APREA Market Flash: Global Trade Rewired
In this edition of APREA Market Flash, we take a close look at how tariffs are reshaping investment flows and capital allocation in the Asia Pacific real assets market. The year began on a positive note, yet caution among investors persists in light of tariff-related uncertainties.
Our issue explores which markets and sectors are most affected by these changes and identifies potential opportunities for growth. We have asked thought leaders and industry experts to provide their insights on the strategic adjustments institutional investors must consider in this dynamic environment.
Sigrid ZialcitaCEO
APREA
Christine Li
Head of Research, Asia Pacific
Knight Frank
Dr. Dominic Brown
Head of International Research
Cushman & Wakefield
Dr. Henry Chin
Global Head of Research
CBRE
Roddy Allan
Chief Research Officer, APAC
JLL
How are rising tariffs reshaping investment flows and capital allocation in Asia Pacific real assets?
The re-emergence of tariffs as a structural feature of international trade has prompted a recalibration of capital allocation strategies across Asia Pacific. This shift reflects a broader transition from a globalised framework of economic integration toward a more regionalised model of production and investment. Trade policy, once considered a peripheral cost factor, has now assumed central importance in investment decision-making, particularly in the context of rising geopolitical tensions and the ongoing decoupling between major economies. Institutional investors are increasingly prioritising supply chain resilience and alignment with stable policy regimes, prompting a realignment of real asset portfolios toward geographies better positioned to absorb such macroeconomic shifts. Knight Frank Q1 2025 research supports this thesis: despite quarterly fluctuations, cross-border investment into the Asia-Pacific region reached USD 9.5 billion, a twofold increase year-on-year, indicating sustained interest in real assets underpinned by long-term structural resilience.
Which markets and sectors in the region are (1) most impacted and (2) positioned to benefit from tariff-related shifts?
(1) The sectors most directly affected by rising tariffs are those deeply embedded within globalised manufacturing and technology supply chains, notably semiconductors, electronics, and automotive. These sectors are experiencing significant disruption due to escalating trade barriers, particularly within the US-China corridor. This has led to broader ramifications for associated real estate asset classes, including high-specification industrial facilities, logistics hubs, and R&D infrastructure, where occupier demand is being recalibrated in response to operational risk.
(2) In contrast, certain markets within the region are well-positioned to benefit from these structural shifts. Australia and Japan, in particular, have witnessed a marked increase in demand for institutional-grade office and retail assets, as evidenced by capital deployment patterns in Q1 2025, according to Knight Frank research. Their appeal lies in perceived policy stability, robust domestic fundamentals, and their capacity to accommodate diversified supply chain strategies. Furthermore, emerging Southeast Asian markets are gaining strategic importance as corporate occupiers seek to establish alternative production bases and a large consumer market, thereby enhancing demand for industrial and infrastructure-related real estate in these jurisdictions.
How can institutional investors adapt to manage risks or seize opportunities arising from tariff changes?
In today's shifting geopolitical and trade landscape, institutional investors are moving beyond cost-focused strategies and placing greater emphasis on resilience, flexibility, and policy alignment. This includes diversifying real estate portfolios geographically to reduce concentration risk and reassessing sector exposures to prioritise assets that can support operations in a more protectionist environment. Factors like regulatory stability and alignment with trade and industrial policies are becoming increasingly important in investment decisions. The rise in cross-border investment in Q1 2025-particularly into Japan and Australia-reflects how investors are repositioning to manage risks and capture long-term growth. Trade policy is no longer just background noise—it’s now a key consideration in how capital is deployed across the region.
Christine Li
Head of Research, Asia Pacific
Knight Frank
How are rising tariffs reshaping investment flows and capital allocation in Asia Pacific real assets?
The strong cross border capital flows into Asia Pacific in 2024 continued through the first quarter of 2025. The region saw USD6.0 billion of capital inflows from external sources in Q1 2025, a 115% increase from the USD2.8 billion recorded in Q1 2024. Reciprocal tariffs were then announced on April 2nd, followed by a 90 day pause a week later and more recently, over the weekend of May 12th, there was a de-escalation of tariffs between the US and China. This fluid environment is likely to give investors reason to pause amid the uncertainty. So, while it is too soon to predict how investment flows and capital allocation will be shaped by the tariff announcements, the initial thinking is likely a slowdown in overall investment activity.
Which markets and sectors in the region are (1) most impacted and (2) positioned to benefit from tariff-related shifts?
