INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP
out and start of the recovery cycle in Western markets, while investors in APAC wait out repric - ing exercises. That said, PwC reported that com - mercial volume was down 25% in the first three quarters of 2023 in China, with many funds and other players stepping out of the market indefi - nitely. The collapse of Evergrande and Country Garden, in part due to changes in central gov - ernment policy, may hamper inbound as well as domestic investment in the market for the fore - seeable future. Australia may also be an outlier, as its upward interest rate swing was steeper than in other markets in the region. Not all was grim, however. There was investment activity in certain asset classes, including data centres, housing, cold storage, medical office and life science assets. The data centre space was the best performing asset class in 2023. The rise of artificial intel - ligence, along with cryptocurrencies, stream - ing services and other heavy computing power usages, are combining to fuel the need for ever more data centre space. According to CBRE, North American deliveries increased 26% from 2022 to 2023, and current construction projects were up almost 50% from the previous year. A Cushman & Wakefield study predicts a 2.5 times increase in data centre capacity in the Ameri - cas, a two times increase in EMEA and a 2.2 times increase in APAC. Research firm Renub predicts that, within four years, the Asia-Pacific data centre market alone will be worth USD54 billion. US investment management firm PIMCO recently announced the launch of its first Euro - pean data centre fund, targeting a EUR750 mil - lion fundraise. Although the demand is strong and predicted to grow, one challenge faced by this sector is the availability/sufficiency of power and, in some markets, the availability of land.
Longer term, analysts are nearly unanimous in seeing increased activity in the housing markets. Ageing populations, especially in East Asia and Europe, lack of affordable housing in Western urban centres, and the demand for education are starting to strain current inventory, so construc - tion growth in senior, student and affordable multi-family housing, in particular, is anticipated. 2024 Outlook: Have We Reached the Bottom of the Market? There are some signs of light at the end of the tunnel. In a recent consensus forecast from the Pension Real Estate Association (PREA), inves - tors predict a gradual improvement in 2024 and beyond, and a recent CBRE survey reveals high - er purchasing and selling expectations for 2024 compared with 2023, amid growing optimism that the real estate investment market will return to normalised levels of activity in the short to medium term. A number of the largest commer - cial real estate investors have indicated that they believe that the market is close to, or already at, the point where significant investment opportu - nities will arise. For example, with Blackstone recently announcing its USD10 billion acquisi - tion of AIR Communities and its USD3.5 billion agreement to take single-family landlord Tricon private, President Jonathan Gray told investors that the firm believes that real estate values are bottoming and he expects deal activity to pick up. More generally, US transaction volume start - ed to rebound in the last quarter of 2023, ris - ing by more than a third from the prior quarter’s doldrums, according to Altus Group. European investment volumes started to pick up slightly in the fourth quarter, too, according to CBRE, with large upticks in the Nordic markets, Spain and Italy. A year ago, one of the topics of the day was distressed debt, and how resolving the difficul -
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