Asia Pacific real estate market outlook Q4 2025

APAC economic outlook 

Trans-shipment tariffs will curtail China’s ability to re-route exports. Meanwhile, Chinese household consumption is being weighed down by falling house prices and negative perceptions about job prospects. We forecast growth to slow in the coming quarters, with full-year growth at 4.8% and 4% in 2025 and 2026, respectively. We expect weak investment data to spur further stimulus measures and for more steps to loosen financial conditions [1]. 

The US-Japan trade deal has removed more extreme downside risks, but the tariffs still represent a significant shock and uncertainty is likely to linger. We expect Japan to narrowly avoid a recession, registering growth of just 0.1% in 2026 (from 1.1% in 2025). With the Liberal Democratic Party-led coalition having no majority in either house, there will be more pressure to increase spending in social security, childcare, and education. This has unnerved the JGB markets, but the BOJ has the tools to manage bond market dislocation. We expect the BOJ’s policy normalisation to remain very gradual and for the next rate hike to be in January 2026.  

Australia’s gross domestic product grew 1.8% year on year (YoY) in the second quarter of 2025, marking the fastest yearly pace since the fourth quarter of 2023. Policy support is clearly acting as a catalyst, and the recovery is likely to broaden as the rate cuts work through the economy. While this introduces some hawkish risk to the Reserve Bank of Australia’s (RBA) cash-rate outlook, the markets expect the RBA to remain on a gradual easing path. It’s expected to deliver another two rate cuts to bring the cash rate to a terminal level of 3.1% by early-2026. 

The markets also expect the Bank of Korea (BOK) to deliver two more rate cuts to reach a terminal policy rate of 2% by early-2026. While the BOK is keen to support the economy, Seoul’s elevated house prices are limiting the extent to which policy may be eased.

Real GDP growth (%)

CPI (average; %)

Policy rate (YE; %)

Source: Aberdeen Investments Global Macro Research; September 2025 
Forecasts are a guide only and actual outcomes could be significantly different.

APAC real estate market overview 

There was a rebound in occupier performance during the second quarter of 2025, following some softening in the first quarter. On a RevPAM (revenue per available sqm = rent x occupancy) basis, two-thirds of the APAC CRE markets/sectors we track registered YoY growth in the second quarter, up from 60% in the first quarter. Offices were among the quarter’s top occupier performers, especially those in Australia (Sydney/Brisbane), Japan (Tokyo/Osaka), and Indian tier-one cities (Delhi’s National Capital Region/Bengaluru/Mumbai)[2].  

With investors increasingly pricing-in lower borrowing costs, the investment market outperformed the occupier market in the second quarter. APAC’s total CRE transaction volumes had their seventh quarter of YoY increases, and 72% of the markets/sectors we track achieved YoY capital value growth (from 64% in the first quarter). Offices, especially those in Japan and Korea, led the region’s CRE investment activity during the 12 months to June 2025, with a market share of 35%[3].      

Excluding Japan, almost all markets/sectors had higher yield gaps in the first half of 2025, as borrowing costs tracked lower. Importantly, over 50% are now above their historical 10-year averages. The occupier outlook, however, remains bifurcated. We expect investors to remain selective, with a bias towards markets/sectors with prospective positive real rental growth. 
We expect institutional investors based in the US and Europe to increase diversification into APAC CRE. Meanwhile, increased refinancing needs and unlisted fund expiries could present opportunities for capital deployment, including general partner-led opportunities like recapitalisation/continuation vehicles. In APAC, these opportunities have mostly been found in Australia, but other markets may now be playing catch-up. The fund that holds the Yeouido International Financial Centre offices and retail mall in Seoul, for instance, is reportedly looking to raise KRW800 billion (USD576 million) in new capital to replace the existing limited partners. 

For markets/sectors where repricing has been more limited, but where occupier fundamentals remain solid, we think the investment case for Japanese multifamily properties remains robust. Vacancy rates in Tokyo and Osaka are still relatively tight. The trends underpinning residential leasing demand – such as net migration, improved wage growth, and increased female labour participation/dual-income households – will likely endure, despite the potential of an economic slowdown and some concerns over rent affordability.

APAC real estate market trends 

Offices

Occupier sentiment is strengthening as trade tensions ease and as office attendance mandates tighten. All markets, except Mainland China, are reporting an increase in tenant enquiries and inspections[4].

The short-term occupier fundamentals for Seoul’s offices remain solid. Leasing demand for newer, larger offices in key areas kept vacancy rates at a low of just 4% in the second quarter (from 3.4% in the first quarter). While there are concerns over the longer-term supply outlook, especially in the central business district (CBD), it remains to be seen if the supply will be delivered as planned. According to Genstarmate, just 11 of the 36 office projects planned for completion in the CBD by 2029 have started construction. This is a result of tighter access to project financing and higher construction costs. 

In Tokyo, the average office vacancy rate for the central five wards narrowed to 2.85% in August (from 3.16% in July), according to Miki Shoji. This brings the vacancy rate to its lowest level in five years. Despite the weaker economic outlook, we think any upside risk to vacancy rates is likely to be limited in the short term. Large-scale office completions over the next 12-15 months are already substantially pre-committed. Companies’ return-to-office strategies and their desire to secure prime space for talent retention are driving leasing demand, while high construction costs constrain new supply. 

