Apac Commercial Real Estate Investment Still Subdued 2Q2024 Msci
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The latest Asia Pacific Capital Trends report by MSCI reveals a continuing decline in commercial real estate investment volume in 2Q2024, reflecting a lackluster market in the region. According to the report, completed commercial real estate deals in Apac totaled US$32.4 billion ($42.4 billion), marking a 17% y-o-y decrease. This brings the total sales activity for the first half of the year to US$70.4 billion, down 7% y-o-y.
The decline in deal volume can be attributed to subdued activity in the region’s two largest markets of China and Japan. China saw a 19% y-o-y drop in investment volume to US$8.2 billion, while Japan experienced a significant 39% y-o-y decline to US$6 billion in the same period. MSCI’s head of real assets research for Asia, Benjamin Chow, notes that China’s decline is a result of weaker-than-expected GDP growth, while Japan’s plunge was influenced by expectations of a rise in interest rates.
Despite this, Chow points out that there are divergences across various markets in Apac. He highlights that the mid-year mark has shown that price adjustments in high-interest markets have finally stimulated demand. MSCI data reveals that deal volume in major Apac markets, excluding China and Japan, remained relatively steady, but the number of deals has increased for the second consecutive quarter. These markets, with higher interest environments compared to China and Japan, are seeing demand boosted by the possibility of future interest rate cuts.
When it comes to property types, hotels were the only sector that saw an increase in aggregate Apac deal volumes, with a 57% y-o-y surge to US$5.4 billion. Office investment volumes, on the other hand, recorded an eighth consecutive quarter of decline, dropping 12% y-o-y to US$11.3 billion. The industrial and retail segments also reported significant declines, with 35% and 18% y-o-y falls to US$7.2 billion and US$6.5 billion respectively.