Our latest edition of APREA Market Flash takes a close look at how markets across the Asia Pacific are responding to the Middle East situation and the broader backdrop of geopolitical uncertainty, inflation pressures, and shifting capital flows.
Across Asia Pacific, fundamentals remain resilient, but the near-term environment is characterised by greater caution. Investors are becoming more selective, with capital rotating toward core, income-generating assets and markets supported by strong domestic demand. At the same time, higher energy prices and financing costs are reinforcing valuation discipline and a focus on income visibility, while structural demand continues to support opportunities in sectors such as logistics, data centres, living, and infrastructure, alongside emerging opportunities from market repricing and strategic transactions.
In this edition, we have gathered perspectives from our APREA members on how investors are navigating this environment and where they see opportunities emerging across markets and sectors.
西格丽德-齐亚尔西塔
首席执行官
APREA
高级副总裁 – 研究与投资咨询，资本市场
ANAROCK Capital Advisors Pvt Ltd
We have not seen any material impact on demand or investor appetite in India arising from the current situation in West Asia. India continues to stand out as the fastest-growing large economy, supported by strong domestic consumption, ongoing formalisation, and a stable policy environment – factors that keep institutional investor interest intact.
Structural drivers such as the success of the Production Linked Incentive (PLI) schemes, increasing manufacturing activity, and India’s expanding trade relationships – including the operational FTA with Australia and the recently concluded FTAs with the UK and EU – further reinforce medium to long-term confidence.
Real estate, by its nature, is a long-duration asset class. While geopolitical developments may induce short-term volatility, investment decisions in this space are anchored in long-term fundamentals. On that front, India’s growth story and real asset demand drivers remain robust and intact.
So far, elevated oil prices have not materially impacted investor behaviour or asset valuations in India. This is partly due to proactive government measures – such as excise duty adjustments on fuel – which have helped cushion the immediate inflationary impact.
Additionally, India’s macroeconomic management and diversified energy sourcing have provided a degree of resilience against external shocks.
At this stage, markets do not appear to be pricing in a prolonged period of elevated energy prices or sustained geopolitical conflict. However, if such conditions persist, we could see second-order effects in the form of higher inflation expectations, tighter monetary conditions, and some recalibration in return thresholds.
Indian real estate continues to witness strong investment activity, with FY26 recording approximately USD 4.3 billion in private equity investments – up 13% and 16% over FY24 and FY25, respectively.
Source: Anarock Research
This momentum has been driven in large part by a meaningful increase in domestic capital participation, particularly in commercial real estate – an asset class that has historically been dominated by foreign institutional investors.
Source: Anarock Research
This increasing depth of domestic capital provides resilience to the market and reduces dependence on global capital flows during periods of uncertainty.
From a strategy standpoint, investors continue to favour core and core-plus assets backed by strong occupier demand. India’s office market, supported by Global Capability Centres (GCCs) and a growing services economy, along with manufacturing-led demand for industrial and logistics assets, provides multiple growth levers.
Importantly, rental levels in India – still relatively low compared to global benchmarks – offer a strong margin of safety, making the market attractive even in uncertain global conditions.
Financing conditions and liquidity remain the most critical drivers for real asset markets. The availability and cost of capital directly influence both transaction activity and asset valuations. Any tightening in liquidity – global or domestic – could have an adverse impact on deal flow and pricing.
Currency volatility is another key factor, particularly for foreign investors, as it directly affects realised returns. That said, the share of foreign capital in Indian real estate has been gradually declining – from approximately 82% in FY22 to 52% in FY26 – with domestic capital stepping up to account for 38% share, compared to 14% in FY22. This transition cushions the potential impact of currency volatility for real estate.
Supply chain disruptions, at present, are unlikely to have a direct material impact on real estate demand. However, if disruptions persist, they could lead to broader cost pressures – not only in construction inputs, but also in overall cost of living. This, in turn, may compress disposable incomes and weigh on demand in price-sensitive segments such as affordable, mid-income housing sectors.
