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Asia Pacific Q4 2022 Commercial Property Deal Volume Weakest Since 2012: MSCI Report

Asia Pacific Q4 2022 Commercial Property Deal Volume Weakest Since 2012

Feb 18- 2023 – Commercial property deal volume tumbled in Q4 2022 as interest rate hikes and uncertainty about the pricing outlook took their toll, according to the latest Asia Pacific Capital Trends report from MSCI Real Assets, a part of MSCI. 

Concerns about economic growth also held back buyers and sellers. The deal volume of income-producing properties totaled US$32.6 billion; a 52% decline relative to the year-earlier period. This was the weakest fourth quarter for dealmaking since 2012, MSCI Real Estate said in a report.

For the year in total, deal activity came to US$171.2 billion, a 24% decline on 2021.

China Was the Largest APAC Market in 2022, Despite Tumbling Deal Volume

Deal activity in China tumbled by about one-third in 2022 versus 2021, but despite the drop, it was the largest market in Asia Pacific in 2022. For the fourth quarter, deal volume halved versus the same period in 2021, and it would have been worse but for a flurry of large office deals in Shanghai and Beijing. Shanghai’s resilience in 2022 despite lockdowns was a remarkable story, as it was the biggest office market in the region in terms of trading volume, edging out Tokyo for only the second time.

Japan Outshines Peers in 2022

Japan outshone its regional peers in 2022 with a shallower drop in deal activity than seen elsewhere in APAC. Investment volumes in the fourth quarter dropped by about 20%, in contrast with declines of 40-60% for the other major markets. Unlike many Asia Pacific economies, rising interest rates could not be held to blame in the region’s second largest market. Instead, it appears that global economic woes crimped dealmaking. The standout deal which did reach completion in the fourth quarter was the sale of a portion of Otemachi Place in Tokyo’s CBD for US$3.2 billion.  

The multifamily sector continued its seemingly inexorable growth, with a fourth consecutive record year in 2022 in terms of the number of deals above US$10 million. Yields continued to contract, falling 20 basis points through the year.

Singapore Bucks the APAC Trend as 2022 Deal Activity Surpasses 2021

Singapore was a standout market regionally and globally in 2022, posting deal volumes greater than in 2021. Volume exceeded US$10 billion, which was the second year that the city-state reached this milestone. Inflows from overseas investors also increased in 2022 relative to 2021.

For the fourth quarter, however, Singapore could not escape the region-wide downturn, and trading volume fell 41% year-over-year.