Report | Intelligent Investment
Asia Pacific Real Estate Market Outlook 2025
Steady Growth, Split Performance: Navigating a Multispeed Recovery
January 23, 2025 15 Minute Read
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2025 Asia Pacific Real Estate Market Outlook Event Recording
Executive Summary
The Asia Pacific commercial real estate market will see a modest improvement this year on the back of a resilient regional economy and the downward interest rate cycle. However, the outlook by market and sector will vary, often significantly, leading us to adopt “Steady Growth, Split Performance: Navigating a Multispeed Recovery” as the central theme of our 2025 Asia Pacific Real Estate Market Outlook.
Asia Pacific GDP growth is forecasted to reach 4.1% in 2025, slightly above the estimated 3.9% expansion for 2024. Economic growth will accelerate in India, Australia, and Japan, driven by government spending as well as higher consumption. Upward momentum is expected to slow in Greater China and Korea due to sluggish consumer spending.
Although U.S. tariffs could weigh on regional growth, the precise implementation and impact of any new tariff regime remains uncertain. Policy rates across many Asia Pacific economies are forecasted to fall at relatively modest magnitudes, except for Japan, which is expected to implement further interest rate hikes this year.
CBRE forecasts commercial real estate transaction volume to rise 5-10% y-o-y in 2025, driven by growth in Singapore, Korea, Australia and Hong Kong SAR, and continued investor interest in Japan and India. With individual Asia Pacific markets at different stages of the pricing cycle, yield movement will diverge across individual markets.
Office leasing activity and rents are expected to register modest growth, with flight to quality demand remaining prominent. This will drive additional requirements for high-quality office space in prime core locations, with properties in non-core areas set to become even less attractive.
Expansionary sentiment among logistics occupiers will gradually pick up this year, backed by a mild increase in requirements from manufacturers and e-commerce platforms. However, most occupiers will retain a cautious approach towards real estate portfolio planning amid high cumulative rental growth; a trend that will drive a preference for renewals and moves involving upgrading and/or consolidation.
Consumer sentiment is expected to improve in 2025 amid the solid employment market, leading to stronger retail sales growth. Regional retail rents will continue their slow but steady recovery as retailers retain a cautiously optimistic attitude towards real estate planning. Leasing demand will be focused upon prime core assets, with absorption of vacant secondary space remaining slow amid limited retailer interest.
The outlook for the hotel sector is positive, with international tourism projected to complete its recovery in 2025. CBRE expects modest RevPAR growth in 2025, driven by further hotel occupancy gains as daily rates continue to moderate.
Executive Summary
The Asia Pacific commercial real estate market will see a modest improvement this year on the back of a resilient regional economy and the downward interest rate cycle. However, the outlook by market and sector will vary, often significantly, leading us to adopt “Steady Growth, Split Performance: Navigating a Multispeed Recovery” as the central theme of our 2025 Asia Pacific Real Estate Market Outlook.
Asia Pacific GDP growth is forecasted to reach 4.1% in 2025, slightly above the estimated 3.9% expansion for 2024. Economic growth will accelerate in India, Australia, and Japan, driven by government spending as well as higher consumption. Upward momentum is expected to slow in Greater China and Korea due to sluggish consumer spending.
Although U.S. tariffs could weigh on regional growth, the precise implementation and impact of any new tariff regime remains uncertain. Policy rates across many Asia Pacific economies are forecasted to fall at relatively modest magnitudes, except for Japan, which is expected to implement further interest rate hikes this year.
CBRE forecasts commercial real estate transaction volume to rise 5-10% y-o-y in 2025, driven by growth in Singapore, Korea, Australia and Hong Kong SAR, and continued investor interest in Japan and India. With individual Asia Pacific markets at different stages of the pricing cycle, yield movement will diverge across individual markets.
Office leasing activity and rents are expected to register modest growth, with flight to quality demand remaining prominent. This will drive additional requirements for high-quality office space in prime core locations, with properties in non-core areas set to become even less attractive.
Expansionary sentiment among logistics occupiers will gradually pick up this year, backed by a mild increase in requirements from manufacturers and e-commerce platforms. However, most occupiers will retain a cautious approach towards real estate portfolio planning amid high cumulative rental growth; a trend that will drive a preference for renewals and moves involving upgrading and/or consolidation.
Consumer sentiment is expected to improve in 2025 amid the solid employment market, leading to stronger retail sales growth. Regional retail rents will continue their slow but steady recovery as retailers retain a cautiously optimistic attitude towards real estate planning. Leasing demand will be focused upon prime core assets, with absorption of vacant secondary space remaining slow amid limited retailer interest.
The outlook for the hotel sector is positive, with international tourism projected to complete its recovery in 2025. CBRE expects modest RevPAR growth in 2025, driven by further hotel occupancy gains as daily rates continue to moderate.