That said, the affordable and mid-income housing segment (less than Rs 15 mn) has already been witnessing relatively weak demand and now constitutes a significantly lower share of overall residential absorption – declining from approximately 89% in CY2021 to 58% in CY2025.
Source: Anarock Research
In contrast, we do not anticipate a material adverse impact on premium and luxury housing, which continue to be key demand drivers in the Indian real estate market, supported by rising incomes, wealth creation, and aspirational buying.
Overall, while global uncertainties warrant close monitoring, India’s real asset market remains fundamentally well-positioned, supported by strong domestic drivers and increasing capital resilience.
研究负责人
Colliers Singapore
From an operating perspective, rising energy prices have had only a modest impact on most commercial real estate assets. Utilities typically account for around 5–15% of total operating expenses, and in many markets these costs are recoverable from tenants or passed through via service charges. In addition, landlords often mitigate volatility through fixed-rate electricity contracts or hedging arrangements, which reduces the immediate impact of energy price spikes.
More broadly, real assets are long-duration investments, and near-term income streams remain relatively resilient. Assets with shorter lease structures (3–5 years), strong tenant demand and modern energy-efficient specifications are particularly well positioned to maintain stable cash flows. In Asia Pacific, the impact of oil price volatility has also been moderated by the fact that many markets maintain strategic energy reserves or regulate retail energy prices, which dampens pass through effects to occupiers.
However, if protracted geopolitical tensions lead to sustained energy price increases, this could reignite inflationary pressures globally. In turn, central banks may maintain higher-for-longer interest rate policies, which would keep borrowing costs elevated. Higher financing costs would in turn weigh on transaction activity and valuation across the region.
On balance, the near-term outlook for Asia Pacific real assets remains relatively resilient, but capital markets and investment sentiment will likely remain cautious until there is greater clarity on energy prices, inflation trajectories and geopolitical stability.
Second order impacts from higher inflation and consequentially higher borrowing costs will lead to more investor caution, slow decision making and widen bid-ask spreads as more adopt a wait-and see approach.
From a valuation perspective, sustained inflation and higher interest rates can place upward pressure on discount rates and cap rates, particularly for assets with weaker income growth prospects or shorter lease visibility. As a result, investors are increasingly focused on assets with defensive income characteristics, including assets with strong tenant covenants, long weighted-average lease terms, and resilient sectors such as living, logistics, data centres and non-discretionary retail.
Yes, heightened geopolitical uncertainty has reinforced the relative attractiveness of safe-haven markets and core assets in Asia Pacific, particularly those with strong governance, deep liquidity and transparent regulatory frameworks.
Singapore is a prime example. The market has continued to attract capital from both regional and global investors seeking stability, with investment volumes rising over the past five quarters and reaching a record high in 1Q 2026. In periods of geopolitical volatility, institutional investors often prioritise markets with currency stability, strong rule of law and high market transparency, which has historically benefited cities such as Singapore, Tokyo and Sydney.
This shift is shaping investment strategies in several ways.
First, investors are increasingly allocating capital toward core and core-plus assets with stable income profiles, such as prime offices, high-quality logistics facilities, and modern business parks in established gateway markets. These assets offer defensive income streams and strong tenant covenants, which become more attractive during periods of macro and geopolitical uncertainty. Second, occupiers themselves are placing greater emphasis on operational resilience and supply chain stability, which is supporting demand for logistics, advanced manufacturing and business park space in strategically located and politically stable markets across the region. Third, the current environment is reinforcing the value of energy-efficient and sustainable assets. Buildings with strong environmental credentials tend to have lower operating cost volatility and greater regulatory alignment, which enhances income resilience and makes them more attractive to occupiers and institutional capital. Finally, some investors are also increasing allocations to defensive real estate sectors, particularly segments of the living sector, as well as the logistics, data centres and non-discretionary retail sectors.
