Apac Commercial Real Estate Investment Still Subdued 2Q2024 Msci
The latest Asia Pacific Capital Trends report by MSCI shows a continued lacklustre market, resulting in a decline in commercial real estate investment volume in 2Q2024. The region registered a total of US$32.4 billion ($42.4 billion) completed deals, which is a 17% decrease from the previous year. This brings the sales activity for the first half of the year to US$70.4 billion, recording a 7% decline compared to the same period last year.
According to MSCI, the decrease in investment volume can be attributed to the muted activity in the two biggest markets in the region, China and Japan. China saw a 19% year-on-year decline to US$8.2 billion, while Japan experienced a 39% decrease in sales volume to US$6 billion in 2Q2024. Benjamin Chow, head of real assets research for Asia at MSCI, stated that China’s decline was a result of weaker-than-expected GDP growth, while Japan’s plunge was due to expectations of an interest rate rise.
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However, despite the overall decline, Chow notes that there are differences in performance across different markets in Apac. He highlights that the mid-year mark has shown that price adjustments in the high-interest markets in Asia Pacific are starting to stimulate demand. As per MSCI data, while the deal volume in major Apac markets, excluding China and Japan, remained relatively unchanged, the number of deals increased for a second consecutive quarter. The report also states that these markets, which have a higher interest rate environment compared to China and Japan, are seeing an increase in demand due to the possibility of interest rate cuts in the future.
In terms of property type, hotels were the only sector to see an increase in aggregate deal volume in 2Q2024. The segment recorded a 57% year-on-year surge to US$5.4 billion. On the other hand, office investment volumes have been declining for the past eight quarters, with a 12% decrease year-on-year to US$11.3 billion. The industrial and retail segments also saw declines in investment volume, with a 35% and 18% decline respectively to US$7.2 billion and US$6.5 billion.