Asia-Pacific commercial property deals hit 10-year low and called-off purchases spike as interest rates freeze investment

In the July-to-September period, commercial real estate deals in the region fell by about 40 per cent to US$33 billion, according to MSCI

Sluggish deal-making is likely to persist well into next year, analysts say

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Korean asset manager Mirae Asset Global Investments’ US$3 billion purchase of the International Finance Center Seoul from Brookfield Asset Management fell through during the third quarter. Photo: Shutterstock

Published: 9:30am, 20 Nov 2022

Sluggish deal-making in the commercial property market across Asia-Pacific is likely to persist well into next year after third-quarter transaction volume in the region fell to the lowest level in 10 years, according to analysts.

In the July-to-September period, commercial real estate deals in the region fell by about 40 per cent to US$33 billion, the worst quarter since 2012, according to MSCI. The slump likely reflects the increasing cost of money as monetary authorities across the globe tighten policy to curb runaway inflation, the investment research firm said.

The percentage of announced transactions that failed to materialise increased to 3.5 per cent in the quarter, far above the long-term average of 1 to 1.5 per cent.

“The rapid changes in the macroeconomic environment are now bearing down hard on the commercial real estate market, and the slowdown has deepened in the third quarter,” said Benjamin Chow, head of Asia real assets research at MSCI. “Not only is new deal-making activity dwindling, but deals are also falling through, which is a negative signal for upcoming quarters.”

A man takes picture along Boat Quay in Singapore on October 20, 2022. Analysts predict a slump in commercial property transactions could last into the second half of 2023 or longer. Photo: AFP

One of the highest-profile deals that fell through was South Korean asset manager Mirae Asset Global Investments’ US$3 billion purchase of the International Finance Center Seoul from Brookfield Asset Management.