Overall, geopolitical uncertainty is reinforcing an existing trend toward quality, stability and income durability, with capital gravitating toward prime assets in transparent markets and sectors with resilient long-term demand fundamentals.
Looking ahead, the most significant secondary effects for real assets in Asia Pacific are likely to come through inflation dynamics, financing conditions, and supply chain disruptions, all of which can influence investment activity and asset valuations.
Higher inflation remains the most immediate concern. If elevated energy prices feed through into broader inflation, investors may demand higher risk premiums, while central banks could maintain tighter monetary policy for longer. This would keep borrowing costs elevated and raise discount rates used in underwriting, which could slow real estate investment activity as investors reassess return thresholds and pricing expectations.
Supply chain disruptions are another potential channel. Any escalation that affects major shipping routes or logistics costs could encourage companies to diversify supply chains and increase regional inventory buffers, which may support demand for logistics and industrial assets in key Asia Pacific hubs such as Singapore, Japan and Australia.
Overall, the real estate market tends to react less to geopolitical events themselves but more to how those events reshape inflation expectations, capital costs and investor risk appetite.
Catherine He
研究负责人
Colliers Singapore
国际研究主管
戴德梁行
Currently, most of the impacts of the conflict are being seen in the high-frequency data such as equity and bond markets. Recent releases of inflation data are starting to show the effects of surging energy prices. Over the next three to six months, the key impacts for commercial real estate are likely to be related to heightened uncertainty around inflation and interest-rate trajectories, and their subsequent effects at both the household and corporate levels.
It is still too early to make any definitive changes to the outlook. The region came into 2026 on a strong footing, with over 100 million square feet of office space absorbed across the region in 2025, and momentum continuing through the first quarter. However, with increased uncertainty, we expect that some decision-making may be delayed or deferred.
Rising oil and energy prices are the primary mechanism for driving higher inflation. However, as time progresses, we expect that second and potentially third order inflation effects across supply chains and production will become apparent. Central bank responses to these inflationary effects will vary, though the fact that inflationary pressures were relatively subdued across most of Asia Pacific prior to the conflict means that many central banks have a buffer before they need to act. While ultimately this could be in the form of rate hikes, it may instead manifest as a delay or cancellation of expected rate cuts.
It is important to note that investor demand has been strong through the first quarter. Preliminary investment volumes for the first three months sit at USD44bn, supported by robust fundamentals. Periods of geopolitical uncertainty tend to lead to wider risk premiums and more selective capital deployment. Investors will also closely monitor central bank messaging and future interest rate movements. As such, deal velocity could slow temporarily as investors re-evaluate their entry and exit assumptions. However, given the limited property yield movement seen during the current cutting cycle, we don’t anticipate immediate upward pressure on yields should central banks decide to hike rates.
Again, it is too early to see any significant changes in investor intentions at the asset, sector or geographical level. Over time, though, the Middle East conflict may cause investors to reassess not only their geographical focus but also hone their attention on more resilient assets that provide both defensive qualities and growth opportunities.
The most significant secondary effects for real assets in APAC are likely to be via inflation persistence through second and third order effects. These are likely to take longer to become apparent and therefore longer to dissipate. Accordingly, this will cause interest rates to stay higher for longer, as seen in the last inflationary cycle. As we saw at that time, investment volumes declined and property pricing adjusted to accommodate higher interest rates.
Running alongside this, inflation effects will also impact construction costs and so declines in new supply that we already expected at the start of the year will likely be exacerbated as economic rents move further away from market rents.
多米尼克·布朗博士
国际研究主管
戴德梁行
亚太区首席投资官
DWS
The Middle East situation is influencing our Asia Pacific real assets outlook mainly through macro and financial channels rather than direct asset exposure. From a fundamental’s perspective, most APAC real assets have limited direct sensitivity to the region. However, the conflict has heightened uncertainty around energy prices, inflation, and interest rates, which matters over the next three to six months.
