Asia-Pacific real estate investment surged to US$201 billion in 2025, a 13.7% year-on-year increase, according to Knight Frank’s latest Capital Markets Insights report. The full-year result landed within the consultancy’s forecast range of 10–15%, reflecting renewed investor confidence amid stabilising interest rates and improving fundamentals across key markets. The rebound was most visible in the retail sector, where investor appetite returned robustly.

Retail investment volumes in Q4 rose 109.5% quarter-on-quarter and nearly doubled from the same period in 2024. For the year, the sector saw 31.2% growth, outperforming most others.

Investors focused on prime, income-generating retail assets with stable occupancy and cash flows, a sharp divergence from the limited demand for secondary or structurally challenged properties.

Deals driving this retail revival included Lendlease Global Commercial REIT’s US$476.2 million acquisition of a 70% stake in Singapore’s PLQ Mall and Dexus’s US$447 million purchase of a 25% share in Westfield Chermside, Brisbane.

These signal a growing conviction in the medium-term potential of well-located retail, particularly in Australia where structural tailwinds, rising population and real incomes, reinforce the recovery narrative.

“Despite geopolitical headwinds and early-year caution, capital is clearly returning to high-quality assets,” said Daniel Dixon, head of capital markets, Asia-Pacific at Knight Frank. “The trend towards selective reinvestment in core office and retail assets, particularly in Australia, is expected to continue into 2026.”

Cross-border capital flows

While overall investment rose, cross-border flows moderated to US$46.8 billion, down 19% from 2024. This decline reflects a shift towards domestic opportunities amid currency volatility and fewer large-ticket deals. Still, several markets showed resilience.

Japan retained its status as the largest destination for international capital, attracting US$16.2 billion in 2025. The bulk of investment went into Tokyo’s office market, where prime vacancy remains below 2%. Notably, Nissan’s sale of its global headquarters in Yokohama to KKR and Taiwan’s Minth Group for US$629.9 million illustrated how corporate balance-sheet pressures are unlocking high-value assets.

Australia recorded US$12.4 billion in cross-border investment, up 3.2% from 2024. Retail was again the standout, with volumes leaping to US$1.8 billion, up from US$491.7 million the year before.

South Korea meanwhile rounded out the top three, with cross-border flows rising 23.7% to US$6.3 billion. Over half of that was directed at industrial and logistics assets, driven by strong e-commerce tailwinds and a tightening supply of modern logistics space. KKR’s US$691.6 million acquisition of the Cheongna Logistics Centre from Brookfield was the country’s largest logistics deal to date.

Christine Li, Knight Frank’s head of Research for Asia-Pacific, noted: “Cross-border investors are now prioritising markets where supply constraints align with strong occupier demand. Rather than chasing cap rate compression, they’re backing rental growth, a more sustainable strategy in today’s environment.”

With financing conditions stabilising and interest rates across most of Asia-Pacific now settled, Knight Frank expects real estate investment momentum to continue. It forecasts a further 5–10% increase in transaction volumes for 2026, led by Japan, Australia, Singapore, and South Korea.

The property consultancy said emphasis is shifting from yield arbitrage to demand-supply fundamentals, favouring well-located assets with resilient income streams and rental growth potential.