Record Investment Volumes in Asia-Pacific Commercial Real Estate
Investments in the Asia-Pacific commercial real estate market reached nearly US$64 billion in the third quarter of 2025, marking a significant increase compared to the previous year. This figure represents the highest level on record and reflects a 56.8% growth over the same period in 2024. According to Knight Frank’s Q3 2025 Capital Markets Insights, this surge in activity nearly doubled the volumes recorded in the second quarter of the year. The growth was primarily driven by several major entity-level transactions and the completion of deals that had been delayed due to extended due diligence periods.
Market Revival and Investor Confidence
Christine Li, Head of Research, Asia-Pacific, Knight Frank, highlighted that the record transaction volume of US$63.8 billion signifies a genuine market revival in the region. This is attributed to policy clarity and stabilizing capital rates. Investors are shifting their focus from cap rate compression strategies to external factors such as active asset management and income growth. This renewed confidence is directing substantial capital into strategic, defensive sectors like living sectors and logistics.
Year-to-date transaction volumes have already reached 80% of 2024’s full-year total, with Asia-Pacific investment expected to surpass US$195 billion in 2025, representing a 10% increase year-on-year.
Cross-Border Investment Gains Momentum
Cross-border investment into the Asia-Pacific region totaled US$17.8 billion during the quarter, showing a 72.1% increase from Q2 and a 28.6% rise year-on-year. Australia attracted the highest volume of cross-border capital at US$5.0 billion, primarily directed toward the living and industrial sectors. Japan followed with US$3.5 billion, concentrated in office and multi-family assets, while South Korea secured US$2.3 billion, predominantly in industrial and office properties.
Dan Dixon, Head of Capital Markets, Asia-Pacific, Knight Frank, noted that cross-border investors are increasingly confident in the fundamentals of key Asia-Pacific markets. Constrained future supply, particularly for institutional-grade office and logistics assets, combined with stabilizing prices, creates compelling investment opportunities. He emphasized that the breadth of activity across offices, industrial, and living sectors reflects genuine structural demand rather than opportunistic plays.
South Korea Leads Regional Growth
South Korea led the region with US$14.3 billion in transactions, up 93.6% year-on-year, recording the highest growth rate across Asia-Pacific markets. Office assets accounted for 70.9% of South Korea’s total volume, as sellers moved to divest ahead of potential CBD oversupply. Rental growth expectations remain positive. The Pangyo Tech One Tower achieved the highest-ever transaction price in South Korea’s office market history at US$1.42 billion.
Foreign investors were active in Seoul’s office market, with BentallGreenOak (BGO) acquiring Tower 730 from Hyundai Investments for US$625 million and Aberdeen purchasing Pacific Tower from Pebblestone AMC for US$427 million. Interest in industrial assets strengthened as the slowdown in new warehouse construction eased earlier oversupply concerns.
Key Markets Show Strong Performance
The Chinese mainland recorded US$13.5 billion in investment volume, rising 29.9% year-on-year, with data centers representing nearly one-third of total volume activity. This was driven mainly by Bain Capital’s divestment of data center operator WinTriX DC Group’s Chinese mainland business to a consortium led by Guangdong Hec Technology for US$3.9 billion.
Australia registered US$9.5 billion, up 87.8% year-on-year, supported by pricing stabilization and renewed deal flow across multiple cities beyond Sydney. Activity in Melbourne strengthened, highlighted by Assembly Funds Management and PGIM Real Estate’s US$289.3 million acquisition of Woodgrove Shopping Centre from QIC and PAG’s US$163.8 million acquisition of the Flinders Gate Complex.
Singapore posted US$3.8 billion in investment volume, up 28.6% year-on-year, driven by the completion of several large-scale transactions. Major deals included Lendlease Global Commercial REIT’s US$356 million sale of Jem’s office component to Keppel Land, and UOL Group’s US$292.3 million divestment of Kinex to Kinex Times Square and Xiaohong Property Management.
Sector Performance Reflects Mixed Trends
Office transactions drove regional sector activity with US$23.7 billion in volume, up 64.2% year-on-year. With limited new supply coming to market in major CBDs, rental and capital values are expected to continue climbing. Industrial investment totaled US$10.7 billion, down 3.7% year-on-year, though South Korea defied the broader trend with volumes rising 38.6%.
Hotel transactions rebounded strongly to US$6.2 billion, up 67.7% year-on-year, while retail volumes totaled US$7.7 billion, down 13.4% year-on-year as investor sentiment remained measured amid global trade uncertainties.
Outlook for the Remainder of 2025
Investment momentum across Asia-Pacific is expected to hold firm into the final quarter of 2025, supported by clearer monetary policy direction and improved liquidity. While recent US tariffs on the Chinese mainland continue to weigh on sentiment, Q3’s record performance demonstrates underlying market strength.
Capital rate stabilisation will likely encourage greater deal flow in Q4 as underwriting confidence improves. Christine Li added that industrial and retail assets may face near-term headwinds as policy adjustments take effect, but the fundamentals remain sound. Amid this capital re-allocation phase, Japan stands out as a policy-anchored beneficiary. Its yield spreads remain comparatively attractive, and despite gradual monetary tightening, rental fundamentals are supported by sustained urbanisation.
International capital is increasingly targeting multifamily and logistics assets in Greater Tokyo and Osaka, drawn by Japan’s inflation-hedging characteristics and relative stability in an otherwise volatile environment.