
DNE’s Shanghai Jinchuang Building was one of the few large assets changing hands in China (Image: DNE Group)
Investment in income-producing properties in Asia Pacific fell 40 percent year-on-year to $31.7 billion in the second quarter of 2023, weighed down by China’s economic slump and a lack of big-ticket office deals, according to MSCI Real Assets.
Office acquisitions across APAC in the April-June quarter fell 56 percent year-on-year to $10.7 billion, the data provider said in its Capital Trends report. First-half office investment reached $23 billion, which was down 50 percent from the year-earlier period.
South Korea proved an outlier, with a flurry of office deals in the second quarter after a quiet first three months, and the region’s overall deal volume eclipsed activity at the start of the year, offering room for optimism.
“Many signs point to the descent nearing the bottom, and there has already been a pickup in activity for specific sectors and markets,” said Benjamin Chow, head of Asia real assets research at MSCI. “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.”
Bright Spot Amid Gloom
Office deals in South Korea totalled $3.8 billion in the second quarter — representing 12 percent of global office volume during the period — as tight vacancy and strong rental growth helped boost the market, MSCI said. When factoring in completed and pending third-quarter office deals, the country’s global share rises to nearly 20 percent.

Benjamin Chow, head of Asia real assets research at MSCI
South Korean office transactions accounted for three of the top 10 single-property sales in APAC during the first half, a feat made all the more impressive given the country’s elevated interest rates compared with levels in China and Japan.
“With office price expectations so narrow, South Korea has proven to be one of the more investable office markets worldwide, accounting for close to 60 percent of investment volumes in South Korea this quarter,” Chow said.
Nonetheless, total deal volume in South Korea fell 37 percent year-on-year in the second quarter to $6.7 billion as retail and logistics acquisitions slowed, though that showing was still good enough for second place in the region behind Japan’s $7.5 billion, with the value of deals in Asia’s second-largest economy down 22 percent.
Japan recorded the largest single-property APAC deal tracked by MSCI in the quarter: Tokyu Land’s sale of the Tokyu Plaza Ginza mall to Sumitomo Mitsui Trust Panasonic Finance. The agreed price was unavailable, but the property was worth more than $1 billion based on its 2022 book value. Other large deals during the period included KKR and Gaw Capital’s acquisition of the Hyatt Regency Tokyo from Odakyu Electric Railway for $409.3 million.
“Overseas investors were all over Japan in the second quarter, drawn by the positive yield spreads still on offer,” said David Green-Morgan, global head of real assets research at MSCI.
Broader Weakness
In China, previously APAC’s largest investment market, second-quarter deal volume slid 44 percent year-on-year to $6.1 billion, which was good for third place in the region. The mainland squeaked onto the top 10 list of first-half deals with AIA Group’s acquisition of DNE Group’s Shanghai Jinchuang Building for $462.9 million.
Hong Kong posted just $1.3 billion in closed deals, the market’s weakest second-quarter performance on record, while Singapore’s $1.8 billion was enough for fifth place but was still down 65 percent from year-earlier levels. The largest deals in China, Hong Kong and Singapore were for development sites.
The region’s fourth-place finisher, Australia, saw second-quarter volume plunge 59 percent to $3.6 billion as a booming multi-family segment failed to offset the absence of office deals.
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