This has reinforced a more cautious macro backdrop, with reduced visibility on the timing and extent of monetary easing across Asia. As a result, we expect greater dispersion across markets and sectors, driven less by tenant demand and more by financing conditions and investor risk tolerance. Real assets remain strategically important in portfolios, but capital deployment is becoming more selective. The emphasis has shifted toward income visibility, balance sheet resilience, and assets that can withstand periods of higher volatility. Overall, the near term outlook is more about repricing risk rather than deterioration in underlying demand.
Rising oil and energy prices are the most important transmission channel from geopolitical risk into Asia Pacific real assets. Asia is a net energy importing region, so higher energy prices quickly feed into inflation expectations and reinforce a higher for longer interest rate environment. This has direct implications for asset valuations, which are highly sensitive to discount rates and financing costs.
From an investor perspective, this is reshaping decision making in several ways. Valuation discipline has increased, with higher required yields and greater focus on downside scenarios. Operating cost exposure, including utilities, construction inputs, and logistics, is now under closer scrutiny. At the same time, assets with pricing power or inflation linked income streams are being prioritised.
Importantly, higher energy prices are not leading to a collapse in demand for real assets. Instead, they are changing how assets are assessed and priced, particularly for leveraged or cost intensive strategies.
What we are seeing is better described as a rotation than a retreat. Investors are not stepping away from Asia Pacific real assets, but they are reallocating capital toward areas perceived as more resilient under heightened uncertainty. This has increased demand for core and core plus strategies, stable income profiles, and assets with conservative capital structures.
Markets with strong domestic demand support, credible policy frameworks, and lower refinancing risk are being favoured. At the same time, there is greater caution toward markets that are more exposed to energy imports, currency volatility, or tightening financial conditions. The objective is not to avoid risk entirely, but to ensure that risk is appropriately compensated and well understood.
This shift is shaping investment strategy by prioritising visibility and durability over cyclical upside. Predictable income and balancesheet strength are taking precedence overgrowth optionality.
The most relevant secondary effects are inflation passthrough and financing conditions. Higher energy prices are already feeding into construction costs, utilities, and operating expenses. If sustained, this can affect development feasibility, refurbishment economics, and operating margins, even where rental demand remains steady.
Financing conditions are equally important. Inflation pressures reduce the scope for rapid rate cuts, which keeps borrowing costs elevated. This affects transaction volumes, refinancing risk, and return expectations, particularly for more leveraged assets.
Supply chain and logistics disruptions are less severe than in earlier cycles but still impact project timelines and capex planning. Currency volatility is also a consideration for cross border investors, as rising hedging costs can materially affect returns. Taken together, these factors reinforce a more selective and disciplined investment environment rather than undermining the long term role of real assets.
吴艾薇
亚太区首席投资官
DWS
Regional Vice President, Asia Pacific
STR
Clearly outlook will be based on different scenarios that depend primarily on timing, as in when there is peace in the region.
As long as it continues, not only will we see impact as per below continue and develop, but the eventual recovery time frame extends.
Firstly – The impact of hotels in the region
With market-level occupancy averages in hotels in key GCC markets dropping from 85-95% in February to 30-50% at the moment (some areas also lower) and rates have dropped significantly as a result, and a number of large properties have to release staff and/or start renovations as demand falls short – anything to manage this sudden drop in profitability.
While more domestic-depending areas like Saudi Arabia would initially hold off better, similar to what one saw during the pandemic), as the weeks roll on it’s a similar story there as everywhere else.
Secondly – Impact on hotels that depend on outbound travellers from Middle East
Turkey would normally see one in five travellers from GCC, and this is severely limiting their hotel demand, and while some APAC areas and hotels will have seen some impact depending on their usual source markets, it’s much less impact here compared to southeast Mediterranean areas but also key hubs like Paris and London.
Thirdly – Airspace limitations on travel patterns
This continues to lead to high rate increases in air fares, both new tickets and changes, and also sees cancellations and uncertainty about long-haul travel between Europe and APAC, as some of the most used travel hubs carry limitations in flight access.
