Asia Pacific commercial real estate investment volume grows in Q1 2025

HONG KONG, 8 May, 2025 – Commercial real estate (CRE) investment in Asia Pacific rose 20% year-over-year (YoY) in Q1 2025 to US$ 36.3 billion, reaching the highest first quarter level since the 2022 rate hike cycle, according to data and analysis by global real estate consulting firm JLL (NYSE: JLL). Despite the threat of tariffs, the region recorded a sixth quarter of YoY growth, with all property sectors except industrial & logistics experiencing higher investments, demonstrating investors’ commitment to rational decision making grounded in objective fundamental analysis.

2025 saw the highest Q1 cross-border volumes since 2019, with Asia Pacific notching US$ 8.6 billion in cross-border investment volumes, a 152% YoY growth. The most attractive sectors to overseas investors were office, logistics, and living assets.  Global capital sources made large acquisitions in Japan across the office and retail sectors. Japan has retained its position as the region’s top market for receiving foreign investments, due to positive yield spreads across all sectors despite rising interest rates, with US$ 13.7 billion recorded in Q1 2025, a 20% YoY increase, and the highest Q1 level in five years in Japan.

Hong Kong’s investment volumes of commercial properties over HKD 50 million were USD 850 million (about HKD 6.59 billion) in the first quarter of 2025, falling 17.8% year-over-year. Investment sentiment remained subdued as interest rates remained high. Transaction volumes were supported by distressed asset sales. Investors remained cautious and were generally searching for opportunities offering yields at or above 6%, as the cost of debt for core real estate financing stood at above 5%.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong, said: “Currently, the overall capital values of the city’s commercial real estate are declining due to uncertainties surrounding US tariff and interest rate policies. However, this situation presents a buyer market for investors seeking value-based assets, especially for end-users. A recent example is the Hong Kong Stock Exchange's acquisition of nine office floors in One Exchange Square in Central. End-users are expected to remain active in the market this year. The industrial and logistics properties market was dominated by smaller transactions as institutional investors remained on the sidelines amid the high interest rate environment,”

“Looking forward, investment volumes are expected to remain at a relatively low level as investor sentiment would not improve significantly when the financing cost is higher than property return. However, interest rate cuts by the US Fed and China's stimulus package would likely raise investor confidence,” he added.

"The continued growth in Asia Pacific commercial real estate investment is a testament to the region's strong fundamentals and attractiveness to global capital," said Stuart Crow, CEO, Asia Pacific Capital Markets, JLL. "While short-term tariff-induced market volatility might give investors cause for temporary pause on LARGE deal activity, property investors with a long-term horizon, looking for stable income streams and higher yields will continue to allocate into this resilient asset class as it remains relatively insulated from short-term fluctuations. We continue to be of the opinion that the Asia Pacific region will be a net beneficiary of cross border capital flows”

In the face of tariffs, CRE investment could be cheaper for regional and global investors into Asian markets.

The US tariffs will impact countries through slower GDP growth, with US export-reliant markets such as Vietnam, Malaysia, and South Korea expected to be the hardest hit by tariffs. With lower growth expectations and recession fears, leasing and investment across all CRE sectors could be affected. Employment growth affects demand for office space and consumer spending translates to retail sales volumes, which impacts retail leasing.

The logistics sector is expected to experience impact, with reduced trade or diversions in distribution routes changing stock requirements. For example, warehouses near Nagoya Port, the largest in terms of cargo volume in Japan, which exports ~35% of it’s auto parts to the US, could see adverse impacts in value and tradability. However, trade within Asia Pacific remains strong, underpinned by structural trends such as rising e-commerce penetration among the growing middle class.

“Asian markets reliant on US exports may face depreciation pressures ahead, due to the weakening of the US Dollar brought about by pessimistic US growth outlook.” said Pamela Ambler, Head of Investor Intelligence, Asia Pacific, JLL. “This could have a knock-on effect and make real estate cheaper for regional and global investors investing with US Dollars. Meanwhile, some funds will be under pressure to deploy and private credit is stepping in where banks exhibit more ‘flight to quality’ , with asset classes such as Living and Data Centres becoming increasingly attractive to lenders.”

Learn more in JLL’s Q1 2025 Capital Tracker.