When PERE hosts a roundtable discussion, it is customary for us to ask participants to pick transactions that reflect salient themes happening in the market. At this year’s PERE Asia Roundtable, which you can read here, the participants picked deals that fell apart instead.

Claire Tang, co-chief investment officer, Asia-Pacific and head of greater China at Chicago-based manager LaSalle Investment Management, selected Toronto-headquartered manager Brookfield Asset Management’s sale of the office-led Seoul IFC complex to Korean manager Mirae Asset Management. The deal for the property – comprising three office buildings, a shopping mall and a Conrad hotel – was intended to be held in a $3 billion REIT, but plans were scuppered by the Korean government over concerns of high levels of borrowing.

In a second example, Adrian Baker, chief investment officer for APAC at Los Angeles-based manager CBRE Investment Management, pointed to Singapore state fund GIC and Sydney-based manager Charter Hall’s withdrawal from their purchase of Southern Cross Tower in Melbourne, again from Brookfield, which was selling alongside New York-based sector giant Blackstone. That deal, which collapsed in the summer, was supposed to fetch approximately $2.1 billion. Baker described the deal as an early example of how rising interest rates “really changed the market.”

These deals exemplify a spike in pulled deals in the region. According to data provider MSCI Real Assets, 19 percent of the total deals in Asia were terminated, the highest percentage since the global financial crisis. By comparison, terminated deals reached 12 percent in 2019 at the start of the coronavirus pandemic.

Beyond these terminations, MSCI Real Assets also recorded a fall in transactional activity in the region by 38 percent to $32.6 billion for the third quarter. The firm said that measure brought APAC volumes for the first three quarters of this year down 16 percent to $132 billion.

Such evidence runs counter to the belief that somehow Asia is demonstrating a degree of insulation from the economic malaise besetting the West.

While PERE’s roundtable participants agreed that signs of distress were yet to materialize, they have witnessed a growing reluctance to transact amid fears the rising interest rate story – Japan aside – still has some way to go. The freeze gripping North America and Europe has likewise taken a hold of Asian private real estate markets.

And as elsewhere, investors that remain active during this period of price rediscovery are expected to prioritize strategies “more resilient to unusual economic pressures,” stated the Emerging Trends in Real Estate Asia Pacific Report, co-authored by the Urban Land Institute and advisory firm PwC. The report, published last week, described resilient real estate as offering features including rent indexation, shorter lease terms and reliable recurrent incomes. In practice that means buying into “new economy sub sectors,” including data centers, cold storage properties, life science offices and self-storage, alongside the already institutionalized multifamily, hotel, senior living and logistics sectors.

With large office and mall transactions – which historically dominated Asia’s private real estate transaction volumes – now out of favor and many of what ULI and PwC consider as “resilient” sectors yet to reach institutional scale, it is reasonable to forecast lower transaction volumes in the region for longer. Even if next year’s Asia Roundtable participants are not reflecting on collapsed deals, they are less likely to point toward the multi-billion-dollar office tower trades that have defined investment volumes in the region for so long.