Apac Commercial Real Estate Investment Still Subdued 2Q2024 Msci
In the second quarter of 2024, Asia Pacific (Apac) saw a continued decline in commercial real estate investment volume, as the market remained lacklustre according to the latest Asia Pacific Capital Trends report by MSCI.
The region recorded a total of US$32.4 billion ($42.4 billion) worth of completed deals, a 17% year-on-year decrease. This brings the total sales activity in the first half of the year to US$70.4 billion, down 7% compared to last year.
MSCI attributes the decline to subdued activity in the two largest markets of the region, China and Japan. China saw a 19% year-on-year drop in investment volume, recording only US$8.2 billion in the second quarter of 2024. Meanwhile, Japan experienced a more significant 39% year-on-year decline, with sales volume plunging to US$6 billion during the same period. Benjamin Chow, head of real assets research for Asia at MSCI, notes that this decline in China can be attributed to weaker-than-expected GDP growth, while in Japan, expectations of an interest rate rise took center stage.
However, Chow also points out that there are significant differences in the performance of different Apac markets. “One key observation at the mid-year mark is that price adjustments in the high-interest markets of Asia Pacific are finally stimulating demand,” he says.
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According to MSCI data, while deal volume in major Apac markets, excluding China and Japan, remained relatively flat, the number of transactions increased for the second consecutive quarter. MSCI also notes that these markets, which have higher interest environments compared to China and Japan, are seeing an increase in demand due to the possibility of interest rate cuts in the near future.
In terms of property types, hotels were the only sector to see an increase in aggregate Apac deal volumes in the second quarter of 2024. The segment recorded a 57% year-on-year surge to US$5.4 billion. On the other hand, office investment volumes continued to decline for the eighth consecutive quarter, falling 12% year-on-year to US$11.3 billion. The industrial and retail segments also saw a decline in deal volumes, with drops of 35% and 18% year-on-year respectively, reaching US$7.2 billion and US$6.5 billion.