India Still a Potential Market Despite the APAC Commercial Real Estate Deals’ Tough Spell in Q3!
Asia-Pacific commercial real estate hit a three-year low in third-quarter 2023, with deal volumes falling 37 percent year-on-year to $25,7 billion, according to a report from MSCI, the region’s largest commercial real estate market, and the lowest level since 2010. The report says the previous quarter was promising, but the story of a “higher for longer” interest rate environment put a damper on optimism for an early rebound. Most of the region’s countries saw a decline in deal volume. India accounted for 44 percent of the increase at $1,5 billion, led by Brookfield’s $683 million sale of 50 percent of its Mumbai office portfolio to Singapore’s GIC.
India has consolidated its position as one of the world’s most promising emerging markets, and activity has continued to recover from the lows of late last year. The overall weakness in the APAC ex-India region was mainly driven by the office sector, with several deals that were expected to close in the third quarter failing to do so, particularly in Korea. Other economies such as South Korea and Australia, as well as Singapore and Hong Kong, remained subdued. In the China property market, the country recorded the highest deal volumes in the third quarter at USD 7.4 billion, however, it was 22 percent lower on a year-on-year basis. The market saw significant price drops across most segments and a wave of distressed sales. Global investors have stayed away, and listed developers’ investments have fallen to a record low.
Japan, which recorded a 27 percent decline in deal volume in the fourth quarter, was the largest commercial real estate market of APAC in both terms of volume and number of deals in the first 9 months of 2023, according to the MSCI report. Growth was limited in the office sector, which recorded a historic low in volume. According to the report, the APAC region lags behind the global market in price discovery. Price adjustments in reaction to interest rate hikes were a necessary condition for a revival in investment activity, although there were other macro concerns, such as the conflict in Western Asia. India In India, the capital market activity in the commercial real estate sector increased with more domestic participation. The number of deals over $10 million increased compared to the same period last year, reaching a new peak.
According to the MSCI report, “Over the past 12 to 15 months, US, Canadian, and European investors have significantly reduced their acquisitions across the region, with each group spending more than 50 percent less in the first 9 months of the year than the same period in 2021-2022.” According to the report, investors from Singapore have replaced them by investing in countries like Japan, India, and South Korea, although they have decreased their investment in Australia and China.
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