INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP
however, are not willing to sell at these lower values. The result has been a dramatic drop in transaction activity. MSCI Real Capital Analytics estimated that real estate sales decreased by 51% from 2022 to 2023, and the Urban Land Institute reported that global transaction activity within commercial real estate was lower in 2023 than in any year since 2012. Anyone working in this space (presumably anyone who may be reading this global guide) has seen more recent examples than they would care to of buyers and sellers starting down the road to transact but ultimately finding themselves unable to bridge the bid-ask gulf. The results, at a macro level: • Very few deals occurred. It qualifies as rela - tively good news that Asia-Pacific volume, after an uptick in the final quarter of the year, was down only 17%, with some markets such as Hong Kong and Australia actually expand - ing volume, according to real estate advisers JLL. On the other hand, property agents Col - liers reported that direct investment in major European markets in commercial real estate was down 50% from 2022 – a ten-year low. In the US, according to Altus Group, only about USD190 billion was invested in traditional property classes for the year, down by almost half from 2022, with overall transaction vol - ume down 55% from 2021, making 2023 the slowest year since 2013. • Sticking close to home: the activity that was seen in 2023 was largely focused on investing domestically. A Real Capital Analytics study showed that global cross-border real estate activity in 2023 was down 40% from its five- year average. This was most pronounced in EMEA (down 59%) and the US (off 56%), in large part due to Asian funds staying home or at least in-region. Global funds transactions among Asian investors were down 64% year-
on-year in the third quarter of 2023, accord - ing to professional services network PwC. • Banks and owners spent more time fixing their debt portfolios, and for good reason: according to a recent • Wall Street Journal article, close to USD550 billion in loans linked to commercial proper - ties matured last year. Ratings agency Fitch anticipates that almost 5% of loans in com - mercial mortgage-backed security pools will be delinquent at the end of the year, with potentially 10% of those tied to office properties in default by some point in 2025. A significant number of owners will lose out before seeing a reset in debt costs, but in the meantime, there is sufficient appetite in both the investor and lender worlds to continue extending and restructuring loans. New loan issuances, by contrast, were down 43%, according to the Mortgage Bankers Associa - tion. • Investors, seeing better returns in safer plac - es, could not be bothered. As but one exam - ple, according to JLL, among US closed-end funds, fundraising was down nearly a third in 2023 from the year prior, to just USD142 billion. Investment data company Preqin reported that less than half as many funds closed in the first three quarters of 2023 as in the year before. Private funds in Asia-Pacific play a smaller role, but even there, new fund closings were off by more than 50% from 2022. Some of this unavailability of new funds is offset by the lack of transactions clos - ing, although global commercial real estate company CBRE’s European Market Outlook for 2024 indicated that funds on the continent were sitting on USD66 billion in dry powder for European deployment alone. Value reductions in 2023 were much smaller in Asia, which may indicate an earlier bottoming
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