Asia Pacific real estate outlook – Edition 2025/26

When the Trump administration fired off its tariff salvoes in April, Asia was on the front line. Since then, however, some of the smoke has started to clear. Although the past few months have been a volatile mix of tariff ramp-ups, retreats and trade deals, a truce of sorts appears to be holding – for now, at least.

The most significant recent development has been October’s agreement between the US and China to postpone the imposition of reciprocal tariffs for a year. While the US has imposed heavy tariffs on India for continuing to buy Russian oil, it has also struck trade deals with Vietnam, Cambodia, Malaysia, Thailand, South Korea, Australia and Japan.

All of that leaves US tariffs significantly higher than they were at the start of the year. Geopolitics remain exceptionally fraught and it is still unclear how long the truce with China will hold. But we do have a little more certainty over trade arrangements, and this should allow countries, companies and investors to adapt.

In its latest APAC outlook, the International Monetary Fund (IMF) points to the resilience of the region, which is expected to remain the world’s fastest growing this year and next.

Some of this strength has come from companies ramping up exports ahead of expected tariffs. Nevertheless, the IMF now forecasts a YoY decline of just 0.1 percentage points in the region’s real economic growth in 2025, to 4.5%, before a further slowdown to 4.1% in 2026. These are healthier projections than those published in April.

Given recent strength in Chinese exports and the effects of Beijing’s stimulus measures, the IMF now expects China to grow faster than the broader region this year and next. The 2025 real GDP growth estimate for China is now 4.8%, down from 5.0% in 2024 but up from the IMF’s April estimate of 4.0%. For 2026, the IMF predicts that China’s real GDP will grow by 4.2%, compared with April’s estimated 4.0%. The decline reflects this year’s front-loading of orders to get ahead of tariffs.

Beyond China, the IMF has also revised upward its predictions for most other countries in the region. Overall, forecasts now point to a significantly less sharp slowdown than previously feared. While trade agreements and postponements are mitigating the effects of US tariffs, some APAC economies – notably South Korea, Taiwan and Japan – are also benefiting from the AI boom.

And not all APAC economies are slowing. The IMF expects Japan’s real GDP growth to accelerate from 0.1% in 2024 to 1% in 2025, before falling back to 0.6% in 2026. The trend in Australia is more positive still, with real GDP growth forecast to rise from 1.0% in 2024 to 1.8% in 2025 and 2.1% in 2026. These are our favored markets for real estate investment.

For all APAC countries, sensitivity to trade remains the key consideration in assessing the economic outlook. We expect volatility in both forecasts and final figures in the months ahead.

As we noted in May, the overall impact of US tariffs is likely to be disinflationary in APAC, with cuts to interest rates a likely consequence. So far, our thesis has been borne out. Since May, we have seen rate cuts in India, Indonesia, Thailand, the Philippines, Malaysia, Australia and Hong Kong. Meanwhile, the US Federal Reserve has resumed its easing cycle. After keeping rates on hold since December 2024, the Fed cut them in both September and October by a quarter of a percentage point on each occasion. This should give APAC central banks further license to loosen policy. Japan remains the outlier. We expect the gradual normalization of its monetary policy to continue, albeit with rates rising at a slower pace than was expected before April.

In May, we noted that the favorable conditions at the start of the year were being clouded by the trade uncertainties, at least in the short term. We also said that the longer-term attractions of APAC real estate should remain intact, barring any significant escalation in trade hostilities. With trade deals and the temporary US-China détente in place, the outlook is now somewhat brighter.

Of course, the current arrangements are fragile. But with the appropriate caveats in place, we can look forward with a little more clarity. Logistics remains the sector most vulnerable to the current uncertainties and any renewed trade tensions. Offices are, of course, sensitive to any shifts in the cycle, and demand for space will be curtailed by caution in most markets while the trade outlook remains unclear. That has an impact on consumer confidence too, which in turn affects the outlook for retail assets. So we continue to see residential as the most defensive sector.

Our preferred markets are still Japan and Australia, where we see resilience and prospects of recovery, respectively.

As Japan’s escape from deflation gathers steam, its real estate market has remained robust. Although performance in logistics has been mixed, other sectors have sustained their earlier strength.

