2024 Winter Issue of Urban Land - 87

ASIA REAL ESTATE TRANSACTION VOLUMES BY SOURCE OF CAPITAL, AND YEAR-ON-YEAR PERCENTAGE
CHANGE, 3Q 2-23
Source: MSCI Real Capital Analytics.
Note: Apartment, hotel, industrial, office, retail, and senior housing transactions included. Entity-level deals included.
Development sites excluded.
with borrowers seeking capital in an elevated rate
environment that may trigger a wave of sales by
owners who are unable or unwilling to recapitalize
assets.
Nonbank financing steps up. One consequence
of newly tightened bank lending regimes is that
real estate debt is now being offered by significant
numbers of nonbank players, including institutions
and private equity funds. It marks the start of what
may be a fundamental shift away from traditional
bank-dominated real estate lending and toward
nonbank debt structures similar to the more mature
private credit markets in the U.S. and Europe.
Transition risk comes to the fore. Investors fear
that buildings which fail to comply with baseline
environmental standards will be discounted by both
tenants and investors, even as such structures face
increased regulatory pressure. Attention to transition
risk varies widely, however, depending on the type
of asset owner and the geography, with Australia,
Singapore, and Japan currently leading the way.
Top markets
Findings from this year's Emerging Trends investment
prospects rankings reveal a surprisingly optimistic
outlook. Sentiment overall registered levels slightly
lower than ones in the 2023 report, but roughly on
par with surveys in 2021 and 2022. Six cities scored
in the " generally good " category, versus seven last
year.
Japan: The low cost of capital has made Japan the
overwhelming favorite among cross-border investors.
Tokyo and Osaka scored first and third, respectively,
for city investment prospects. Japan's large and
liquid markets have long been seen as a safe harbor
in times of economic retrenchment. In addition, the
country is probably capturing capital that might
otherwise have been earmarked for China.
Australia: Strong rankings for both Sydney (no. 2)
and Melbourne (no. 5) underline continuing interest in
Australian assets. Australia has been an early leader
in repricing of assets. In addition, several interviewees
identified Sydney grade A office as a promising
trade for 2024, betting on tenants upgrading from illlocated
grade B buildings.
Singapore: Investors continue to see Singapore as a
viable core market, given its limited supply, booming
demand for space, and prospects for rental growth
that are among the highest of any Asia Pacific city.
Although institutional owners have been resistant to
the idea of cap rate expansion, high-net worth buyers
have been actively acquiring smaller properties.
Seoul: Despite the city's near-zero-vacancy office
sector, a bank-sector liquidity crisis generated a
wave of distress sales during the first half of 2023.
Investors flocked to buying opportunities, making
Seoul one of the strongest transactional office
markets globally in the second quarter of the year.
Current sales activity is driven largely by cash-rich
domestic investors.
At the opposite end of the spectrum, Beijing,
Guangzhou, and China's second-tier cities all scored
in the " generally poor " category. UL
BETH MATTSON-TEIG is a freelance business writer and editor based
in Minneapolis.
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