Economy
Steady Growth
- Economic growth to remain stable: Asia Pacific GDP growth is forecasted to reach 4.1% in 2025, slightly above the estimated 3.9% expansion for 2024. Drivers of economic growth will vary across individual markets, such as the increase in migrant workers in Australia; strong growth in visitor arrivals in Japan; and a rise in government spending in India.
- Gradual decline in policy rates: Economic growth in the U.S. is expected to be spurred by the new administration’s policies on tax reduction and lighter government regulations in some sectors. In addition to reduced labour supply, these factors could prompt the Fed to adopt a more conservative attitude towards cutting interest rates in 2025 given concerns that inflation could regain upward momentum. Policy rates across many Asia Pacific economies are also forecasted to fall at relatively modest magnitudes, except for Japan, which is expected to implement further interest rate hikes this year.
Split Performance
- Divergence in growth momentum across economies: GDP growth is forecasted to accelerate in India, Australia, and Japan in 2025, driven by government spending as well as higher consumption. Economic growth momentum is expected to slow in Greater China and Korea, due primarily to continued sluggishness in domestic consumer spending.
- U.S. tariffs to have varied impact on region: Widely anticipated tariffs on all imports to the U.S. are expected to have a varied impact on individual markets in Asia Pacific. Vietnam, Japan, and Korea are more vulnerable given their higher proportion of total exports to the U.S. While mainland China remains the largest exporter to the U.S., its reliance on the U.S. market has been decreasing. The mainland China-U.S. trade relationship nevertheless remains complex as many U.S. companies retain large manufacturing bases on the mainland. CBRE expects the implementation of new U.S. tariffs to prompt some companies to consider shifting supply chains away from mainland China to locations in Southeast Asia or other locations globally. Any impact on Australia is expected to be minimal given its limited export volumes to the U.S..
Capital Markets
Steady Growth
- Net buying intentions improve; investment to accelerate in 2025: CBRE’s 2025 Asia Pacific Investor Intentions Survey detected an improvement in real estate investment sentiment, with net buying intentions increasing from 5% in 2024 to 13% in 2025. Survey participants identified interest rate cuts and asset repricing as their main reasons for increasing real estate allocations this year. With buying sentiment improving, CBRE forecasts investment volume to rise by 5-10% y-o-y in 2025, driven by growth in Singapore, Korea, Australia and Hong Kong SAR, and continued investor interest in Japan and India.
- Value-add remains most popular strategy; interest returns for office: CBRE expects investors to continue to prioritise value-add investment opportunities in 2025 owing to this strategy’s high internal rate of return. Core-plus strategies will become more popular among investors amid a growing belief that core assets have repriced into this return profile. Investor preference for office assets will strengthen in 2025, with Australia, Korea, and Singapore the major focus. Industrial remains top of mind as investors target super prime logistics in Australia and dry logistics assets in Seoul.
Split Performance
- Yields set to diverge across individual markets: With individual Asia Pacific markets at different stages of the pricing cycle, there is a divergence in the yield outlook across the region. Yield expansion is forecasted to continue in Greater China amid subdued investor sentiment, while Australia is likely to record tighter yields as interest rates fall and investment activity picks up. Yield compression is likely to be witnessed in Japan, particularly for prime office assets in Tokyo, where such properties continue to be highly sought after.
Office
Steady Growth
- Flight to quality to drive demand: Leasing activity is expected to register modest growth in 2025, with flight to quality demand remaining prominent. Occupiers’ more selective approach will result in stronger demand for high-quality and ESG-compliant office buildings with a strong amenity offering. With availability remaining high in markets such as Greater China and Southeast Asia, occupier choice will improve.
- Rents expected to see steady growth: Most markets are forecasted to record steady rental growth in 2025. Despite slower upward momentum in Brisbane and Sydney, these two markets will continue to outstrip other cities in the region in terms of rental growth on the back of high demand for premium office space. Office rents in Greater China will remain on a downward trend, ensuring this market stays in favour of tenants and prompting landlords to adopt a flexible stance towards lease negotiations.
Split Performance
- Bifurcation between the best and the rest: The flight to quality trend will underpin demand for high-quality office space in prime core locations in 2025, with properties in non-core locations set to become less attractive. The difference in vacancy between office buildings in CBDs and decentralised locations across the region could vary from 100bps to up to 300bps. Landlords with high vacancy portfolios will need to offer attractive rents and other incentives to ensure their properties stay competitive.
Industrial & Logistics
Steady Growth
- Leasing demand expected to stabilise: Expansionary sentiment among logistics occupiers will gradually improve in 2025, backed by a mild increase in requirements from manufacturers and e-commerce platforms. However, most occupiers will retain a cautious approach towards real estate portfolio planning amid high cumulative rental growth; a trend that will drive a preference for renewals and moves involving upgrading and/or consolidation. CBRE expects gross new leasing volume to be largely on par with that in 2024.
