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The global data centre market remains dominated by cloud and corporate usage, with AI contributing less than 15% of total workload as of 2025. With most AI demand now concentrated in the U.S., the ratio in Asia Pacific is even smaller.
Q1 2026 opened against one of the most severe global supply chain disruptions in recent memory. The US-Israel military campaign against Iran, launched in late February, triggered the effective closure of the Strait of Hormuz, through which roughly 20% of the world’s seaborne oil and LNG volumes transit, with major carriers including Maersk, CMA CGM and Hapag-Lloyd suspending operations through the strait entirely. Shipping companies were forced to reroute vessels, delay deliveries or suspend operations, causing a slower and materially more expensive global supply chain. Against this backdrop, the Indian rupee depreciated approximately 9% over FY 2026, reaching around INR 93.88 per USD. Sustained dollar demand from oil importers widened the current account deficit and raised landed costs for USD-denominated freight and equipment procurement, compressing margins across the logistics sector. Yet India’s macroeconomic foundations held firm. FY 2026 real GDP growth forecast came in at 7.6%, outperforming expectations, and the RBI has projected FY 2027 growth at 6.9%, supported by strong services sector activity, robust domestic consumption and ongoing GST rationalisation benefits, even as the RBI flagged downside risks from further geopolitical escalation.
Against this backdrop, industrial and warehousing activity remained buoyant, driven primarily by Manufacturing and Third-Party Logistics (3PL) occupiers, reinforcing India’s position as a resilient and strategically located hub for regional supply-chain diversification. Occupier activity continued to strengthen despite the volatile macroeconomic environment, with leasing volumes reaching 1.8 mn sq m (19.3 mn sq ft) in Q1 2026, reflecting a 15% YoY increase. Notably, this marks the second-highest quarterly transaction volume recorded since the beginning of 2023, underscoring sustained occupier confidence and strong underlying market momentum.
Balanced Momentum: Moderating Growth with Selective Strength
The Asia Pacific Cap Rates Report highlights quarterly cap rate movements across the region, providing a clear benchmark for investment returns and identifying opportunities across the office, retail, and industrial sectors.
KEY TAKEAWAYS
Strong tourism inflows and new infrastructure development boost hotel performance in Vietnam; Mumbai outperforms other Indian cities thanks to solid corporate, MICE and domestic demand; Hotel pricing in Goa moderates despite strong performance throughout peak season.
Renewal rates remain high in Australia amid tight availability of super prime space; Solid domestic consumption and flight to quality drive expansionary demand in Japan; Expansionary demand in Vietnam ensures occupancy remains high despite elevated supply.
Leasing sentiment in Mainland China strengthens on expansionary demand from local and international retailers; Market polarisation seen in Korea amid strong inbound demand and flat domestic consumption; Retailer demand in Vietnam strengthens but absence of new CBD supply remains bottleneck.
Domestic capital drives office investment activity in Korea, and competition for logistics assets remains strong; Interest rate hikes in Australia see investors turn from cautiously optimistic to wait-and-see mode; In Hong Kong, market sentiment improves modestly as HIBOR falls; living sector underpins investment activity.
Leasing volume in India reaches record high amid robust demand from Global Capability Centres; Occupiers in Japan prioritise core locations to attract talent amid scarce availability and rising rents; Solid demand pushes down Singapore CBD vacancy to record low despite cautious global outlook.
FY26 saw a recovery in deal activity after two relatively subdued years.
Total reported deal value rose 13% and 16% over FY24 and FY25, respectively. Unlike prior years, activity was more evenly distributed, with no single transaction dominating the landscape
Kemmu Kawai joined Longevity Partners Japan in September 2022 as the Country Director. Based in Tokyo, he oversees all operations and activities in Japan, the Asia-Pacific region and beyond. He brings him more than 16 years of experience in finance where he specialised in real estate and credit investments. Before joining Longevity Partners, he served as a Portfolio Manager at Norinchukin Bank and as Investment Manager at Center Point Development.
Kemmu Kawai
Managing Director
Longevity Partners
