Expect dynamic changes in APAC real estate in 2025: analyst

Office demand is expected to average 75 million square feet per annum.

According to a recent release from Cushman & Wakefield, the Asia Pacific real estate market is set for dynamic changes in 2025, with significant developments across the office, logistics and industrial, and capital markets sectors. The region is poised for growth, driven by varied economic trajectories and strategic market adjustments.

Dr. Dominic Brown, Cushman & Wakefield’s Head of International Research, said, “The Asia Pacific economy is expected to grow at 3.7% in 2025, driven by robust performances in the India and Southeast Asian economies. The region overall, continues to exhibit diverse economic trajectories. Inflation control remains a key focus, with central banks taking varied approaches to interest rate adjustments. Emerging markets, particularly India, face ongoing inflation challenges, while developed economies like Australia and Japan are seeing more consistent inflation control. Amidst these varied economic dynamics, our outlook for Asia Pacific in 2025 reflects a resilient real estate market, poised for growth.”  

Here's more from Cushman & Wakefield:

Office Market
The office market in the Asia Pacific region is expected to experience robust demand, averaging 75 million square feet (msf) per annum over the forecast period. However, new supply exceeding 100 msf in 2025-27 will push regional vacancy rates to nearly 20%.

• Demand: India remains the main driver of office demand, with cities like Bengaluru and Hyderabad leading the surge. The region is forecast to absorb 72 msf of office space in 2024, increasing to an average of 75 msf per annum from 2025 to 2029.
• Supply: New supply is set to increase significantly, with 121 msf expected to enter the market in 2025. Major markets such as Shanghai, Bengaluru, Tokyo, and Shenzhen will see notable increases.
• Vacancy and Rent: Regional vacancy rates are projected to rise, highlighting the importance of local market conditions. Office rental growth will remain muted, averaging around 2% per annum, with significant variations between and within markets.

Logistics and Industrial Sector
The logistics and industrial sector has faced headwinds due to economic slowdowns and geopolitical uncertainties, which has seen growth normalise following outperformance in the past two years. However, with accelerating economic growth and interest rate cuts, occupier demand is expected to improve, supporting rental growth in key markets.

With the incoming Trump administration, attention is once again turning to the possibility of increased tariffs for exports to the U.S. Given there has not been any formal policy announcements yet, it is still too early to know the full impacts of any tariffs. However, intraregional trade in Asia Pacific, which has increased five-fold in value since the year 2000 along with demand emanating from Europe, should provide strong foundation support for the sector across the region.

• Demand and Supply: Occupier demand for logistics and industrial space has slowed but is expected to improve in 2025. Key markets such as Australia, India, and parts of Southeast Asia are forecast to lead rental growth.
• Vacancy and Rent: Vacancy rates have trended up in most markets, but rental growth is expected to stabilize across the region, except for Hong Kong and Shenzhen, where some rental decline is anticipated.

Capital Markets
The investment market in the Asia Pacific region has found its bottom, with volumes expected to increase through 2025. Property values are anticipated to remain stable, though asset-level trends may vary.

• Investment Volumes: Rolling annual investment volume of stabilized assets totalled USD153 billion as of Q3 2024, up from the Q4 2023 low of USD146 billion. Investment volumes are expected to continue trending upwards in 2025, potentially recouping around half of the peak-to-trough decline to reach an estimated USD200 billion.
• Pricing Stability: The bid-ask spread between vendors and purchasers has narrowed, indicating a period of pricing stability. Capitalization rates are forecasted to remain stable across most of the region.