Where Asia-Pacific real estate investors are landing in flight-to-safety moves
Office sector continues to anchor allocations, while South Korea is emerging as a major new frontier for investment
ACROSS the region, investment trends have shifted. With a lack of capitalisation rate compression, investors are laser-focused on asset-level alpha creation. In this macro environment, returns are increasingly tied to operational execution and net operating income growth.
The success in unlocking value is derived in various stages of the deal life cycle. For the winners, it comes down to buying well, active management and, most critically, exiting at the right moment.
Sector strengths
While the logistics and industrial sector is experiencing moderate headwinds as investors and occupiers alike recalibrate to price in realities, demand for modern facilities remains robust, driven by e-commerce and optimised supply chains.
The living sector – which includes multifamily housing, student accommodation and senior living – is experiencing significant growth, fuelled by demographic shifts and urbanisation.
Data centres continue to be a magnet for investments, propelled by the exponential growth of cloud computing, artificial intelligence, and the ever-increasing demand for data storage and processing.
The cornerstone of real estate in the Asia-Pacific remains to be the office sector, with a dominance of nearly 40 per cent of overall allocation.
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In some markets, prime office assets are seeing increasing occupancy, rental growth and positive yields, driven by demand for newer, sustainable buildings. Supply constraints from high construction costs are limiting new prime developments, tightening top-tier vacancy rates.
This scarcity, combined with economic tailwinds, ensures sustained demand for quality office space, making acquisitions a strategic long-term play.
Also seen is a preference divergence between assets with long-term inflation-linked leases and those able to reset market rates more frequently. Hotels and the various living products that have an operational layer have the ability to move average daily room rates on a short-term basis.
Falling costs and a drive for energy security are fuelling a surge in corporate clean energy procurement. Companies are increasingly using direct power purchase agreements (PPAs) to secure long-term, low-cost renewable energy, meet sustainability goals, and provide stability for developers, with 173 corporate PPAs totalling 9 gigawatts signed in 2024.
South Korea drawing attention
Undoubtedly, the weakening of the US dollar is contributing to the attractiveness of the Asia-Pacific. As the greenback continues to lose its dominance, regional currencies will gain competitiveness, making assets priced in these currencies more appealing to global investors.
The Asia-Pacific recorded US$8.6 billion in cross-border investment volumes in the first quarter of 2025, a staggering 152 per cent year-over-year increase. This trend is likely to continue, and capital will keep flowing into the region.
Central to regional growth is Singapore, which recorded a 16 per cent increase in investment volumes, underscoring the small island nation’s pivotal role in the Asia-Pacific.
The results are not simply a matter of geographical luck, but a testament to Singapore’s well-regulated market, transparent governance and proactive approach to drawing foreign investment.
Singapore has remained attractive to investors looking for stable and defensive assets. Economic uncertainty has prompted a shift away from office transactions, with investors increasingly targeting higher-yielding assets such as logistics, data centres, hospitality-related properties, and properties with value-add or conversion potential.
This trend is expected to define the market moving forward.
Beyond established hubs, South Korea is increasingly drawing attention. Its new government’s supportive policies are fostering an environment that could see it emerge as a significant new frontier for commercial real estate investment, akin to Japan.
The South Korea market had US$6.8 billion in Q1 investment, a 58 per cent year-over-year rise, fuelled by improved foreign and domestic institutional sentiment and the declining cost of debt.
This drove a 74 per cent year-on-year surge in Q1 office transactions in Seoul and intensified competition for logistics assets. Its proactive approach to attracting foreign investment positions it as a compelling growth story.
While often overshadowed by institutional players, private wealth has steadily amassed a formidable portfolio, investing more than US$1.5 trillion globally in direct commercial real estate over the last decade, with the Asia-Pacific capturing over US$300 billion of that total.
These investors, whether individual or pooled, are increasingly drawn to real estate’s stability amid volatile financial markets, positioning them as an integral and growing force.
Key trends to watch
Over the coming months, the Asia-Pacific’s commercial real estate market faces both challenges and opportunities. To navigate the evolving landscape, investors must monitor several key factors. New tariffs threaten to reshape logistics, while market volatility demands a sharper focus on commercial real estate pricing.
However, financing dislocations are creating attractive risk-reward scenarios for international lenders and private credit investors. Furthermore, operational real estate sectors such as data centres, self-storage and hospitality are poised for growth.
Underlying all these trends is the growing importance of sustainability, with metrics such as the National Australian Built Environment Rating System directly impacting property yields and vacancy rates.
Yield compression is a key trend to watch in certain Asia-Pacific markets and sectors. As demand for commercial real estate assets increases, yields are being pushed lower, making it more challenging for investors to find attractive returns.
However, financing conditions remain relatively favourable, with debt readily available for well-structured deals.
The long-term success of the Asia-Pacific’s commercial real estate market hinges on more than just favourable currency dynamics. It requires a continued commitment to sound economic policies, infrastructure development, and a willingness to adapt to evolving investor preferences.
While specific sectors such as logistics and data centres are currently experiencing strong demand, it is crucial to identify and nurture emerging opportunities in areas such as sustainable development and technology-driven real estate solutions.
By embracing innovation, fostering transparency, and prioritising long-term value creation, the Asia-Pacific can solidify its position as a global leader in commercial real estate investment.
The flight to safety is underway; it’s up to the region to ensure it continues to provide a safe and prosperous landing.
The writer is CEO of Asia-Pacific capital markets at JLL
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