As a large and diverse region, Asia Pacific offers investors a range of opportunities. Markets across the region are at different stages of maturity and property cycles and have different levels of exposure to tariffs and trade flows. This presents geographical and sectoral options to investors, depending on their preferred risk profiles. Generally, markets running a trade surplus to the U.S. (buying more than they sell) could ultimately have a lower exposure to tariffs, such as Australia and Singapore and therefore will have more resilient GDP growth, which in turn will drive CRE activity. The same applies to markets with strong domestic consumption such as India. We expect demand for the living sector (multifamily / student accommodation) and data centres to remain strong.
How can institutional investors adopt to manage risks or seize opportunities arising from tariff changes?
With the uncertainties caused by the evolving tariff situation and the difference in which each market or asset class is impacted, it is even more critical for investors to conduct their due diligence and research to better understand local market drivers, their levels of exposure to the wider macro-economic conditions and longer term structural opportunities before making a decision on where to invest in the current environment.
Dr. Dominic Brown
Head of International Research
Cushman & Wakefield
How are rising tariffs reshaping investment flows and capital allocation in Asia Pacific real assets?
We can expect to see a slowdown in APAC investment volumes in the short term, especially in countries facing significantly higher U.S. tariffs, as investors were in a wait-and-see mode in the previous months.
But, with the de-escalation of the tension and clearer outlook for interest rate cuts in the APAC region, there is more room for investments to pick up in the second half of the year. Capital allocation is likely to be shifted within APAC away from markets with heavier tariff impacts to areas with lower tariff influence. Investors continue to prefer Japan, Australia and select markets in India.
Which markets and sectors in the region are (1) most impacted and (2) positioned to benefit from tariff-related shifts?
Southeast Asian markets with a high reliance on exports to the U.S. will likely be the most affected. During Trump's first term, U.S. trade volumes in Vietnam, Taiwan, South Korea, and Thailand increased; however, we cannot be certain of the outcome of ongoing trade negotiations. In the longer term, India will be the next destination to absorb the production capacity from China.
oWe believe the China economy is large enough to absorb the tariff impact, particularly if they are sustained at the lower levels that have recently been negotiated. Historically, the U.S. has been China's largest trading partner, but the relationship is changing significantly. The industrial sector (esp cross-border e-commerce players) will likely be the most impacted within China, but the shift in trade policy could negatively affect all sectors within China to some degree.
Outside of APAC, manufacturing and logistics in Mexico is expected to benefit.
How can institutional investors adapt to hedge risks or seize opportunities arising from tariff changes?
Focus on longer-term themes, and remember commercial real estate is a long-term investment. Many active leases and loans will outlive the policy changes that are now unfolding. Opportunities will arise amid uncertainty, which keeps some investors sidelined. Geopolitical risks can be hedged by acquiring strong assets in an array of geographies.
Dr. Henry Chin
Global Head of Research
CBRE
How are rising tariffs reshaping investment flows and capital allocation in Asia Pacific real assets?
Quarter one of 2025 saw an optimistic start when it came to investment volumes in APAC. As tariffs have impacted and created uncertainty, to some extent we have seen some investors take a more cautious approach in terms of pushing deals over the line. That said, we are still seeing deals getting done and we remain optimistic for 2025, and we expect to see volumes rebound as clarity around tariffs plays out. News in recent days around initial progress in dialogue between the US and China can only bode well for confidence.
Which markets and sectors in the region are (1) most impacted and (2) positioned to benefit from tariff-related shifts?
We are still in the early stages and it's difficult to pick clear winners out there. That said, markets which have a greater share of their GDP attributable to US exports are likely to see the greatest impact in the short term. Markets may see disinflationary pressures due to lower trade with the US and more muted domestic consumption as a result. There are also possible upsides, with potential for growth in intra-regional trade resulting in lower material costs and enhanced trade which could flow through into real estate markets. Economic uncertainty can invariably affect both leasing and investment deal flows for commercial real estate; however, anecdotally we still see healthy pipelines on the ground within the Firm for both.
How can institutional investors adopt to hedge risks or seize opportunities arising from tariff changes?
The tariffs mainly affect the export of goods and this is likely to flow through into some great challenges as well as opportunities within the logistics, industrial and manufacturing real estate sectors. The degree to which markets will be affected will largely be driven by the level of their trade with the US. Similarly, emerging sectors such as data centers still retain strong tailwinds. Within Asia Pacific we also continue to see strong long-term demographic trends as key drivers of economic growth and growth of our real estate markets. Other sectors we expect to continue to grow would be multifamily.
*It is too early to call out specific APAC markets given the tariff policy and the overall macroeconomic implications remain uncertain.
Roddy Allan
Chief Research Officer, APAC
JLL
