APAC Real Estate Deal Volume Falls 28% to Lowest Level Since 2012: MSCI

Trades of income-generating real estate in Asia Pacific tumbled 28 percent in 2023 to $139.7 billion, the lowest annual reading for the region since 2012, according to MSCI.

Although rising interest rates over a roughly two-year period squeezed investment, dealmaking activity picked up sharply in a few markets during the fourth quarter, the data provider said in its Capital Trends report released Wednesday.

Hong Kong began to show signs of life towards the end of 2023 with a string of office deals, led by the sale of the Nexxus Building in the city’s prime Central district to a Taiwanese tycoon for $782.3 million. A 146 percent year-on-year surge during the fourth quarter lifted the Asian financial hub’s 2023 deal volume to $8.1 billion, with the October-December period accounting for more than a third of the city’s full-year total.

Not to be outdone, regional rival Singapore equalled Hong Kong’s sum of $3 billion in the fourth quarter, which saw investment in the city-state shoot up 112 percent year-on-year to reach a 12-month total of $9.1 billion.

“Chinese investors acquired a record $1.5 billion of Singaporean properties in 2023, and this was the second consecutive year in which they had spent more in Singapore than Hong Kong,” MSCI said.

Japan Investment Cools

One of the more resilient APAC real estate markets, Japan, finished 2023 on a subdued note after a strong performance earlier in the year. Asia’s second-largest economy saw fourth-quarter deal volume dive 44 percent year-on-year due to a lack of office transactions, bringing full-year investment to $36.9 billion.

Japan’s last-quarter pullback enabled China to squeak into the top spot for the year with $37.5 billion in deal volume. The regional giant posted a modest 13 percent drop in the fourth quarter as trades of office and retail assets resumed after a mid-year quiet period.

“However, over one-fifth of the $37.5 billion of investment came from distressed property sales, which is understandable given the pressure that many developers are under to secure liquidity,” MSCI said.

South Korea was one of the few markets where the number of deals rose during the fourth quarter, while deal volume fell just 6 percent to bring the full-year figure to $18.8 billion. Price declines spurred interest in the country’s logistics sector, with notable cross-border deals by Nuveen and Warburg Pincus in the final quarter.

Australia missed the traditional year-end bounce and concluded 2023 with $16.5 billion in deal volume amid lacklustre activity in the office and retail segments.

Inbound Flows Plunge

Global investors’ share of APAC acquisition activity dipped to just 9 percent in 2023, the second-lowest level for a calendar year on record, according to the Capital Trends report.

US-based investors slashed their APAC real estate allocation by 49 percent last year compared with the 2020-22 average, while investment from Canada and Europe plunged 75 percent and 79 percent, respectively.

MSCI drew a link to the broader global narrative of investors retreating to markets closer to home, but Japan stood out as exceptional. Investors in the Land of the Rising Sun increased their cross-border real estate outlay in 2023 by 211 percent compared with the 2020-22 average, spending a greater amount last year than in the previous three years combined.

Australia was by far the biggest target of Japanese money, as evidenced by Blackstone and Mirvac’s $500 million sale of 60 Margaret Street in Sydney to Mitsubishi Estate and local partner AsheMorgan. The transaction topped the table as last year’s largest single-asset deal Down Under.