Cross-Border Investment in Asia-Pacific Real Estate Soars to US$9.5 Billion Despite Global Uncertainty

SINGAPORE, May 5, 2025 – Cross-border investment in Asia-Pacific commercial real estate surged to US$9.5 billion in the first quarter of 2025, more than doubling year-on-year and marking a 116.7% increase, according to Knight Frank’s latest Asia-Pacific Capital Markets Insights. The spike in international capital flow comes even as global markets remain rattled by ongoing geopolitical tensions and uncertainty surrounding the United States’ trade policies.

The robust performance reflects investor resilience and a growing appetite for stable, income-generating assets across Japan, Australia, and South Korea. These three markets were flagged as top destinations for institutional investors, drawn by favourable currency conditions, resilient property sectors, and clearer interest rate outlooks.

“Asia-Pacific’s property market has started the year on a solid footing,” said Craig Shute, CEO, Asia-Pacific, Knight Frank. “We’re seeing international capital actively chasing opportunities, particularly in markets like Japan, where a weaker yen and reliable income streams offer a compelling case. As inflation pressures ease and interest rate trajectories become more predictable, investors are regaining the confidence to redeploy capital into real estate.”

Japan Leads the Pack with Record-Breaking Deal

Topping the charts for Q1 2025 was Blackstone’s landmark US$2.6 billion acquisition of Tokyo Garden Terrace Kioicho from Seibu Holdings. The deal marked not only the largest transaction of the quarter but also the biggest real estate acquisition by a foreign investor in Japan’s history, underlining the country’s enduring appeal as a global investment safe haven.

Japan’s office sector continues to thrive, buoyed by high occupancy rates and a deep-rooted office-based work culture. With construction costs surging, new developments have slowed, creating an attractive environment for existing property owners. Meanwhile, the retail space also drew significant investor interest, exemplified by Gaw Capital and Patience Capital Group’s over US$1 billion purchase of Tokyu Plaza Ginza in Tokyo’s upscale retail corridor.

South Korea and Australia Also in the Spotlight

South Korea’s industrial real estate market has gained momentum among global investors, thanks to its resilience, rising lease activity, and limited availability of prime assets. The country is increasingly seen as a regional hub for logistics and advanced manufacturing, which aligns well with the shift towards e-commerce and smart supply chains.

Australia, on the other hand, witnessed a rebound in retail property investment, with volumes nearly tripling year-on-year to US$592 million. As inflationary concerns and interest rate volatility begin to subside, consumer sentiment has improved—pushing retail sales higher and re-establishing confidence in the sector.

Strong Start to Q2 Amid Cautious Optimism

Knight Frank notes that early Q2 figures indicate further upward momentum, with US$5.6 billion in deals already inked in the opening weeks. Falling interest rates and stabilised asset prices are creating a more attractive financing environment, especially for debt-backed acquisitions.

Still, global economic uncertainty lingers. Christine Li, Head of Research, Asia-Pacific at Knight Frank, warns that tariff volatility remains a wild card.

“While capital markets are showing encouraging signs of recovery, fluctuating tariff policies—particularly those involving the US—could introduce new challenges,” Li said. “A full-scale tariff implementation could reignite inflationary pressures, forcing the US Fed to reconsider its rate strategy, which may ultimately suppress global investment activity. Sectors like retail and industrial, closely tied to consumer sentiment and trade flows, are especially vulnerable.”

Office Sector Remains a Beacon of Stability

Despite these macroeconomic headwinds, the office segment across Asia-Pacific continues to offer steady returns. Japan and Australia, in particular, are seeing sustained rental growth and high occupancy rates, reinforcing the sector’s appeal to risk-averse institutional investors.

As structural advantages such as limited new supply and entrenched work patterns continue to support office market fundamentals, this asset class is expected to remain a cornerstone of cross-border investment strategies throughout 2025.

In an environment marked by geopolitical flux and shifting economic signals, Asia-Pacific’s commercial real estate sector is demonstrating a rare combination of resilience and opportunity—making it a bright spot on the global investment map.