hakimian Capital, CH Capital Group, Creed Equities and Nassimi Realty.
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The window for family offices to jump into the market at a discount could close at any time, the investor told Bloomberg.
“I think that when the rebound happens, it’ll happen very quick with international money, so while opportunities exist, we’re very quick to react on assets that we like,” Rahmani said.
— Holden Walter-Warner