Emerging Trends in the APAC Region

The Asia Pacific commercial real estate market is poised for measured growth in 2025, supported by resilient economic conditions and favourable interest rate trends. However, performance will diverge across submarkets, shaped by domestic policies, the U.S. Federal Reserve’s policy, and global trade dynamics.

India, Australia, and Japan are expected to see accelerated GDP growth, while economic activity moderates in Greater China and Korea. Although the Federal Funds Target Rate is projected to decline, most Asia Pacific central banks will adjust rates accordingly, except Japan. Meanwhile, potential U.S. tariff expansions may pressure export-driven economies like Vietnam, Japan, and Korea, prompting Chinese manufacturers to explore alternative supply chains.

Investor sentiment has improved, with net buying intentions rising to 13% in 2025. Investment volumes are forecasted to grow by 5-10% year-on-year, driven by activity in Australia, Singapore, Korea, and Hong Kong SAR, alongside sustained interest in India and Japan. Yield expansion is likely in Greater China, while compression may continue in Japan and Australia.

A flight-to-quality trend is shaping the commercial sector, with occupiers favouring premium, ESG-compliant office spaces. This is boosting rental growth in Australia while keeping rents under pressure in China. In industrial and logistics, India leads rental growth, while Greater China faces rising vacancy. Supply is increasing in Vietnam, Australia, and Singapore but stabilising in Korea, Japan, and Hong Kong.

Economic Outlook: Moderate Growth, Rate Adjustments, and Trade Policy Implications

Regional GDP growth reached 3.9% in 2024 and is projected to edge higher to 4.1% in 2025. India will remain a key driver, supported by increased government expenditure and rising export demand from the U.S. Australia’s economy will strengthen, fuelled by an expanding migrant workforce and growth in services exports. Japan’s expansion will be underpinned by sustained inbound tourism, gradual improvements in domestic consumption, and a recovery in real incomes. However, growth will moderate across Greater China, Korea, and Singapore.

CBRE forecasts a reduction in the Federal Funds Target Rate by 50-75 basis points to 3.75-4% by the end of 2025, mitigating inflation risks while sustaining economic stability. Most Asia Pacific central banks—including those in India, Australia, China, New Zealand, Korea, Hong Kong, and Taiwan—are expected to lower policy interest rates. Japan remains an exception, with rates projected to rise from 0.3% in 2024 to 0.8% by 2025.

The proposed U.S. tariffs on imports could impact American-export-dependent economies such as Vietnam, Japan, and Korea. A potential 60% tariff on Chinese imports is widely seen as a negotiation tool, leading manufacturers in China to diversify supply chains under the China Plus One strategy.

Capital Markets: Strengthening Buying Sentiment & REIT Recovery

Net buying intentions in Asia Pacific rose to 13% in CBRE’s 2025 Investor Intentions Survey, reflecting increased investor confidence across most markets outside mainland China. The most significant sentiment shifts were observed among investors in Singapore and Hong Kong SAR, as well as asset managers in Australia and Korea, drawn by attractive valuations. Japanese investors are expected to maintain a net buying stance, with both domestic and cross-border investment activity remaining robust.

REITs have signalled a shift towards acquisitions in 2025, with net buying intentions reaching 22%, a notable recovery from -13% the previous year. Lower central policy rates are expected to fuel further activity among REITs, private equity funds, real estate funds, and institutional investors, including insurance companies and pension funds.

Office: Flight-to-Quality Drives Leasing & Rental Trends

Office leasing demand remained resilient in 2024 and is set to continue in 2025, driven by corporate priorities around workplace optimisation and talent attraction. Companies are adopting a selective approach, favouring high-quality, ESG-compliant spaces. Japan and India are expected to lead leasing activity, while Seoul faces constraints from limited new supply. Mainland China remains subdued, though stimulus measures may gradually boost demand.

Grade A office rents in most Asia Pacific markets are expected to grow at a modest 2-3% year-on-year, with stronger gains projected in Melbourne and Singapore due to supply constraints and steady economic performance. Brisbane and Sydney’s core CBDs are set to lead rental growth, albeit at a slower pace than previous years. India’s major cities will continue to see robust rental increases, while Greater China faces downward pressure, with rents projected to decline by 5-10% due to rising vacancies.

Industrial & Logistics: Cost-Conscious Leasing, Rising Vacancy & Limited Rental Growth

Cost and efficiency will drive logistics leasing in 2025. Renewals and consolidation in prime hubs will dominate, while net new demand remains limited. Manufacturing demand, particularly in high-tech and automotive, will remain near production centres, though uncertainty over U.S. tariffs may slow expansion. E-commerce leasing is rebounding in Australia, Japan, and India, while China faces downsizing.

Logistics supply will peak at 160 million sq. ft. in 2025, up 4% year-on-year, exerting short-term leasing pressure. Greater Seoul’s supply will decline 70% year-on-year, easing vacancy over time. Tokyo’s occupancy will improve as supply stabilises. Oversupply in China will push vacancies to record highs in Beijing and Guangzhou, though Shenzhen may benefit from solid demand. Vietnam’s record supply will cause moderate vacancy increases, while Singapore’s 5 million sq. ft. expansion will see landlords offering flexible terms. Australia’s 26 million sq. ft. pipeline will have a moderate vacancy impact, with Sydney’s 50% pre-commitment rate mitigating risks. Hong Kong SAR, with no new supply until 2027, will still face rising vacancy as occupiers consolidate.

Rental growth will remain subdued, stabilising in H2 2025 as supply pressures ease. India will lead rental growth, driven by expanding e-commerce and manufacturing. Australia’s rents will rise with development costs, while super prime logistics spaces will outperform lower-grade assets due to a flight-to-quality trend.

Retail: Improved Sentiment, Selective Leasing & Mild Rental Growth

Asia Pacific’s strong job market will support steady consumer spending in 2025, helping domestic consumption rebalance against robust tourist-driven retail. India and emerging Southeast Asia show the most optimistic leasing outlooks, attracting global retailers due to a rising middle class and improved mall infrastructure. While political uncertainty in Korea may delay retail expansion, China’s stimulus measures should boost sales, though leasing demand will remain cautious.

Retailers will focus on high-profile locations amid rising fit-out and operational expenses, leading to prolonged lease negotiations. The F&B sector will drive demand, though expansion will slow, with bakeries and coffee shops showing stronger interest than high-end restaurants. Experiential retail, including toys and entertainment, will sustain demand.

Luxury brands will slow expansion due to weaker sales, prioritising efficiency and cost-cutting. In contrast, mid-priced designer labels, streetwear, and sporting goods retailers will be more active, though they will favour smaller prime units over large flagship stores. Prime core retail assets remain highly preferred, but tight vacancies in markets such as Australia and Japan will restrict leasing.

Conclusion: A Region of Diverging Real Estate Trends

The Asia Pacific real estate market will see contrasting trends in 2025, shaped by economic conditions, trade policy, and monetary shifts. While India, Australia, and Japan experience strong investment and rental growth, Greater China and Korea will face challenges from moderating demand and rising vacancies. Investors and occupiers will remain selective, prioritizing high-quality, ESG-compliant assets amid a shifting economic landscape. As global macroeconomic factors continue to evolve, divergence in regional market trends will define Asia Pacific’s real estate trajectory in the coming year.