There is no doubt for us that the Middle East markets will come back, as done from other crisis in the past, it’s a well-established travel hub with continued investment interest in the hotel asset class across all classes, from economy to luxury, as more owners look to diversify their portfolios.
Jesper Palmqvist
Regional Vice President, Asia Pacific
STR
Co-Chief Executive Officer
Indochina Capital
From my perspective, the impact on Vietnam over the next 3–6 months is more about risk repricing than weakening fundamentals. Capital is not disappearing, it is shifting toward markets offering stability, resilience, and growth. In that context, I see Asia as a relative beneficiary, with Vietnam particularly well placed given its prolonged political stability and strong economic momentum.
My long-term conviction remains unchanged. Vietnam delivered Q1 GDP growth of 7.83% YoY, while FDI continues to flow into manufacturing and industrial sectors. We see industrial real estate continuing to benefit from this growth.
The government has responded pragmatically through fuel tax relief, tariff reductions, and active price stabilization measures, while monetary policy remains focused on inflation control, FX stability, and liquidity.
For real estate assets, I expect investors to remain active but more selective, with higher risk premia and tighter underwriting standards. This should create opportunities in recapitalizations, joint ventures, and strategic divestments for well-capitalized investors.
In my opinion, rising oil and energy prices are impacting both sentiment and fundamentals, particularly through inflation expectations and higher funding costs. In Vietnam, CPI rose 4.65% YoY in March, with fuel a key contributor, while borrowing costs and interbank rates have also remained elevated.
For investors, this has led to more cautious underwriting, especially around construction costs, debt pricing, lease-up assumptions, and exit timing. Newer entrants are generally pausing, while established platforms with local capability continue to deploy selectively.
On valuations, we expect cap rates to expand by 50–100 basis points if inflation proves prolonged and interest rates remain higher for longer.
That said, I see Vietnam as relatively resilient given its strong underlying fundamentals, export-led economy, and continued FDI inflows. Stabilized sectors such as industrial and hospitality should continue to outperform.
More broadly, markets are becoming increasingly desensitized to geopolitical shocks, reflected in continued global equity market strength despite ongoing conflict.
It is still early to draw firm conclusions, but from what I am seeing, many investors have adopted a wait-and-see approach. That said, particularly in Asia, most institutions we work with are largely continuing business as usual, with capital deployment becoming more selective rather than stopping altogether.
I believe Vietnam is on the right side of this shift. In a more defensive allocation environment, capital is gravitating toward markets with political stability, structural growth, and operational resilience. Alongside traditional liquidity hubs such as Singapore and Hong Kong, Vietnam stands to benefit from supply chain diversification and manufacturing relocation.
Strategy is clearly moving toward income-producing, defensive assets. We continue to see the strongest interest in industrial/logistics and hospitality, while speculative development is losing appeal in a higher-rate environment.
At the same time, tighter liquidity among local developers is creating better entry points through joint ventures, recapitalizations, and strategic acquisitions for well-capitalized foreign investors.
In my view, the biggest secondary risk is rising input costs and the pressure these places on new project feasibility.
Higher energy prices feed directly into the cost of construction materials, logistics, commodities, and labor, which can quickly compress development margins. In Vietnam, where many projects were underwritten in a lower-cost environment, this creates a meaningful reset for land values, pricing expectations, and return hurdles.
At the same time, tighter financing conditions are amplifying the pressure. Higher borrowing costs and more selective lending mean developers are facing both rising construction costs and more expensive capital simultaneously.
What I am seeing on the ground is a market entering an adjustment phase. Some projects will be delayed, re-scoped, or recapitalized, while others may seek joint venture partners or strategic exits.
I think that this is the most immediate challenge for real assets activity over the next 6–12 months. The market will need time to reprice costs, restore feasibility, and reset to a more sustainable base before development activity accelerates again.
