The volume of commercial real estate trading activities in Asia Pacific halved during the first three months of 2023 compared with the same period last year.
The MSCI Real Assets Asia Pacific Capital Trends report for the first quarter of 2023 showed that the volume of income-producing properties that changed hands amounted to $27.2bn (€24.7bn) in the first quarter of the year, a performance attributed to rising interest rates and an unsettled picture on pricing.
According to the MSCI report, the figure for the first three months of the year is the lowest total in over a decade.
With the exception of Singapore and Hong Kong, each gaining from mega deals, all the major markets in the region recorded declines. South Korea was the weakest of the major APAC markets at the start of 2023.
Benjamin Chow, the head of Asia Real Assets Research at MSCI, said: “The continuing slowdown is perhaps unsurprising given that price adjustments in Asia Pacific have been modest compared with those witnessed in other parts of the world.
“At the same time, outside of Japan, dealmaking remains challenged given where prices sit relative to borrowing costs, and the pipeline of deals has continued to shrink even in the first quarter of the year.”
In terms of property type, retail posted the shallowest decline across the core sectors, buttressed by the Singaporean mega-deal, but still fell more than 25% to $7.3bn compared to a year ago. The sale of the Mercatus retail portfolio across two separate deals in Singapore alone accounted for 60% of deal volumes within the quarter.
Industrial deal volume fell by 63% year on year to $4.6bn.
Offices remained the largest asset class for investment, despite a halving of activity to $10.6bn. The biggest office transaction during the period was the $830m Goldin Financial Global Centre deal.
David Green-Morgan, the global head of real assets research at MSCI, said the office sector is perhaps the most closely watched of the major asset classes at the moment, as capital values in Asia Pacific continue to hold up for the moment even as those in the US and Europe have slid considerably.
Green-Morgan added: “There remains more appetite for this asset class in the APAC region but even that may not be enough to prevent some degree of price corrections later this year.”
Benjamin Chow said: “A quiet first quarter was largely the product of a liquidity crunch and interest rate volatility witnessed towards the end of last year.
“With the central bank’s more recent stabilisation of the cash rate since February, the market began to pick up towards the end of the quarter. In fact, the worst could already be behind us – office volumes in April alone had already far exceeded office investment for the whole of the first quarter.”
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