The transaction volume of commercial property in the Asia Pacific region plunged 40% y-o-y in 2Q2023, and the region as a whole recorded an investment total of US$31.7 billion ($41.9 billion) during the quarter, according to the latest capital trends report published by MSCI Real Assets.
Investment sentiment was weighed down by China’s slowing economy and a retreat from office investment, says Benjamin Chow, head of Asia real assets research at MSCI. However, he notes that the bottom could be in sight given the gradual pickup in activity for specific sectors and markets.
He adds: “Given the tentativeness in the office market and the significant gap between buyer and seller price expectations, however, it could still be some time before the region as a whole reaches a sustained recovery.”
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According to the report, investment volumes in Singapore saw a significant 65% y-o-y drop in 2Q2023, clocking about US$1.8 billion worth of deals. Hong Kong also did not fare well, with trading activity falling 46% y-o-y in 2Q2023 to US$1.3 billion.
Singapore could have recorded a worse performance were it not for a high volume of transactions of smaller strata offices and shops in 2Q2023. In 1H2023, the shophouse segment notched US$484 million across 22 deals.
But real estate investment volumes in major economies such as China (-44%), Japan (-22%), and South Korea (-37%) failed to pick up last quarter. “In China, the signs of recovery seen in previous quarters were absent in the second quarter. Cross-border investors from elsewhere in Asia had helped sustain activity previously, but these firms were quieter in the past quarter,” says Chow.
The decline was led by a 56% y-o-y fall in office acquisitions across the region in 2Q2023. The reduction in office acquisitions hit Australia particularly hard, with total deal activity in the country falling 59% y-o-y in 2Q2023. Over the first six months of this year, Australia recorded a 65% y-o-y decline in trading volume, the largest fall among the countries in the region.