APAC real estate shows early signs of cyclical shift as cap rates stabilise

Several cities are showing distinct signs of momentum.

Asia Pacific real estate markets are showing early signs of a cyclical turning point, with stabilising cap rates increasingly supported by growing investor confidence and early transactional momentum, according to a new report from Colliers.

Colliers’ Asia Pacific Cap Rate Report Q4 2025 points to a region that has largely moved through its period of adjustment and is beginning to position for renewed growth. While cap rates broadly held steady across most markets and sectors, Colliers notes that underlying conditions are becoming more constructive, laying the groundwork for improving investment activity into 2026.

“Cap rates held steady across most Asia Pacific markets and sectors this quarter, which suggests the region is moving into a smoother, more stable phase and laying early foundations for improvement,” said CK Lau, Managing Director, Valuation and Advisory Services, Asia at Colliers.

“The stabilisation across Asia Pacific markets is encouraging and suggests that investors are becoming more confident in the direction of travel. Many have been waiting to see clearer signals and we are now observing the early stages of that shift.”

According to Colliers, easing interest rates and strengthening fundamentals in several core markets are helping shift investor behaviour from caution toward preparation. While transaction volumes remain selective, the report highlights that confidence is gradually rebuilding across multiple asset classes.

“With interest rates easing and several core markets showing stronger fundamentals, we expect more investors to move from caution to preparation,” Mr Lau said. “The groundwork for a more constructive year is already being laid, particularly in sectors where underlying demand remains firm.”

Momentum emerging across key markets

While the overall regional picture remains one of steady cap rates, Colliers’ report highlights a number of markets and sectors that are beginning to show clearer signs of momentum.

In Australia, Colliers notes continued resilience across multiple asset classes. Retail has attracted strong investment flows for the third consecutive year, while industrial markets in Sydney, Adelaide and Brisbane recorded notable growth, underpinned by ongoing business expansion and occupier demand.

New Zealand also maintained a stable outlook, supported by low interest rates and significant government-backed infrastructure commitments, which Colliers says are helping to underpin investor confidence.

Singapore’s appeal strengthened further during the quarter, with easing monetary conditions widening investment spreads. Colliers highlighted that this has reinforced Singapore’s position as a safe and competitive destination for long-term foreign capital.

India continued to deliver robust performance across office, retail and industrial sectors, supported by a balanced supply pipeline and healthy leasing demand. In Korea, Colliers reported a record year for office investment, driven largely by strong activity in Seoul.

Hong Kong experienced renewed interest in premium office space, with Colliers attributing this to increased global listing and financing activity from Mainland Chinese firms, which has helped support the city’s headquarters economy.

China’s investment market remained cautious overall, with activity dominated by end users. However, Colliers noted that prime retail assets in Beijing and Shanghai continued to demonstrate resilience. Taiwan remained stable, with owner occupiers driving much of the investment activity, particularly within the industrial sector.

Sector outlook: industrial leads, office and retail stabilise

At a sector level, Colliers highlighted improving conditions across office, retail and industrial markets, albeit at varying stages of recovery.

Across the office sector, cities such as Sydney, Tokyo and Seoul recorded strengthening activity. Limited new supply in several markets has helped stabilise rents, while major transactions during the quarter signalled improving investor sentiment, according to Colliers.

Retail investment remained active across the region. Colliers pointed to high occupancy levels in Mumbai, strong performance from large-format retail operators in Auckland, and tourism-driven demand lifting high street rents in Hong Kong.

Industrial continued to stand out as one of Asia Pacific’s most resilient asset classes. Colliers highlighted strong demand across Australian markets, stable take-up within Tokyo’s logistics sector, and increased en bloc activity from end users in Hong Kong.

Although the quarter was characterised by steady cap rates rather than sharp movement, Colliers believes the broader economic and investment environment is turning more positive.

“Although the quarter was defined by steady cap rates, the broader economic and market environment has begun to shift in a more positive direction,” Mr Lau said. “Easing interest rate cycles, moderating inflation and improving activity in several gateway cities have helped strengthen investor expectations for 2026.”