SINGAPORE, August 12, 2026: Asia-Pacific commercial real estate investment continued its recovery in the second quarter of 2026, with transaction volumes reaching US$53.5 billion, up 31.1% year-on-year, according to Knight Frank’s latest Asia-Pacific Capital Markets Insights.
The Q2 figure was also 16.1% above the five-year quarterly average, underscoring the region’s continued appeal to institutional capital despite a more challenging interest-rate environment. While activity declined 22.5% from the record first quarter, Knight Frank said this reflected a normalisation from an exceptional start to the year rather than a reversal in market direction.
The latest data points to a market that is being driven less by broad-based momentum and more by disciplined conviction. Investors are deploying capital selectively, focusing on assets with strong income visibility, clearer pricing and identifiable value-add opportunities.
Dan Dixon, Head of Capital Markets, Asia-Pacific, Knight Frank, said the pullback from Q1 should be read in context. “Q2’s pullback from Q1’s record turnover is a moderation from an exceptional quarter, not a change in direction. We continue to see institutional investors re-engage with conviction, particularly where assets offer income resilience and clear execution pathways, even as rate paths across the region have turned less obliging than many expected,” Dixon said.
Hotels Lead Sector Growth
Hotels emerged as one of the strongest-performing sectors in the quarter, as the recovery in tourism continued to support investor appetite for hospitality assets.
Hotel investment across Asia-Pacific totalled US$5.4 billion in Q2, rising 55.2% year-on-year. Knight Frank attributed the increase to sustained tourism recovery, improving operating performance and a limited supply of quality assets. Refurbishment, repositioning and rebranding strategies are also giving investors clearer routes to value creation.
Several high-profile transactions reflected this momentum. CapitaLand Investment acquired Voco Seoul Myeongdong for US$243.1 million, while Wentworth Capital purchased two Sydney hotels for US$269.2 million.
Knight Frank also pointed to its own activity in the sector. In June, the firm sold The Orchid Hotel in Singapore for S$273 million, equivalent to about US$213 million. In July, it advised on the sale of the Silka Seaview Hotel in Hong Kong SAR.
Over the past five years, Knight Frank’s Hong Kong SAR team has transacted more than HK$7.3 billion, or about US$930 million, of hotel assets. The firm said this represented more 200-plus room hotel transactions than the rest of the market combined.
With a strong pipeline of mandates and active sales campaigns across the region, Knight Frank expects momentum in the hospitality sector to continue, supported by sustained investor demand and increasing transaction activity across Asia-Pacific.
Cross-Border Capital Focuses on Gateway Markets
Cross-border investment into Asia-Pacific reached US$12.5 billion during the quarter, accounting for 23.4% of total regional investment volume. While this was down 42.2% from Q1’s elevated US$21.7 billion, it was 156.8% higher than in Q2 2025.
The sharp annual rise signals renewed international investor appetite, particularly for markets where liquidity, pricing and income fundamentals are clearer.
Japan remained the region’s leading destination for cross-border capital, attracting US$5.0 billion of inbound investment, more than double the volume recorded a year earlier. International demand remained resilient despite softer overall investment volumes and the Bank of Japan’s interest rate increase to 1% in June.
Knight Frank said Japan continues to be seen as a core deployment market because of its liquidity, scale and broad range of investible opportunities.
Singapore followed with US$3.0 billion of cross-border investment, more than three times the level recorded in Q2 2025. International capital accounted for 58.1% of total investment volume in the city-state.
The quarter was led by IOI Properties Group’s US$1.9 billion acquisition of Asia Square Tower 2 from CapitaLand Integrated Commercial Trust. The transaction reinforces continued international demand for Singapore’s prime CBD office market, supported by stable recurring income and a constrained development pipeline.
Australia was the third-largest recipient of cross-border capital, attracting US$1.9 billion, up 56.9% year-on-year. Knight Frank said the increase did not indicate a broad-based return of offshore capital, but rather selective re-engagement as valuations reset and income fundamentals remained resilient.
Hotels were a particular bright spot in Australia, with cross-border investment rising nearly fivefold year-on-year to US$674 million. Notable transactions included Forest Endeavour’s US$250 million acquisition of the Novotel Surfers Paradise and adjoining Paradise Centre from Abu Dhabi Investment Council and Challenger Life.
Quality, Scale and Pricing Discipline
The preference for Japan, Singapore and Australia reflects a broader pattern in Asia-Pacific real estate capital flows. In a more demanding financing environment, investors are prioritising markets with liquidity, transparency and established investment frameworks.
Dixon said the continued willingness of cross-border capital to deploy into gateway markets, despite tightening monetary policy, demonstrated the resilience of the region’s fundamentals.
“The willingness of cross-border capital to keep deploying into key gateway markets despite tightening monetary policy speaks to the resilience of the region’s fundamentals. That said, macro risks remain, and we expect the remainder of 2026 to reward quality, scale and pricing discipline over broad-based activity,” he said.
This suggests that the next phase of Asia-Pacific’s real estate recovery will not be uniform. Investors are likely to remain cautious in markets where pricing remains uncertain, financing costs are elevated or asset-level income growth is less visible.
At the same time, large-scale opportunities in core locations are expected to continue attracting institutional capital, particularly where investors can underwrite cash flows with greater confidence.
Selective Recovery Ahead
Christine Li, Head of Research, Asia-Pacific, Knight Frank, said Q2’s numbers reinforce the underlying strength of the region’s investment recovery, but also show that the path ahead is likely to be uneven.
“While Q2’s results reinforce the underlying strength of Asia-Pacific’s investment recovery, the path forward looks more uneven than the headline growth suggests. Liquidity is concentrating around quality assets, clearer pricing and large-scale execution opportunities, and the next phase of the recovery is likely to be led by investors with strong conviction and the ability to underwrite asset-level complexity,” Li said.
She added that prime office, selected retail, logistics and tourism-linked hotel assets should remain in focus, while large-scale opportunities in liquid markets are likely to command the strongest capital interest.
Transaction volumes remain above both year-earlier levels and the five-year Q2 average, giving Asia-Pacific positive momentum heading into the second half of 2026.
However, the pace of capital deployment will depend on pricing alignment, income visibility and investors’ ability to execute value-add strategies. For Asia-Pacific real estate, the recovery is no longer just about capital returning to the market. It is about where that capital can deploy with conviction.
As the second half of 2026 begins, gateway markets, income-resilient assets and hospitality-linked opportunities appear best placed to capture investor attention.