Michael Piro
Co-Chief Executive Officer
Indochina Capital
Senior Director, Strategic Research & Advisory, Asia Pacific Capital Markets
萨维尔斯
The situation remains highly fluid, but financial markets are still pricing a relatively contained and short-lived disruption. Equity markets have been broadly stable, even as oil prices and bond yields have moved higher, suggesting limited expectations of a sustained escalation despite risks around the Strait of Hormuz.
For Asia Pacific real assets, the near-term impact is more behavioural than fundamental. Elevated uncertainty raises the hurdle for deploying capital, increasing the opportunity cost of action versus waiting, which is already leading to some delays in investment decisions.
If disruption to energy markets persists, the more material channel would be through inflation and higher long-end interest rates, which would put renewed pressure on pricing and cap rates. But in the absence of a prolonged shock, this is likely to remain a short-term pause in activity rather than a structural shift in outlook. For now, deals aren’t being cancelled, contracted deals are still closing, but new investments in some markets are being delayed.
It is still too early to see any direct impact on CRE pricing, but the primary transmission channel remains through inflation and interest rates rather than operating fundamentals. Markets are still pricing a relatively contained and short lived disruption, which is why the impact so far has been limited.
Rising energy prices have pushed inflation expectations higher, with breakeven rates moving up across index linked bond markets. Policy tightening has already taken place since the onset of the conflict in Australia and Singapore, with yield curves moving higher in Korea, Japan and several smaller markets.
The region’s exposure to Middle East energy is a key risk factor. Major North Asian economies are heavily reliant on imported oil and gas, so any sustained disruption would have a more pronounced inflation impact than in more energy independent markets.
At this stage, the effect is showing up in sentiment and rate expectations rather than valuations. But if energy market disruption were to persist, it would start to translate into renewed downward pressure on asset pricing.
Capital allocation shifts tend to be slow moving, so there has been no clear reallocation toward safe haven markets or core assets at this stage. While there are no true safe havens in APAC under an energy shock scenario, some markets are relatively more insulated than others.
Markets like Singapore are generally seen as more insulated from direct geopolitical risk, although they remain exposed through global trade and energy flows. A similar dynamic applies across other perceived safe havens in the region. Japan is highly reliant on imported energy, while Australia, despite being a major energy exporter, has limited liquid fuel reserves, highlighting that exposure varies but is rarely absent.
For now, investor preference continues to tilt toward living sectors and data centres or digital infrastructure, although this is a multi-year trend rather than a reaction to current events. The current environment does, however, bring greater focus to operating costs, particularly for more energy intensive sectors such as data centres.
One area with both upside and downside implications is construction costs. Higher energy and input costs will make new development more challenging, but will also lift replacement costs and provide some support to existing asset values.
The most important secondary effect remains interest rates and financing conditions. Higher energy prices are feeding into inflation expectations and pushing long end yields higher, which directly impacts discount rates and can stall transaction activity.
The key risk is not the initial inflation spike, but persistence. If inflation remains elevated, it delays policy easing and reinforces a higher for longer rate environment, keeping pressure on pricing.
Energy costs also introduce greater sector divergence. More energy intensive assets such as data centres and certain industrial uses face higher operating costs, while living sectors are less directly exposed.
Construction costs are another important channel. Higher input and transport costs would further constrain new development, tightening future supply and reinforcing replacement cost dynamics that support existing assets over time.
At the same time, any slowdown in activity is more likely to delay rather than destroy capital deployment, which, alongside improved pricing discipline, could create a more constructive entry environment once uncertainty clears.
Nicholas Wilson
Senior Director, Strategic Research & Advisory, Asia Pacific Capital Markets
萨维尔斯
Kemmu Kawai 于 2022 年 9 月加入 Longevity Partners Japan，担任国家总监。他常驻东京，负责日本、亚太地区及其他地区的所有业务和活动。他拥有超过 16 年的金融从业经验，专门从事房地产和信贷投资。在加入 Longevity Partners 之前，他曾在 Norinchukin 银行担任投资组合经理，并在 Center Point Development 担任投资经理。.
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