Tokyo continues to be one of the world’s most in-demand locations for office space. In the third quarter, prime Tokyo offices registered the largest quarterly rise in average rents in 18 years. Overall vacancy rates have fallen to 2.1%, with prime vacancies exceptionally low at just 1%. As competition for office space in central Tokyo intensifies and supply remains constrained, CBRE has raised its rental growth outlook and now expects prime rents to increase by 13.0% in the next 12 months. The picture is similar in Osaka, where prime vacancies are down to 2.9% and prime rents have risen at their fastest rate in six years. With demand expected to stay strong, CBRE forecasts a 6.3% rise in prime rents in the year ahead.

In retail, the picture is similarly bright. In Tokyo’s Ginza district, the high-street vacancy rate has remained at 0%, with rents rising by 1.4% in the third quarter. Osaka’s Shinsaibashi also has high-street vacancies at 0%, and rents have registered record rises for the third consecutive quarter. Meanwhile, modest declines in consumer spending must be set against Japan’s tourism boom. Tourist arrivals exceeded 30 million in the first nine months of the year – another record – and the total looks set to surpass 40 million for 2025 as a whole.

Our preferred sector, however, is residential – specifically the multifamily property market. As Japan contends with generational economic change at home and trade turbulence abroad, residential property’s steady rental growth and solid occupancy rates should leave it less exposed to the turn of the economic cycle than the more dynamic office sector. According to the Association for Real Estate Securitization, second-quarter average occupancy rates stood at 98.8% and 97.8% in Tokyo and Osaka, respectively. Meanwhile, annual rental growth was 7.9% in Tokyo and 4.8% in Osaka. We expect sustained support from demographic trends (especially in Tokyo), constrained supply and rising wage growth.

We remain wary of the logistics sector for now, given areas of oversupply and its vulnerability to any resumption of trade hostilities.¹

Australia’s office sector has long been out of favor with investors. Working from home and the global economic uncertainties have continued to weigh on the sector, and vacancy rates remain high. But there are at least tentative reasons to look for improvements in the quarters ahead. The Reserve Bank of Australia has now cut interest rates three times this year, and the brighter growth forecast from the IMF should help restore confidence. Employers are optimistic about achieving higher attendance rates, and expansion plans are rising as fewer firms seek to shrink their space, according to research by CBRE.²

While we wait to see how the domestic and international dynamics play out, we continue to focus on prime quality and central locations with strong supply / demand dynamics. We do not see a broad-based recovery any time soon, so we think a ‘best-of-breed’ approach might be the way to go.

Sydney remains the prime location for Australia’s businesses. Here, prime rents are on the rise and availability is on the wane in the city’s central business district.³ Net effective rent has now increased for 12 consecutive quarters. There is still further room for recovery, however, with net effective rent still a little way off the levels of 2019. Across the whole Sydney market, net absorption has fallen back from the levels of 2024 but remains positive. Capitalization rates have held steady in recent months.⁴

Meanwhile, Brisbane continues to benefit from internal migration and its status as the host of the 2032 Olympics. Vacancy rates for prime assets have risen to 10.6%, but net effective rent has registered a 10.8% YoY increase to the end of June.⁵

Australia’s residential market is supported by ongoing undersupply. As 2025 has played out, rental growth has slowed from high to mid-single digits, but we expect it to stay at similar levels in the coming years.⁶ Although Australia’s build-to-rent market is still in its infancy, student accommodation continues to provide an attractive alternative.

The sectors highlighted in this article are opportunities that we think are relatively well positioned but are by no means exhaustive. Ultimately, we think a diversification strategy is still crucial and is likely to show its true benefits in this uncertain macro environment. Being selective about sectors is important as an overarching filter, but it does not mean ruling out deals that have attractive attributes at the asset-specific level – such as value-add and opportunistic angles in pricing, under-renting, plot ratio optimization and area rejuvenation.

¹Greater Tokyo LMT Logistics Market Analysis | CBRE Japan.
²2025 Australian Office Occupier Survey | CBRE Australia.
³Sydney CBD Report July 2025
⁴Sydney | JLL.
⁵Brisbane Office Market Dynamics Q3 2025.
⁶Australia's Residential Property Market Analysis 2025.