Split Performance
- Flight-to-quality assets set to outperform: Occupiers’ overriding focus on operational efficiency will drive strong flight-to-quality demand this year, supporting leasing momentum for modern logistics facilities with excellent transport connectivity. Landlords of lower grade assets or properties in less attractive locations will find it more challenging to attract and retain tenants.
Rental growth in Indian cities will outperform on the back of expansionary demand from 3PLs, e-commerce and manufacturing sectors. Greater China will see rents decline further owing to insufficient demand and ample availability. - Divergence in logistics and factory demand: Vacancy and rental performance in 2025 will be uneven across individual submarkets and asset types. While prime core modern logistics properties will be highly sought after in developed markets, manufacturing will be more popular in India and emerging Southeast Asia. Investors are advised to retain flexibility in development planning and lease negotiations in response to the rapidly changing demand supply landscape.
Retail
Steady Growth
- Consumer sentiment expected to strengthen: Asia Pacific consumer sentiment is expected to improve in 2025 amid a solid employment market, leading to stronger retail sales growth. The two-tier retail spending market, characterised by robust tourist expenditure but sluggish domestic consumption, will achieve a more equitable balance this year.
- Gradual upturn in rents to continue: Regional retail rents will continue their slow but steady recovery this year as retailers retain a cautiously optimistic attitude towards real estate planning. While luxury groups and retailers of big-ticket items will be less aggressive in taking up new space, fashion and sports retailers are expected to turn more active.
Split Performance
- Prime core assets will continue to outperform: CBRE’s December 2024 Asia Pacific Leasing Sentiment Index revealed that 70% of retailers intend to seek space in prime core retail assets this year; a trend that points to continued demand at the top end of the market. In contrast, absorption of vacant secondary space will remain slow amid limited retailer interest. Rental performance among prime and secondary properties will continue to diverge.
- Mainland China set to remain regional laggard: Despite upcoming government stimulus set to support a rebound in retail spending in mainland China, retailers, especially international brands, will retain a risk-averse approach and consolidate store networks. This will ensure rents in this market continue to decline, albeit at a slower pace. Vietnam’s CBDs will lead retail rental growth for a fourth consecutive year despite slower upward momentum.
Hotels
Steady Growth
- International travel continues to recover: Most markets in Asia Pacific witnessed an improvement in inbound tourism in 2024, with total international arrivals in the region reaching 92% as of latest available data, representing growth of 30% y-o-y. International visitor arrivals are expected to fully recover in 2025, with Pacific Asia Travel Association (PATA) forecasting full year numbers of 700 million, which is 2.6% above 2019 levels.
- Daily rates moderate; occupancy gains drive revenue: While international tourism continued to recover, declining levels of inflation saw average daily rate growth moderate in 2024, a trend expected to continue in 2025. Hotel occupancy recovered further last year but most markets are still trailing historic levels. The recovery of hotel occupancy will continue in 2025, with markets with weaker currencies such as Japan, Korea and Thailand to be at the forefront.
Split Performance
- Mainland China yet to stage full tourism recovery: Except for visitors to Hong Kong SAR and Singapore, outbound travel from mainland China continues to lag pre-pandemic highs due to weaker domestic demand. Arrivals from mainland China accounted for 22% of total tourist arrivals in Asia Pacific as of the latest available data in 2024, well below 2019’s 30%. Travellers from mainland China are more cost conscious due to current economic headwinds affecting their market, with their focus shifting to more short-haul and emerging destinations within Asia Pacific. Markets with visa-free policies such as Singapore, Hong Kong SAR and Japan will be the focus for mainland Chinese tourists in 2025.
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Regional Market Outlook Insights
CBRE’s 2025 Pacific Market Outlook includes our house view on investment themes, transaction volumes, cap rates, demand, supply and rents that will guide decision making as the market shifts.
With both domestic and foreign demand as drivers, the Japanese economy is expected to continue its gradual recovery in 2025.
Korea's economy is projected to experience another year of slowed growth in 2025, building on the deceleration seen last year.
GDP is expected to grow at 1 – 3% in 2025, slower than 2024’s 4.0% y-o-y growth.
CBRE expects geopolitical tensions to increase in 2025, presenting challenges for corporations and investors.
The residential sector in Bangkok is well-developed and heavily reliant on the domestic market.
Encouraging signs of movements were witnessed throughout 2024 in the Vietnam real estate market.
Research Contacts
Contacts
Greg Hyland
Head of Capital Markets, Asia Pacific, CBRE
Luke Moffat
Head of Advisory & Transaction Services, Asia Pacific
Richard Stevenson
Managing Director, Head of Office Occupier, Asia Pacific
Danny Mohr
Head of Valuation & Advisory Services, Asia and Head of International Valuations, Asia Pacific
Vivek Kaul
Managing Director, Head of Retail, Advisory & Transaction Services, Asia
Michael Bowens
Managing Director, Head of Industrial & Logistics, Advisory & Transactions Services, Asia Pacific
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