Logistics and industrial (L&I)

Leasing enquiries and site inspections are gaining traction amid a stabilising trade outlook, with tenants still retaining stronger leverage than landlords in negotiations. Sentiment in Japan and Korea is strengthening on the back of easing supply side pressure[4]. 

Australia’s nationwide L&I vacancy rate remained at a low of 2.8% at end-June (from 2.5% at end-2024), with Sydney’s vacancy rate at 2.5% (from 2.1%)4. The sector is slowing from a position of exceptional strength, with rents registering an average sequential growth of just 0.2% in the second quarter – the slowest quarterly pace since the first quarter of 2021. The longer-dated supply pipeline is growing, and net supply delivery has exceeded net demand since the end of 2023. This led to an increase in vacancies.
Occupiers in Singapore remain cautious about their spatial needs. The average logistics rent flatlined for the fourth straight quarter in the second quarter, as vacancy rates rose to 10.5% (from 9.6% in the first quarter). Looking ahead, the total stock of Singapore’s logistics facilities is expected to increase by just 4.6% over the next three years (versus 6.8% in the last three), the bulk of which is for owner-occupation. Limited new supply of multi-tenanted space should help to mitigate the negative impact on rents from a potential slowdown in leasing demand.  

Retail

Retail leasing enquiries and site inspections increased across most APAC markets, excluding Singapore, during the third quarter. Robust leasing demand in India and Korea is providing a foundation for landlords to raise rental expectations. Rising operating costs, however, are prompting retailers to review portfolios and assess whether to relocate underperforming stores[4[.    
India’s shopping mall landlords are adjusting their tenant mix more frequently to boost revenue growth, with non-performing tenants replaced by new brands with higher potential or trading density. Lease terms are also shortening from a typical nine-year lease (3+3+3) to a five-to six-year lease with a terminal clause. Domestic brands outperform international ones, especially those that have yet to adjust and localise their offerings for domestic consumers. 

Rising operating costs and manpower shortages remain key challenges for food and beverage operators in Singapore, while cost-of-living pressures have likely constrained restaurant spending. Weaker market sentiment has, in turn, weighed on leasing demand. Despite a subdued occupier market outlook, investment demand appears to be holding up relatively well. The divestment of all freehold strata-titled units at Kinex, a suburban retail mall in the Paya Lebar/Katong area, for SGD375 million (USD292 million) – a small premium to its valuation in the first half of 2025 – was announced in September.      

Living 

Japan’s multifamily properties registered a 350% YoY surge in investment volumes during the second quarter, with several portfolio transactions emerging in recent months [4]. Robust occupier fundamentals remain supportive of the investment case. Crucially, higher rent reversion appears to be gaining acceptance, which should accelerate the mark-to-market for portfolio rents. In September, Advance Residence, the largest Japanese residential real estate investment trust by market capitalisation, reported its earnings for the six-month period ending July 2025, which were ahead of expectations. Importantly, its portfolio’s average-rent increase at tenant replacement and renewal reached a record high of 16.2% and 3.1%, respectively, led by Tokyo 23 wards (20%, and 3.7%, respectively).      

Structural factors in Korea are supporting the investment case for Seoul’s multifamily/co-living sector. These include the increase of single-person and DINK (dual income, no kids) households, and the shift from the traditional jeonse (long-term deposit) rental system to a more western-style monthly rental one. There are some near-term uncertainties, though, following a government announcement in September that prohibits debt funding for acquisitions of residential properties to be operated as rental housing. While the new regulation doesn’t apply to the construction of new rental housing, it will likely affect investment strategies that are targeting existing properties for conversion into co-living spaces.     

Outlook for risk and performance 

Slower economic growth could threaten occupier demand. The potential impact on jobs of adopting generative artificial intelligence (GenAI) is also a longer-term threat. Some studies [5] show GenAI is already affecting employment for early-career workers in sectors like software/code development and customer service. We believe technological advances will affect how and where people work, but it’s more likely that space needs will evolve, rather than be eliminated. Desk space could potentially give way to more collaborative and flexible space.

Elevated development costs in many markets are likely to constrain new office supply, which could also help to mitigate longer-term vacancy risk (see Seoul’s CBD). 
Despite the prospect of slower economic growth, we have raised our total return forecasts for APAC CRE over the next three-to-five years. This reflects an improved outlook for occupier performance for selected markets/sectors, like prime-grade offices in Sydney’s core CBD and Tokyo’s central five wards. We have also adopted a more sanguine outlook on property yields, given better rental growth expectations, a more dovish outlook on borrowing costs in markets like Australia, and more capital inflow seeking diversification into the region.

Major European banks have recently left the Net-Zero Banking Alliance. Along with the earlier disbanding of the Net-Zero Insurance Alliance, this could reduce the urgency for alignment to decarbonisation pathways, but it’s unlikely to eliminate it. This is because many institutional asset owners remain committed to their decarbonisation objectives and are increasingly focused on real-world decarbonisation progress.