Knowledge Hub

Economic Rent and New Office Development: Increasing construction costs, rising land values, and asset repricing are leading investors to scrutinise theoretical rents more closely when planning new office developments. Investors are looking more closely at ‘economic rents’, which measure the rental income needed to justify development costs and are reassessing office developments across the region. 

Regional Variations:  Most markets in Asia Pacific have reported significant growth in economic rents over the past five years, led by Australia. In Asia, Singapore, Seoul and Beijing have seen the greatest growth.

Postponed New Office Developments: CBRE expects Asia Pacific office developments will continue to be postponed as investors find it difficult to justify commencing work on new schemes. This will constrain the supply pipeline in the medium term. As a result, the region’s office markets will adjust to the tighter supply-demand imbalance, which will help rental growth align with the change in construction and land costs.

Office Investment Hotspots: With the office outlook improving and pricing at the top of cycle in most APAC markets, investors are expected to continue to target acquisitions of existing stock. Markets with strong rental prospects such as Australia, Japan, India, and Korea, will attract investment demand in H2 2025.

In Singapore, investment remains buoyant despite operating performance normalising along with new supply; Indonesia hotel performance mixed as investment liquidity remains a challenge; Strong tourism growth in Vietnam boosts hotel performance and lures new investors.

Sentiment remains positive in Singapore but conditions diverge across eastern and western markets; Solid regional demand and domestic consumption underpin firm leasing demand in Japan; In Australia, transaction activity remains stable as Sydney continues to outperform.

Leasing demand in Vietnam remains strong amid influx of new entrants from mainland China; Demand holds firm in Singapore as retailers expand cautiously in anticipation of slower consumption; Leasing market in India improves after slow start to year, backed by positive domestic consumption.

Continued investment momentum in India driven by large private equity deals; Investment activity strengthens in Hong Kong SAR, driven by key transactions and distressed asset sales; Driven by industrial transactions, investment activity in Taiwan picks up as sentiment improves.

Competition between landlords intensifies in Mainland China as leasing demand remains under pressure; Centralisation and flight-to-quality drives leasing demand in Australia; diminishing high quality options spurs higher renewal rates; Tight office availability in the Middle East prompts occupiers to proactively review real estate strategies, generating more pre-leasing demand.

This exclusive report analyses the five largest REIT markets in Asia – Japan; Singapore; the Chinese mainland; Hong Kong, China; and India – covering financial performances, regulatory frameworks and future developments.

KEY HIGHLIGHTS:

• Emerging Market Growth: The Chinese mainland REIT (C-REIT) market joined the top three largest REIT markets in Asia for the first time with an 85% increase in market value in 2024. Other emerging markets of Thailand, Malaysia, and India reported market value rises of 41%, 21%, and 13%, respectively.
• Sectoral Trends: Data center and hospitality REITs are expected to remain prominent due to advancements in AI and a recovery in tourism. Sustainability and consumer infrastructure REITs are also gaining traction, reflecting growing ESG awareness and demand for technology-driven assets.
• Performance Metrics: Dividend yields varied across markets, with Hong Kong REITs offering the highest average yield (8.3%), followed by Singapore (6.9%) and Japan (5.4%). However, stock price declines in 2024 impacted total returns.
• Regulatory and Structural Changes: Singapore has streamlined leverage ratio requirements for all REITs, providing flexibility for growth while promoting financial prudence. India launched regulations for small and medium REITs (SM-REITs), opening new avenues for smaller investment

Stay ahead of the curve with our insights into these dynamic markets.